Tmp 14966 Quality Control 470920136

Topics: Audit, Management, Auditing Pages: 18 (1083 words) Published: December 3, 2014
AUD 610
QUALITY CONTROL

Quality Control
For CA firm, quality control comprises methods such as
organizational structure and procedures that the firm
establishes.
It is a system that relates to the concepts of
professional
competence
and
the
meeting
of
professional standards (technical and ethical) in
providing professional services, so that audit failures
and risks are reduced to an acceptably low level.
Quality control must be addressed at the professional,
the audit firm and on individual engagement levels.

Importance of Quality
Control
Corporate scandals such as Enron and WorldCom cases
have seriously undermined the credibility of the audit
function and raised questions about the reliability of
financial reporting.
The alleged audit failures in these cases have also
attracted substantial criticisms regarding the competence
and independence of auditors.

Control
Continued
Analyses of legal cases involving auditors have
indicated that dishonest clients, management fraud,
insolvency and unlawful acts, are the common high risk
factors that often led to litigation.
In some legal cases, significant audit deficiencies have
also been noted.
Quality control system aims at addressing these issues.

Measures Taken
Issuance of ISQC 1
 To provide quality control standards for all assurance
and related services at the firm level.
Revision of ISA 220
 To provide quality control standards that are
applicable only for audit engagements.

Elements of Quality
Control
ISQC 1 requires an accounting firm to
establish a system of quality control
designed to provide it with reasonable
assurance that the following objectives
are met:





Compliance with professional standards
Compliance with applicable regulatory and
legal requirements
Reports issued are appropriate in the
circumstances.

Elements of Quality
Control - Continued
Leadership responsibilities for quality
Ethical requirements
Acceptance and continuance of
clients and engagements
Human resources
Engagement performance
Monitoring

AUDIT FIRM LEVEL
Leadership responsibilities for quality




Policies and procedures (PP) should be
established to promote an internal
culture based on recognition that quality
is essential in performing engagements.
Such policies should require the firm’s
CEO to assume ultimate responsibility
for the firm’s system of quality control

AUDIT FIRM - continued
Ethical requirements


PP should be established to provide the firm with
reasonable assurance that the personnel and firm
comply with fundamental principles of professional
ethics, maintain independence, perform all professional
responsibilities with integrity, and maintain objectivity
in discharging professional responsibilities.

Acceptance and continuance of
clients and engagements


PP should be established for deciding whether to accept
or continue a client relationship and whether to perform
a specific engagement for that client. Such procedures
should provide the firm with reasonable assurance that
the likelihood of association with a client whose mgt
lacks integrity is minimized.

AUDIT FIRM - continued
Human resources


PP should be established for hiring, assigning
personnel to engagements, professional
development, and advancement activities that
provide reasonable assurance that
 Those hired possess the appropriate characteristics to

enable them to perform competently.
 Work is assigned to personnel having the degree of
technical training and proficiency required in the
circumstances.
 Personnel participate in general and engagement-specific continuing professional education and participate in
professional development activities that enable them to
fulfill responsibilities assigned, and fulfill applicable CPE requirements of the professional bodies and regulatory
agencies.

AUDIT FIRM - continued
Engagement Performance


PPs should be...
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