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Quality Control Standards
oHuman resources
oEngagement/ client acceptance and continuance
oLeadership responsibilities
oPerformance of the engagement
oMonitoring
oEthical requirements
Human Resources
oRecruiting, hiring, performance development, advancement, and performance evaluation.
Engagement: Client acceptance and continuance of relationship with client.
oAvoid clients with management that lacks integrity.
Leadership responsibilities: “Tone at the top” (SOX 404)
oThis relates to the control environment
Performance of the engagement: Ensure appropriate supervision and that the work is appropriately
reviewed.
oMaintain safe custody
oAllow consultant with experts with respect to complex, unfamiliar, unusual issues.
Monitoring involves an ongoing consideration and evaluation of the design and effectiveness of the
quality control system.
oPartner bears responsibility for this.
oPeer review every 3 years by other public firms according to the AICPA
PCAOB does internal investigation every year for Big Four firms.
Ethical requirements – To maintain public confidence in the profession.
oMust confirm independence in paper or electronic form
oAudit firms cannot also do bookkeeping, appraisal/valuation, actuarial services, internal audit.
Tax preparation services are ok.
Aggressive tax strategies are not allowed.
Cannot provide tax services to corporate officers or family members
oIf the CEO/CFO was the CPA at the audit client, then there is 1 year cool off period.
oLead partner and reviewing partner must rotate off the audit every 5 years.
The rest of the team may stay
oNo contingent fees, commissions, or referral fees – cant have “skin” in the game.
GAAS – relates to engagement
Quality Control Standards – relate to all of the firms conduct
oIf HR lacks quality control standards, then that doesn’t necessarily mean the firm is not in
accordance with GAAS.
oFailed quality control ≠ failed GAAS
Other Engagements, Reports and Accounting Services
oSpecial Reports: Client does not necessarily have to comply with GAAP
Example: OCPOA – cash basis, tax basis; audit A/R or inventory only; compliance with
contrcontractual or regulatory requirements
IAS 800 - Special reports requirement the auditor’s address; U.S. auditing standards
don’t require this for special reports.
oReports on OCBOA Financial Statements
Must change to Non-GAAP titles
Introduction uses different report titles, scope paragraph is unchanged, explanatory
paragraph says the basis of presentation, refers to footnote that describes the basis,
and mentions that it is a non-GAAP basis; opinion paragraph must say it is fair on
the OCBOA basis.
oOCBOA basis to comply with a regulatory agency must have restricted use.
May have a possible restricted use paragraph if it is for a contract or agreement.
oIf auditing a pervasive part of financials (sales or COGS), then a full audit may be required
