Which of the following is an element of a CPA firms quality control system that should be considered in establishing its quality control policies and?
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SURIGAO EDUCATION CENTER CPA-REVIEW PROGRAM AUDITING THEORY MATERIAL # 10- (Quality Control System) 1. Show
2. 3. The main purpose of implementing quality control policies and procedures is: a. To comply with regulatory agency b. To provide reasonable assurance that audit will be performed in accordance with PSA. c. To have favorable peer review. d. To detect all instance of fraud during the audit. Which of the following quality control objectives would best least important to the auditors? a. Review and supervision b. Hiring personnel c. Determination of audit fee d. Professional advancement A CPA firm's personnel partner periodically studies the CPA firm's personnel advancement experience to ascertain whether individuals meeting stated criteria are assigned increased degrees of responsibility. This is evidence of the CPA firm's adherence to prescribed standards of a) Quality control. 4. b) Due professional care. c) Supervision and review. d) Field work. CPA firms should establish quality control policies and procedures for personnel management in order to provide reasonable assurance that a) Employees promoted possess the appropriate characteristics to perform competently. b) Personnel will have the knowledge required to fulfill responsibilities assigned. c) The extent of supervision and review in a given instance will be appropriate. d) All of the above are reasons. 5. A CPA establishes QC policies and procedures for deciding whether to accept a new client or continue to perform services for a current client. The primary purpose for establishing such policies is to a) Enable the auditor to attest to the integrity or reliability of a client. b) Comply with the quality control standards established by regulatory bodies. c) Minimize the likelihood of association with clients whose management lacks integrity. d) To lessen the exposure to litigation resulting from failure to detect irregularities in client financial statements. 6. Within the context of quality control, the primary purpose of continuing professional education and training activities is to enable a CPA firm to provide personnel within the firm with a) Technical training that assures proficiency as an auditor. b) Professional education that is required in order to perform with due professional care. c) Knowledge required to fulfill assigned responsibilities and to progress within the firm. d) Knowledge required in order to perform a peer review. 7. In pursuing its quality control objectives with respect to independence, a CPA firm may use policies and procedures such as a) Emphasizing independence of mental attitude in firm training programs and in supervision and review of work. b) Prohibiting employees from owning stock of public companies. c) Suggesting that employees conduct their banking transactions with banks that do not maintain accounts with client firms. d) Assigning employees who may lack independence to research positions that do not require participation in field audit work. 8. In connection with the element of monitoring, a CPA firm's system of quality control should ordinarily provide for the maintenance of a) A file of minutes of staff meetings. b) Updated personnel files. c) Documentation to demonstrate compliance with its policies and procedures. 1|Page d) Documentation to demonstrate compliance with peer review directives. 9. Which of the following is a quality control standard? a) Peer review. b) Administrative control. c) Engagement performance. d) Time studies. 10. Which of the following is not one of the six elements of quality control system? A. Engagement performance. B. Monitoring. C. Relevant ethical requirements. D. Review. 11. A requirement to design recruitment processes and procedures to help the firm select individuals meeting minimum academic requirements established by the firm is an example of a quality control procedure in the area of: A. Acceptance and continuance of client relationships and specific engagements. B. Engagement performance. C. Human resources. D. Relevant ethical requirements. 12. In pursuing a CPA firm's quality control objectives, a CPA firm may maintain records indicating which partners or employees of the CPA firm were previously employed by the CPA firm's clients. Which quality control objective would this be most likely to satisfy? A. Acceptance and continuance of clients and engagements. B. Engagement performance. C. Personnel management. D. Relevant ethical requirements. 13. Which of the following is not an element of quality control? A. Documentation. B. Engagement performance. C. Monitoring. D. Relevant ethical requirements 14. An engagement review form of peer review is least likely to include a peer reviewer's detailed analysis of: A. Compilation reports. B. Documentation of procedures followed on a review C. Overall system of quality control. D. Review reports. ************************************************************************************************************ Answer Key Section! Warning Don’t Detach!!! 1. 2. 3. 4. Scores on 1st try 2|Page 5. 6. 7. 8. _________ 9. 10. 11. 12. Scores on 2nd try _________ 13. 14. Scores on 3rd try _________ DO-IT-YOURSELF QUESTIONS: 1. 2. A firm of independent auditors must establish and follow quality control policies and procedures because these standards a. Are necessary to meet increasing requirements of auditor’s liability as insurers b. Are required by the SEC for auditors of all firms. c. Include formal filling of records of such policies and procedures to a regulatory agency. d. Give reasonable assurance that the firm as a whole will comply with professional standards. Which of the following is an element of CPA firm’s quality control system that should be considered in establishing its quality control policies and procedures? 3. a. Complying with laws and regulations b. Using statistical sampling techniques c. Assigning personnel to engagement d. Considering audit risk and materiality A quality control policy that requires personnel in the firm to adhere to independence, integrity, objectivity, confidentiality and professional behavior, relates to 4. a. Professional requirements b. Skills and Competence c. Assignment d. Monitoring Quality control for a CPA firm as referred to in Statements on Quality Control Standards, applies to a) Auditing services only. b) Auditing and management advisory services. c) Auditing and tax services. d) Auditing and accounting and review services. 5. The least important evidence of a CPA firm's evaluation of its system of QC would concern the CPA firm's policies and procedures for a) Employment (hiring). b) Confidentiality of audit engagements. c) Assigning personnel to audit engagements. d) Determination of audit fees. 6. In pursuing its quality control objectives with respect to acceptance of a client, a CPA firm is not likely to a) Make inquiries of the proposed client's legal counsel. b) Review financial statements of the proposed client. c) Make inquiries of previous auditors. d) Review the personnel practices of the proposed client. 7. In pursuing a CPA firms' quality control objectives, a CPA firm may maintain records indicating which partners or employees of the CPA firm were previously employed by the CPA firm's clients. Which quality control objective would this be most likely to satisfy? a) Acceptance of client. 8. b) Supervision. c) Independence. d) Monitoring. Which of the following is an element of quality control? a) Supervision b) Inspection c) Personnel management d) Consultation 9. One element of the personnel management quality control standard is professional development. The primary reason why a CPA firm establishes policies and procedures for professional development of staff accountants is to a) Comply with the continuing educational requirements imposed by various states for all staff accountants in CPA firms. b) Establish, in fact as well as in appearance, that staff accountants are increasing their knowledge of accounting and auditing 3|Page matters. c) Provide a forum for staff accountants to exchange their experiences and views concerning firm policies and procedures. d) Provide reasonable assurance that staff personnel will have the knowledge required to enable them to fulfill responsibilities. 10. A procedure in which a quality control partner periodically tests the application of quality control procedures is most directly related to which quality control element? A. Engagement performance. B. Human resources. C. Leadership responsibilities for quality with the firm. D. Monitoring 11. A requirement that working papers be reviewed by the supervisor, and any deficiencies be discussed with the preparer is an example of a quality control procedure in the area of: A. Acceptance and continuance of client relationships and specific engagements. B. Engagement performance. C. Human resources. D. Relevant ethical requirements. 12. The body that issues international pronouncements providing auditing procedural and reporting guidance is the: A. International Federation of Auditors. B. Multinational Reporting Commission. C. International Auditing and Assurance Standards Board. D. Auditing Standards Board. 13. A CPA firm establishes quality control policies and procedures for deciding whether to accept a new client or continue to perform services for a current client. The primary purpose for establishing such policies and procedures is: A. To enable the auditor to attest to the integrity or reliability of a client. B. To comply with the quality control standards established by regulatory bodies. C. To minimize the likelihood of association with clients whose managements lack integrity. D. To lessen the exposure to litigation resulting from failure to detect fraud in client financial statements. 14. A peer review in which the peer reviewers study and appraise a CPA firm's system of quality control to perform accounting and auditing work is referred to as a(n): A. Engagement review. B. Inspection review. C. Supervision review. D. System review. Score on 1st Try: ____________ Answer Key: 1.D 2.C 3.A 4.D 4|Page 5.D 6.D 7.C 8.C Score on 2nd Try: ____________ 9.D 10.D 11.B 12.C Score on 3rd Try: ____________ 13.C 14.D Which of the following is an element of quality control for a CPA firm?The quality control policies and procedures applicable to a firm's accounting and auditing practice should encompass the following elements: Independence, Integrity, and Objectivity. Personnel Management. Acceptance and Continuance of Clients and Engagements.
Which of the following is an element of a CPA firms quality control system that should be considered in establishing its quality control policies and procedure?The six interrelated elements of quality control are: human resources, engagement/client acceptance and continuance, leadership responsibilities, performance of the engagement, monitoring, and ethical requirements.
What should typically be included as a component of a CPA?These include budgeting, preparation of the financial statement, risk management, estate planning, cash management, financial planning, insurance coordination, and investment guidance.
Which section of the aicpa professional standards defines the elements of a system of quality control?AU-C section 220, Quality Control for an Engagement Conducted in Accordance With Generally Accepted Auditing Standards, for example, addresses quality control procedures for engagements conducted in accordance with generally accepted auditing standards.
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