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Introductory Case Exercise 1

The document provides an overview of quality control standards at an audit firm and evaluates the firm's existing procedures against those standards. It finds that while the firm's leadership responsibilities and human resources policies meet some requirements, its procedures for acceptance of clients, engagement performance, and monitoring could be strengthened, such as by establishing frameworks for specialized evaluations and documentation of quality control reviews. The conclusion is that additional policies and documentation are needed to fully comply with quality standards.

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42 views

Introductory Case Exercise 1

The document provides an overview of quality control standards at an audit firm and evaluates the firm's existing procedures against those standards. It finds that while the firm's leadership responsibilities and human resources policies meet some requirements, its procedures for acceptance of clients, engagement performance, and monitoring could be strengthened, such as by establishing frameworks for specialized evaluations and documentation of quality control reviews. The conclusion is that additional policies and documentation are needed to fully comply with quality standards.

Uploaded by

Xena Natividad
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Introductory Case

Exercise 1

To: DeAnna Malott


From:
Date:
Re: Quality Control Standards at Abernethy and Chapman

Overview: [Give a brief overview of the procedures that you performed]

Evaluation: [Complete the table below]

Standard Existing Procedures Recommendations Additional Information Needed


Leadership the partners head the engagement According to PSQC 1 the firm shall in order to have quality-oriented
responsibilities team and supervise the audit system establish policies and procedures internal culture, all level of the firm's
designed to promote an internal culture management must give clear,
recognizing that quality is essential in consistent and frequent actions and
performing engagements. messages.
Relevant ethical The firm has a policy that requires all according to PSQC 1, The employees if there are threats , firm should take
requirements employees to sever all financial ties to are not required to sever all ties but appropriate actions to eliminate or
audit clients. instead are to identify and evaluate reduce those threats by applying
relationship that create threats to safeguard. For example, the audit team
independence to an acceptable level that handles certain client should be
shifted from time to time.
Acceptance and Firm is engaging into new marketing the firm must consider the integrity of the firm should seek information from
continuation of clients strategies like publishing the client, and does not have predecessor auditor if the client permits
advertisements and periodicals to information that would lead it to to do so.
attract more clients conclude that the client lacks integrity.
The firm might need to set up a
Human resources the firm has policies in hiring firm ought to consider changing its framework in which specialized
professional such as : methodology to determine which kind evaluations can be done after every
college graduate major in accounting , of training they require for the forty engagement.
,and with the license of certified public hour rule.
accountant.
once employed, must complete
40hours of continuing education.
and the promotions are guided by
seniority-at 2years, and technical
competence- performance.

Engagement The firm shall establish policies and The firm shall establish policies and
performance a consulting partner is required on procedures designed to provide it with procedures on documentation of the
each engagement to supervise and to reasonable assurance that appropriate engagement quality control review.
ensure that there is complet objectivity consultation takes place on difficult or
and competence in conducting each contentious matters.
audit.

The firm shall establish a monitoring Appropriate documentation relating to


Monitoring deanna Mallott, a partner, monitors the process. monitoring
quality control standards and human
resources policies of the firm

Conclusion: [Give a brief summary of the conclusion that you have determined based upon your procedures
)

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