Certified Public Accountant Quality Control & Assurance 4 — Questions and Answers
Question 1: Under PCAOB AS 2101, which of the following must be included in an audit plan for a public company?
- The audit fee agreed upon with the client
- The planned nature, timing, and extent of risk assessment procedures (Correct answer)
- A listing of all audit committee members and their qualifications
- The engagement partner's assessment of the prior year's quality control findings
Correct answer: The planned nature, timing, and extent of risk assessment procedures
AS 2101 requires the audit plan to document the planned risk assessment procedures, further audit procedures, and other planned procedures.
Question 2: Which of the following BEST describes 'peer review' as it relates to CPA firm quality control?
- An internal review by a senior partner of a junior partner's audit files
- An external review of a firm's quality control system and selected engagements by another CPA firm or review team (Correct answer)
- A PCAOB inspection of a registered public accounting firm
- An audit committee's review of the external auditor's performance
Correct answer: An external review of a firm's quality control system and selected engagements by another CPA firm or review team
Peer review is an external evaluation of a firm's QC system and engagement files conducted by an independent CPA firm or team, required for AICPA member firms.
Question 3: A firm's quality control policies state that engagement partners must approve any change to materiality after fieldwork begins. This policy primarily addresses which QC element?
- Human resources
- Engagement performance (Correct answer)
- Monitoring
- Acceptance and continuance
Correct answer: Engagement performance
Policies governing how audit procedures are performed and supervised — including materiality decisions — fall under the engagement performance element.
Question 4: Which of the following situations would MOST likely impair the independence of an engagement quality control reviewer?
- The reviewer is a partner in a different practice group than the engagement partner
- The reviewer provided consultation on a significant accounting issue during the engagement (Correct answer)
- The reviewer has auditing expertise in the client's industry
- The reviewer is located in a different city than the engagement team
Correct answer: The reviewer provided consultation on a significant accounting issue during the engagement
If the EQCR reviewer provided significant consultation during the engagement, they effectively participated in the audit, impairing their ability to review it objectively.
Question 5: Under AICPA standards, a CPA firm enrolled in an approved peer review program must undergo peer review at least every:
- Year
- Two years
- Three years (Correct answer)
- Five years
Correct answer: Three years
AICPA standards require firms enrolled in the peer review program to undergo peer review once every three years.
Question 6: A firm's quality control manual states that all staff must complete 40 hours of CPE annually in auditing and accounting topics. This requirement is BEST classified under which QC element?
- Monitoring
- Engagement performance
- Human resources (Correct answer)
- Relevant ethical requirements
Correct answer: Human resources
CPE requirements for staff competency are part of the human resources element, which governs development and training of firm personnel.
Question 7: When evaluating whether to accept a new client in a highly regulated industry, a CPA firm should consider all of the following EXCEPT:
- Whether the firm has personnel with relevant industry expertise
- The prospective client's fee payment history with other service providers (Correct answer)
- The prospective client's reputation and integrity of management
- Whether the engagement can be staffed within the firm's current capacity
Correct answer: The prospective client's fee payment history with other service providers
While fee payment history with other providers may be marginally relevant, it is not a standard factor in client acceptance; the key considerations are competence, integrity, and capacity.
Certified Public Accountant Quality Control & Assurance 4
Under PCAOB AS 2101, which of the following must be included in an audit plan for a public company?