Quality Control & Assurance Flashcards
7 cards from real Certified Public Accountant practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Quality Control & Assurance flashcards as text
Under SQCS No. 8, which element of a firm's quality control system addresses the acceptance and continuance of client relationships?
Answer: Acceptance and continuance of client relationships and specific engagements
SQCS No. 8 identifies acceptance and continuance of client relationships and specific engagements as a distinct quality control element.
A CPA firm's monitoring procedures reveal that several audit files lack required supervisory review sign-offs. The firm should FIRST:
Answer: Identify the root cause and remediate deficiencies in affected engagements
When monitoring reveals deficiencies, the firm must understand the cause and take corrective action, including reassessing whether prior reports are appropriate.
Which statement best describes the purpose of an engagement quality control review (EQCR)?
Answer: To provide an objective evaluation of significant judgments made by the engagement team
An EQCR is designed to provide an objective second review of significant judgments before the report is issued.
Under PCAOB standards, an engagement quality reviewer for a public company audit must have which characteristic?
Answer: Must not have participated in the engagement during the period under review
The PCAOB requires that the engagement quality reviewer be independent of the engagement, meaning they did not participate in the audit being reviewed.
A firm's quality control policy requires that all new audit clients be assessed for integrity. Which procedure best fulfills this requirement?
Answer: Contacting predecessor auditors and reviewing publicly available information about management
Assessing client integrity typically involves communicating with the predecessor auditor and reviewing public records about management's reputation.
Which of the following is a key difference between SQCS No. 8 (applicable to non-issuers) and PCAOB QC standards (applicable to issuers)?
Answer: PCAOB standards require concurrence by the engagement quality reviewer before the report is released; SQCS No. 8 does not mandate this
PCAOB standards require that the engagement quality reviewer concur before the audit report is issued, a more prescriptive requirement than SQCS No. 8.
A CPA firm discovers that a quality control deficiency resulted in an audit report that may be inappropriate. The firm's MOST important immediate action is to:
Answer: Evaluate whether to withdraw the report or take other remedial action
When a deficiency may have led to an inappropriate report, the firm must evaluate the situation and determine what remedial steps are required, including potential report withdrawal.