Question

Q.Discuss and define the followin six elements of quality control as it relates to a CPA firm:?

a)LEADERSHIP RESPONSIBILITIES FOR QUALITY WITHIN THE FIRM

b)RELEVANT ETHICAL REQUIREMENT

c)ACCEPTANCE AND CONTINUATION OF CLIENTS AND ENGAGEMENTS

d)HUMAN RESOURCES

e)ENGAGEMENT PERFORMANCE

f)MONITORING

Answer 1

The process of qulity control can be said to be a process to provide firm with reasonable assurance that its personnel comply with the applicable professional standards and the firm's standards of quality. The system of qalitycontrol should provide the firm with reasonabe assurance that the firms engagements are all working properly and accurately being carried on .Elements of quality control relating to a CPA firm -

a. Leadership responsibilities for quality within the firm : Such policies and procedures should be established which show out that quality is essential in perfomance of the clients engagements. Areas that need to be monitored would include managements communication regarding quality, documenting how management monitors the allocations of its responsibility etc.This will ensure that professional standards and requirements are adhered to, whether quality control is effectively implemented and whether quality control policies and procedures have been properly applied.

b. Relevant ethical requirement : Plicies and all such procedures which are designed and established should provide the firm with reasonable assurance that the personnel are working independently both independence in appearance and in fact. They should not involve themselves or be a part of any activities which are unethical . They should have integrity in the professional duties which they discharge.

c. Acceptance and continuation of clients and engagements: The firm has to be selective in determining its client relationship and the professional services that it provides to them. Such policies and procedures should be established by the firm which provide them with reasonable assurance with regard to integrity of the controls existing in clients firm. It has to consider the risks associated with accepting clients engagement .Professional standards will provide us with guidance in deciding whether the understanding of client should be oral or written.

d. Human Resources : The execution of quality control system is greatly affected by the knowledge and competence of the personnel that we employ, and how is their work supervised on a timely basis. The more competent and responsible personnel would lead to reduction in the supervision required, but supervision cannot fully be eliminated. It includes hiring i.e., the appropriate characteristics, assigning engagments i.e., assigned only to those possessing technical training and proficiency, professional development including the continuous personal growth , their continuing education etcand advancement activities of the personnel.

e. Engagement Performance : designing such policies and procedures which provide us with reasonable assurance about whether work performed meets the applicable professional standards, other regulatory requirments, also covering planning, performing, supervising and documenting of them.Policies and procedures should provide with reasonable assurance about whether personel refers to authoritative literature and other sources and consult on timely basis with individuals both inside and outside the firm. The once who are consulted should have appropriate levels of knowledge , competence, judgement and authority.

d. Monitoring :Monitoring involves ongoing consideration and evaluation of effectiveness of professional development, appropraiteness of firms guidane materials and relevance and adequancy of the firm's policies and procedures.