Table23ElementsofQualityControl

Table2-3Elements of Quality Control Element Summary of Requirements Example of a Procedure Leadership responsibilities for quality within the firm (“tone at the top”) The firm should promote a culture that quality is essential in performing engagements and should establish policies and procedures that support that culture. The firm’s training programs emphasize the importance of quality work, and this is reinforced in performance evaluation and compensation decisions. Relevant ethical requirements All personnel on engagements should maintain independence in mind and in appearance, perform all professional responsibilities with integrity, and maintain objectivity in performing their professional responsibilities. Each partner and employee must answer an “independence questionnaire” annually, dealing with such things as stock ownership and membership on boards of directors. Acceptance and continuation of client relationships and specific engagements Policies and procedures should be established for deciding whether to accept or continue a client relationship or specific engagement. These policies and procedures should minimize the risk of associating with a client whose management lacks integrity. The firm should also only undertake engagements that can be completed with professional competence. A client evaluation form, dealing with such matters as predecessor auditor comments and evaluation of management, must be prepared for every new client before acceptance. Human resources Policies and procedures should be established to provide the firm with reasonable assurance that All new personnel should be qualified to perform their work competently. Work is assigned to personnel who have adequate technical training and proficiency. All personnel should participate in continuing professional education and professional development activities that enable them to fulfill their assigned responsibilities. Personnel selected for advancement have the qualifications necessary for the fulfillment of their assigned responsibilities. Each professional must be evaluated on every engagement using the firm’s individual engagement evaluation report. Engagement performance Policies and procedures should exist to ensure that the work performed by engagement personnel meets applicable professional standards, legal and regulatory requirements, and the firm’s standards of quality. The firm’s director of accounting and auditing is available for consultation and must approve all engagements before their completion. Monitoring Policies and procedures should exist to ensure that the other quality control elements are being effectively applied. The quality control partner must test the quality control procedures at least annually to ensure the firm is in compliance.