PSQC1
LEADERSHIP RESPONSIBILITY
CEO/Managing BOPs
-
Person
assigned
to
operational
responsibility for QC
Should have sufficient experience and
necessary authority
Necessary authority
-
Enables
responsible
implement the policies
person
to
ETHICAL REQUIREMENTS
-
Emphasis
should
be
made
on
fundamental
principles
such
as
leadership of the firm, education,
monitoring
compliance
&
dealing
w/
non-
Independence requirements
-
Firm Capability,
competence
CONTINUANCE
engagements
If
there
are
issues
continuance/acceptance,
how
issues
are
resolved
should
documented
in
the
be
Client Integrity
Considerations:
1. Identify business reputation
2. Nature of client operations
3. Information if company has matters of
aggressive interpretation of AS and its
internal control envi
4. If client is interested in making fees as
low as possible
5. Inappropriate limitations in scope of
work
6. If client is involved in money
laundering or other criminal activities
&
ACCEPTANCE
AND
PROCEDURES
Only
undertake/continue
where firm:
time
Considerations:
Familiarity Threats
-
competence,
HR
-
Issues:
1. Recruitment
- Procedures that help the firm select
individuals w/ the capacity and
competence to perform firms work
- Methods to develop competence:
o Prof education
o CPE
o Work experience
o Coaching
2. Performance Evaluation
- Procedures that give due recognition
and reward to development of
competence and commitment to
ethical principles
Steps:
o Make personnel aware of firm
expectation
o Provide personnel w/ evals and
counseling
o Help personnel understand that
advancing to higher positions
depends on performance and
adherence to ethics and failure
to comply may result to
disciplinary action
The size of the firm influence
performance eval. Ex. Smaller firms
may apply less formal performance
eval.
3. Assignment of engagement teams
- Firm should assign responsibility to a
partner. PSQC1 requires that:
o Role of engagement partner is
communicated to key members
of client management & those
w/ governance
o Engagement partner should
have appropriate capabilities
o Responsibility of partner should
be communicated to him
o Firm should assign appropriate
staff w/ necessary capabilities
o Capabilities and competence
should
be
considered
in
assigning engagement teams
and
determining
level
of
supervision
Considerations regarding
engagement teams
assignment
o
o
o
o
o
Includes:
o Tracking
progress
of
engagement
o Considering
capabilities
of
engagement team
o Addressing significant issues
and modifying the planned
approach appropriately
o Identifying
matters
of
consultation
of
Consultation
-
Ensures that:
o Appropriate consultation takes
place in difficult matters
o Resources are available to
enable appropriate consultation
Nature
and
scope
of
consultation is documented
o Conclusion from consultation is
documented and implemented
Involves discussion w/ individuals, w/in
or outside the firm, who have the
expertise to resolve difficult matter
Recognized as a strength
o
External Consultants
-
Documentation of Consultation
-
Differences in opinion
-
Examples:
Passwords
Back-up routines
Process of properly
distributing,
processing
and
collating
documentation
Restricting access
and proper storage
of
hard
copy
documentation
1. Firms independence
2. Significant
risks
identified
and
responses
3. Judgements made
4. If consultations are done to resolve
differences in opinion and the
conclusions made
5. The significance and dispositions
corrected
and
uncorrected
misstatements identified
6. Matter to be communicated to
management, those charged with
governance and regulatory bodies
7. Whether working papers selected
reflect the work performed and
conclusion reached
8. The appropriateness of the report
o
o
Inspections
-
and
has
and
and
in
Responsibility
of
monitoring
is
entrusted by the firm to partner/s or
other persons w/ sufficient experience
and authority to assume responsibility
Matters considered include:
o Analysis of:
New developments in
professional
standards
and reqs. And how they
are reflected in firms
policies
Written confirmation of
compliance on policies on
independence
CPE
Decisions
regarding
acceptance
and
continuance
Determination
of
corrective
actions to be taken and
improvements to be made in
the system
Communication of weaknesses
found to firm personnel
Follow-up by personnel so that
necessary modifications are
promptly made
Possible recommendations
Take remedial action to
an
individual
engagement/member of
personnel
Communication of finding
to in charge of training
Changes in QC policies
Disciplinary
action
to
those fail to comply
Where results indicate that reports
may
be
inappropriate
during
engagement, firm should determine
further action to comply. It should also
consider legal advice.
o
At
least
annually,
firm
should
communicate results of monitoring its
QC system to engagement partner
and managing BOPs
Info communicated include:
o Description
of
monitoring
procedure performed
o Conclusions drawn
o Description
of
systemic,
repetitive deficiency and actions
taken to resolve it
Network firms
-
Ethics
-
Bedrock of profession
When ethics is lacking, the foundation
of the profession crumbles
Professional
-
Professional competence
-
Diligence
-
AND
Fundamental Principles:
A
professional
accountant
should take steps to ensure that
those
working
under
his
authority
have
appropriate
training and supervision
A
professional
accountant
should make clients, employers
etc. aware of the inherent
limitations of services.
Appropriate disclosures
-
threat
that
accountant
will
promote
clients/employers position to the
point
where
objectivity
is
compromised
4. Familiarity threats threat that due to
a close relationship , accountant will
be too sympathetic
5. Intimidation threat threat that
accountant may be deferred from
acting
objectively
because
of
actual/perceived pressures
Safeguards
1. Created by profession, legislation or
envi
a. Educational,
training
&
experience req for entry to
profession
b. Continuing prof devlpt reqs
c. Corporate
governance
regulations
d. Prof standards
e. Prof regulatory and monitoring
f. External review by legally
empowered 3rd party
2. In the work environment
3. Safeguards
that
may
increase
likelihood
of
deterring
unethical
behavior
a. Complaints system to draw
attention to unethical behavior
b. Duty to report breaches in
ethical reqs
Ethical conflict resolution
Factors to consider when deciding whether to
initiate formal/informal conflict resolution:
-
Facts
Ethical issues involved
Fundamental principles related
Established internal procedures
Intimidation threats
-
Self-interest
Self-review threat
-
issuing
assurance
report
on
effectiveness
of
systems
after
designing the system
preparing original data that will be
used
generate
records
in
the
engagement
member of AT recently director/officer
of client
member of AT recently employed by
client to a position that influences
subject matter
performing service to client that
directly affects subject matter
Advocacy Threat
-
Familiarity threats
Threatened
with
dismissal
from
engagement
Client will not award a planned
nonassurance contract if firm disagree
Threatened with litigation
Pressured to reduce work done by
client to reduce fees
Accountant feeling pressured because
client has more expertise
Accountant being informed by partner
that planned promotion will not occur
unless he/she agrees
Safeguards
Engagement-specific safeguards
-
Firm-wide safeguards
-
Safeguards
procedures
-
w/in
clients
systems
and