Auditing: Professional and Legal Responsibilities

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Questions and Answers

Which of the following statements best describes why the CPA profession has deemed it essential to promulgate ethical standards and to establish means for ensuring their observance?

A requirement of most state laws calls for the profession to establish a code of ethics

An essential means of self-protection for the profession is the establishment of flexible ethical standards by the profession

A distinguishing mark of a profession is its acceptance of responsibility to the public (correct)

A requirement for a profession is the establishment of ethical standards that stress primarily a responsibility to clients and colleagues

A basic objective of a CPA firm is to provide professional services that conform with professional standards. Reasonable assurance of achieving this basic objective is provided through?

Compliance with generally accepted reporting standards

A system of quality control (correct)

A system of peer review

Continuing professional education

The objective of quality control mandates that a public accounting firm should establish policies and procedures for professional development which provide reasonable assurance that all entry-level personnel

Prepare working papers which are standardized in form and content

Develop specialties in specific areas of accounting

Have the knowledge required to enable them to fulfill responsibilities assigned (correct)

Will advance within the organization

The Philippine Standards on Quality Control (PSQCs) are to be applied to

All services that fall under the AASC’s engagement standards Signup and view all the answers

Who should take responsibility for the overall quality on each audit engagement?

Engagement partner Signup and view all the answers

For audits of financial statements of listed entities, the partner should:

All of the above Signup and view all the answers

The primary purpose of establishing quality control policies and procedures for deciding whether to accept a new client is to:

Minimize the likelihood of association with clients whose management lacks integrity Signup and view all the answers

The firm should establish policies and procedures designed to promote an internal culture based on the recognition that quality is essential in performing engagements. Such policies and procedures should require the firm's chief executive officer or, if appropriate, the firm's managing board of partners, to assume ultimate responsibility for:

Leadership responsibilities for quality within the firm Signup and view all the answers

In pursuing a CPA firm's quality control objectives, a CPA firm may maintain records indicating which partners or employees of the CPA firm were previously employed by the CPA firm's clients. Which quality control objective would this be most likely to satisfy?

Relevant ethical requirements Signup and view all the answers

Which element of quality control is addressed by the establishment of policies and procedures designed to provide the firm with reasonable assurance that it has sufficient personnel with the competence, capabilities and commitment to ethical principles?

Human resources Signup and view all the answers

Study Notes

Auditor's Professional and Legal Responsibilities

The CPA profession has deemed it essential to promulgate ethical standards and establish means for ensuring their observance because a distinguishing mark of a profession is its acceptance of responsibility to the public.

Quality Control on Audit

A basic objective of a CPA firm is to provide professional services that conform with professional standards, and reasonable assurance of achieving this basic objective is provided through a system of quality control.
The objective of quality control mandates that a public accounting firm should establish policies and procedures for professional development, which provide reasonable assurance that all entry-level personnel have the knowledge required to enable them to fulfill responsibilities assigned.
The Philippine Standards on Quality Control (PSQCs) are to be applied to all services that fall under the AASC's engagement standards.

Engagement Quality Control Reviewer

The engagement partner is responsible for taking overall quality on each audit engagement.
For audits of financial statements of listed entities, the partner should determine that an engagement quality control reviewer has been appointed, discuss significant matters arising during the audit engagement with the engagement quality control reviewer, and not issue the auditor's report until the completion of the engagement quality control review.

Quality Control Policies and Procedures

The primary purpose of establishing quality control policies and procedures for deciding whether to accept a new client is to minimize the likelihood of association with clients whose management lacks integrity.
The firm's chief executive officer or managing board of partners should assume ultimate responsibility for the firm's system of quality control, including leadership responsibilities for quality within the firm.
Quality control policies and procedures should require the firm to maintain records indicating which partners or employees of the CPA firm were previously employed by the CPA firm's clients, to satisfy the quality control objective of acceptance and continuance of clients and engagements.

Human Resources and Ethical Requirements

Establishing policies and procedures designed to provide the firm with reasonable assurance that it has sufficient personnel with the competence, capabilities, and commitment to ethical principles addresses the human resources element of quality control.
The firm's quality control policies and procedures should promote an internal culture based on the recognition that quality is essential in performing engagements, and require the firm's chief executive officer or managing board of partners to assume ultimate responsibility for the firm's system of quality control.

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Description

This quiz covers the professional and legal responsibilities of auditors, including ethical standards and quality control measures.