Auditor's Professional Ethics and Responsibilities

10 Questions

Which of the following best describes an essential characteristic of a profession?

Acceptance of responsibility to the public

What is the most critical objective achieved by implementing a system of quality control in a CPA firm?

Providing reasonable assurance of conformity with professional standards

What is the primary goal of developing policies for professional development in an accounting firm?

Ensuring knowledge to fulfill assigned responsibilities

To which engagements do the Philippine Standards on Quality Control (PSQCs) apply?

All services under the AASC’s engagement standards

Who bears the ultimate responsibility for the overall quality of an audit engagement?

Engagement partner

For audits of listed entities, what is a necessary step before issuing the auditor's report?

All of the above

Why are quality control policies and procedures necessary when a CPA firm decides to accept a new client?

To avoid clients with management lacking integrity

Whose ultimate responsibility is it to lead quality within a CPA firm?

Chief executive officer or managing board of partners

Which aspect of quality control involves the CPA firm maintaining records of partners previously employed by clients?

Relevant ethical requirements

Policies ensuring sufficient personnel with the necessary competence and ethical commitment fall under which quality control element?

Human resources

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.