CHAPTER7

SYSTEMOFQUALITYCONTROLFORPUBLIC
ACCOUNTANCYFIRMS
Questions
1.

Refer to page 292 of the textbook.

2.

Refer to pages 293 and 294 of the textbook.

3. Refer to pages 293 and 294 of the textbook.

4.

a.

Leadership responsibilities for quality within the firm

b.

Engagement performance

c.

Human resources

d.

Monitoring

e.

Human resources

f.

Relevant ethical requirements

g.

Acceptance and continuance of clients

h.

Leadership responsibilities for quality within the firm

i.

Engagement performance

Multiple Choice Questions

1.
2.
3.
4.
5.

A
D
D
B
C

6.
7.
8.
9.
10.

B
A
D
B
C

11.
12.
13.
14.
15.

D
B
C
C
D

16.
17.
18.
19.

C
B
C
D

7-2

Solutions Manual Public Accountancy Profession

Cases
1.

MORALES, CABRERA, & CO., CPAs

1.

a.
b.
c.

Hiring / Professional requirements

To ensure that personnel who will be performing audits have adequate
technical training and proficiency.
New accountants hired must have an accounting degree from an accredited
school.

2.

a.
b.
c.

Advancement / Professional requirements

To ensure personnel are qualified to do the tasks they are assigned.
An in-charge accountant must have served as a staff auditor on an audit in
the clients industry.

3.

a.
b.

Skills and Competence

To ensure that personnel continue to be updated on changes in accounting
or auditing standards.
Personnel will participate in forty hours of continuing education per year.

c.
4.

a.
b.
c.

Consultation
To ensure that personnel have access to persons with more experience in
dealing with problems they have encountered.
For each industry for which the office has a client, a specialist will be
identified.

5.

a.
b.
c.

Independence
To ensure that personnel meet PICPA guidelines for independence.
Firm personnel must list their investments. Personnel must report any stock
acquisitions.

6.

a.
b.
c.

Supervision
To ensure that work performed meets the firms standard of quality.
Staff personnel are to follow firm guidelines for working paper
development.

7.

a.
b.
c.

Inspection / Review
To verify that quality control procedures are being followed.
Inspect the audit programs for all engagements.

8.

a.
b.

Acceptance and retention of clients

To minimize the risk associated with clients.

System of Quality Control for Public Accountancy Firms

9.

c.

New clients must be investigated by a private investigative agency.

a.
b.

Assigning personnel to engagements

To ensure that personnel posses the degree of technical training and
proficiency required for an engagement.
To be eligible to be senior on an engagement, a person must have had
experience in the industry.

c.
2.

7-3

Auditing standards indicate that auditors should report major issues discussed with
the entitys management prior to being retained as auditor, including discussions
regarding the application of accounting principles and auditing standards.
Discussion of such matters may place pressure on the auditor to yield to
managements view. Making the audit committee members aware of such matters
should enable them to better monitor the auditors independence. Standards do not
preclude clients from making suggestions about audit staff. Clients frequently make
requests to have persons on the audit who have experience in the industry. If a client
requests that minority persons not be assigned to an audit, however, the auditor must
carefully consider the ethical implications of that request.

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Solutions Manual Public Accountancy Profession