Question 1

Larger audits may have established procedures that utilize an audit committee whenever there is a dispute between management and the auditors.What is the purpose of such procedures?

Accepted Answer

The purpose of utilizing an audit committee whenever there is a dispute between management and the auditors is to facilitate the auditors' independence from management. An audit committee can act as an intermediary to help resolve any disagreements and ensure the auditor's objectivity and impartiality in conducting the audit. This is important to maintain the integrity and reliability of the audit process, as well as to enhance the credibility of the financial statements. A and D are not correct choices because the purpose of the procedure is not just to ensure that the auditors understand management's point of view or to help make sure the audit is conducted following GAAS. B is also not a correct choice as the procedure is not primarily aimed to improve the competence of the financial statement auditors.

Question 2

There are many elements of quality control at the firm level.Which element does "policies in place should include use of second or independent partner review,technical review,documentation,and compliance with quality control processes" relate to?

Accepted Answer

This element relates to engagement performance, as it specifically outlines policies to ensure quality control in the performance of engagements. Independent partner review, technical review, and compliance with quality control processes are all measures to ensure that engagements meet the firm's standards and requirements. Documentation is also important for quality control, but this specific policy relates more directly to the performance of engagements. Leadership responsibilities and human resources may also involve elements of quality control, but they are not specifically addressed in this policy.

Question 3

There are many elements of quality control at the firm level.Which element does "processes should exist for following up internal and external complaints" relate to?

Accepted Answer

The answer of There are many elements of quality control...

Question 4

There are many elements of quality control at the firm level.Which element does "employees should be adequately trained in the skills needed to conduct audits and reviews" relate to?

Accepted Answer

The element "employees should be adequately trained in the skills needed to conduct audits and reviews" relates to human resources in terms of ensuring that the workforce is sufficiently qualified and competent to carry out their responsibilities effectively. This involves providing appropriate training and professional development opportunities to maintain and enhance skills in audit and review practices.

Question 5

Stafford & Sandiford is a public accounting firm with 30 clients who are reporting issuers.Stafford & Sandiford can expect to be inspected by the CPAB

Accepted Answer

According to the CPAB's schedule of inspections, public accounting firms with 30 or more reporting issuer clients can expect to be inspected once every three years. Therefore, choice B is the best choice.

Question 6

22)A)Outline the reasons why provincial CPA organizations conduct practice inspections.
B)How often are these CPA practice inspections done?
C)What are the implications of these CPA practice inspections?

Accepted Answer

The answer of 22)A)Outline the reasons why provincial CPA organizations...

Question 7

For a CPA working as a sole practitioner or working in a small public accounting office,the provincial practice inspectors will likely come to review audit files

Accepted Answer

Provincial practice inspectors typically review audit files of CPA firms every three years. This is part of the regulatory and quality assurance process to ensure that the firm is following professional standards and guidelines. However, if there are concerns or issues identified, the frequency of review may increase.

Question 8

There are many elements of quality control at the firm level.Which element does "work assignments that match employee competence and performance evaluations related to audit quality" relate to?

Accepted Answer

This element relates to human resources, specifically the process of assigning work based on employee competence and evaluating employee performance as it relates to audit quality. This is an important aspect of ensuring that the right people are in the right roles, which is a key component of effective quality control.

Question 9

Jessica is a summer junior at Branes & Castle,a PA firm.Jessica has only completed three accounting courses in university and has not yet taken her auditing class.A team of auditors from Branes & Castle are starting an audit and Jessica was sent to help them.Jessica

Accepted Answer

Jessica can perform work for the audit engagement as long as she is supervised and her work is properly reviewed. As a summer junior, she is expected to receive on-the-job training and guidance from the more experienced members of the team. However, she should not be given responsibility for critical areas of the audit without sufficient knowledge or experience. Therefore, her work should be limited to areas where the risks are low, and her work should always be reviewed by a more experienced auditor.

Question 10

There are many elements of quality control at the firm level.Which element does "adequate processes and procedures should be in place to ensure that the audit or review is conducted in accordance with GAAS,that quality control procedures are followed for each engagement,and that the audit is appropriately documented" relate to?

Accepted Answer

This element relates to engagement performance, specifically the processes and procedures in place to ensure that audits or reviews are conducted in adherence to GAAS and quality control procedures, and that appropriate documentation is maintained.

Question 11

There are many elements of quality control at the firm level.Which element does "adequate hiring policies (and documentation of their implementation)that ensure competence and integrity of personnel" relate to?

Accepted Answer

The element of quality control that relates to "adequate hiring policies (and documentation of their implementation) that ensure competence and integrity of personnel" is human resources. This element focuses on the firm's policies and procedures for hiring and training personnel to ensure they have the necessary skills and knowledge to perform their jobs at a high level, as well as maintaining a culture of integrity within the organization.

Question 12

How do practice inspections affect the ability of a PA firm to have articling students work at the firm? Practice inspectors

Accepted Answer

Practice inspections review the ability of the office to provide sufficient and appropriate hours to articling students. This is an important factor in determining if the firm is suitable for articling students. The other choices are not directly related to the firm's ability to have articling students work there.

Question 13

Which of the following is a typical consequence to a PA or PA firm if practice inspectors find any files or quality control procedures to be unsatisfactory? The PA

Accepted Answer

If practice inspectors find any files or quality control procedures to be unsatisfactory, the PA may be required to revise processes or attend training courses to improve the quality of their work. Losing the right to conduct audit engagements or being barred from signing audit reports would be severe consequences and are unlikely to occur without repeated and serious violations. Rewriting professional qualification examinations is not an applicable consequence in this scenario.

Question 14

Dimitri works at a large public accounting firm.Dimitri referred one of his friends for a junior auditor position.Dimitri's friend was hired despite the fact that he had a criminal record.The partner at the firm did not perform a background check on Dimitri's friend since he was recommended by an employee.Which element of quality control has been compromised?

Accepted Answer

Human resources element of quality control has been compromised because the firm failed to perform due diligence in hiring, such as conducting a background check, which is a key part of ensuring the competence and integrity of personnel.

Question 15

Danford,a PA,is setting up his accounting firm as a sole practitioner.Which of the following is not an important way that Danford can reduce legal liability with respect to the work completed by his office?

Accepted Answer

The answer of Danford,a PA,is setting up his accounting firm...

Question 16

Gary West is a sole practitioner.He has conducted the audit of Reggie's Farm for the past 12 years.In the current year,Reggie's Farm expanded by acquiring two other farms,installed a new accounting system,and also started to export to the United States.Gary accepted the audit of Reggie's Farm for the upcoming year even though he has no experience with exports to the U.S.or companies the size of Reggie's Farm.Which element of quality control is compromised for Gary's firm?

Accepted Answer

The compromised element of quality control for Gary's firm is client acceptance or continuance. Gary fails to consider the expanded operations of Reggie's Farm and the potentially increased risk in accepting the audit engagement without ensuring he has the necessary competence and resources to perform the audit effectively. As a result, he may have compromised the quality of the audit and violated the client acceptance or continuance element of quality control.

Quiz 2:The Public Accounting Profession and Audit Quality