Video: Quality Control

In this lesson, Nick Palazzolo discusses the importance of quality control in an accounting firm and the various elements that contribute to maintaining a high-quality audit process. The lesson covers the critical steps to take in case of a disagreement between the audit team and the quality control reviewer, highlighting the importance of policies and procedures established by the firm. Emphasis is placed on the importance of engagement acceptance and continuance, which includes reevaluating a client's integrity each year. Furthermore, the lesson delves into the six interrelated elements of quality control: human resources, engagement acceptance and continuance, leadership responsibilities, performance of the engagement, monitoring professional development, and ethical requirements. Overall, this lesson provides valuable insights into the factors that contribute to a robust quality control system within an accounting firm.

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Video Transcript

Instructor: Nick Palazzolo

Nick Palazzolo is head instructor of ExamPrep.ai CPA Review. Nick's teaching style is engaging & upbeat, combining practical Big 4 tax & assurance expertise with years of 1-on-1 coaching. His lessons are concise and emphasize what you need to know to pass. Whether you're a recent grad or working full-time, we’re confident you can conquer your CPA exams with Nick’s review.

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Okay, so quality control, what if there's a difference between the audit team who issued the opinion and the quality control reviewer? Well, the answer to that is we need to follow the accounting firm's policies and procedures. This is up to the firm to have their own policies and procedures because let's say the audit team says it's a clean opinion, the quality control reviewer comes in and says, yeah, no, there are problems. You cannot issue a clean opinion. It needs to be a modified opinion. Well, in that case, we'd follow the accounting firm's policies and procedures. The purpose of establishing these quality control policies and procedures for deciding whether to accept or continue. So that's an important point I want to bring up as well. You may have been, let's say, auditing this client for three years. It's acceptance and continuance. That's the process. It's not just acceptance. Even like I remember my time in public accounting, A and C, it's called A and C, acceptance and continuance. You want to see if, yes, once you accept the client, sure, everything's going great, but maybe over the years they start to lack integrity. You don't want to be associated with that. So every year you need to assess, has anything changed? You want to minimize the likelihood of associating with clients whose management lacks integrity. We've seen that before, but now we're discussing that it doesn't just happen right away in the beginning. It happens every year. Now we've got the six interrelated elements of quality control. They memorize these, sure, but they also make sense here. How do you ensure good quality? Well, human resources, that's important. Make sure you're hiring competent, quality people who are independent, engagement, acceptance, continuance, as we just talked about

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Engagement Planning, Understanding an Entity, & Understanding its Internal Control

Module: 2 Concepts, 36 Videos

Management's Responsibility for Disclosing Related Parties, Going Concern, Litigation, Estimates, & More Overview

1:09

Management's Responsibility for Disclosing Related Parties, Going Concern, Litigation, Estimates, & More Objectives

4:41

Introduction to Management's Representation and Responsibility

2:56

Reliance on Management Representations