Video: Quality Control Policies and Requirements

This lesson covers the importance of quality control policies and requirements that CPA firms must adhere to when selecting and working with clients. It emphasizes the responsibility of the firm to have a well-established system of quality control procedures that aim to minimize the likelihood of client associations with those lacking integrity. Though a firm may not have an appropriate system of quality control, it can still be in compliance with professional standards when it comes to individual engagements. The lesson also addresses the different factors, such as firm size and cost-benefit analysis, affecting the nature and extent of a CPA firm's quality control procedures. Nick Palazzolo, CPA, shares his experience working with both large and small firms and how the size of the firm affects the implementation of quality control procedures.

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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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Quality control policies and requirements. CPA firms will have quality control policies and procedures. Remember, it is the responsibility of the firm to have their quality control and to have a process for client acceptance. We're not just going to accept every single person who comes along. These policies and procedures exist to minimize the likelihood of associations with clients whose management lacks integrity. Super important. We want to work with people who have integrity and we don't want to lack integrity ourselves. As we mentioned, firms are required to adopt these systems of quality control and mentioning anything twice, probably pretty important, I would take note of that. So the firms, it's their responsibility, plus they're required to do it. Quality control standards relate to the firm's practice as a whole and they apply to everything, auditing, attestation, accounting, review services. Now these generally accepted auditing standards relate to an individual engagement. Just repeating that, these standards apply to the practice as a whole. However, standards on how to conduct your audit, generally accepted auditing standards, relate to the individual engagement. Whereas you may have a standard process for no matter what engagement, yeah, we need to interview you, we need to see if you're a good client, we need to ask around and see if anyone has heard that you've committed fraud, but then how do we exactly audit a particular entity? That's going to be just related to that individual engagement. While a firm may have not adopted an appropriate system of quality control, it can still be in compliance, professional standards, as they relate to individual engagements. That's important because we may not be in compliance, we may not have an appropriate system of quality control, but we may be conducting individual engagements properly. That makes

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