Apycom Java Applets
  Apycom Java Applets
 

Objective of this quality control element:

To establish criteria for deciding whether to accept or continue a client relationship and whether to perform a specific engagement for that client. Such policies and procedures should provide the firm with reasonable assurance that (a) the likelihood of associations with a client whose management lacks integrity is minimized, (b) the firm undertakes only those engagements that can be completed with professional competence, (c) the risks associated with providing professional services in particular circumstances are appropriately considered, and (d) an understanding with the client regarding the services to be performed is reached.

General Policies:

• Evaluation of Management Integrity
• Evaluation of Engagement
• Client Understanding

QC Document Sections:

Independence	Engagement Performance
Personnel Management	Monitoring
Acceptance and Continuance	Introduction to QC Document

Implementation: The firm implements this policy through the following procedures: 

1. Developing and maintaining a policies and procedures manual that contains policies and procedures relating to acceptance of prospective clients and the continuance of current clients. Such policies and procedures state that the firm’s clients should not present undue risks to the firm, including damage to the firm’s reputation.

   •  
   •  
2. Advising personnel that they are expected to be familiar with the firm’s policies and procedures for acceptance and continuance of clients.
   •  
   •  
3. Obtaining and evaluating information before accepting or continuing a client, as applicable:
   • Available information regarding the client and its operations from sources such as annual reports, interim financial statements, registration statements, Form 10-K, Form 8-K, other reports to regulatory agencies, enforcement actions by regulatory agencies, and income tax returns.
   • The nature and purpose of the services to be provided by making inquiries of client management.
   • Information regarding the client and its management and principals that may have a bearing on evaluating the client by making inquiries of third parties such as bankers, legal counsel, investment bankers, underwriters, and other members of the financial or business community who may have appropriate knowledge. Inquiries might also be made about management’s attitude toward compliance with outside regulatory or legislative requirements and the presence of reportable conditions, especially those that management is unwilling to correct. In certain circumstances, background checks by investigative firms are required.
   •  
   •  
4. Communicating with the predecessor accountant when required or suggested by professional standards. This communication also includes inquiries regarding the nature of any disagreements and other events required to be reported by Form 8-K, and whether evidence of "opinion shopping" exists.
   •  
   •  
5. Evaluating the information obtained regarding management’s integrity.
   •  
   •  
6. Additional implementation procedures, if desired by the firm
   •  
   •  

Top of Acceptance and Continuance
Top of Quality Control Document

Implementation: The firm implements this policy through the following procedures: 

1. Evaluating whether the practice office has obtained or can reasonably expect to obtain the knowledge and expertise necessary to enable it to perform the engagement, for example, through the use of another practice office’s resources.

   •  
   •  
2. Specifying conditions that require evaluation of a specific client or engagement, obtaining relevant information to determine whether the relationship should be continued, and establishing a time period for evaluations to be made (for example, continuance decisions should be made at least annually). Conditions include the following:
   • Significant changes in the client, for example, a major change in ownership, senior client personnel, directors, advisors, the nature of its business, or its financial stability.
   • Changes in the nature or scope of the engagement, including requests for additional services.
   • Changes in the strategic focus or composition of the firm, for example, the inability to replace the loss of key personnel who are particularly knowledgeable about a specialized industry, or the decision to discontinue services to clients in a particular industry.
   • The existence of conditions that would have caused the firm to reject the engagement had such conditions existed at the time of the initial acceptance. These conditions may include unreliable processes for making accounting estimates, questionable estimates by management, questions regarding the entity’s ability to continue as a going concern, and other factors that may increase the risk of being associated with the client.
   • Client delinquent in paying fees. (This may also affect the firm’s independence.)
   • Engagements for entities operating in highly specialized or regulated industries, including financial institutions and governmental entities, and engagements for employee benefit plans.
   • Engagements where there is a burdensome amount of hours required to complete the engagement.
   • Engagements for entities in the development stage.
   •  
   •  
3. Evaluating the information obtained regarding the acceptance or continuance of the client or engagement.
   • All information obtained about the client or the specific engagement is evaluated by the engagement partner and a recommendation is made regarding whether the client or engagement should be accepted or continued.
   • The engagement partner completes a client acceptance form and submits it to the practice office managing partner for approval.
   • The engagement partner signs a step in the planning program noting client continuance, and a form documenting client continuance is completed if conditions identified above (step 2) exist.
   • The firm’s quality control partner (or designated partner) is responsible for evaluating and approving the recommendation made by the engagement partner. In certain defined circumstances, such as new SEC engagements or high-risk engagements, documented acceptance or continuance decisions may also require the approval of the firm’s managing partner (or designated group of partners.).
   •  
   •  
4. Additional implementation procedures, if desired by the firm
   •  
   •  

Top of Acceptance and Continuance
Top of Quality Control Document

Implementation: The firm implements this policy through the following procedures: 

1. Requiring that all understandings with the client be in writing by obtaining an engagement letter for all engagements, thus minimizing the risk of misunderstandings regarding the nature, scope, and limitations of the services to be performed.

   •  
   •  
2. Additional implementation procedures, if desired by the firm
   •  
   •  

Top of Acceptance and Continuance
Top of Quality Control Document

(Version dated XX XX, XXXX)