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QC Document Sections:

Independence	Engagement Performance
Personnel Management	Monitoring
Acceptance and Continuance	Quality control document for a regional / local firm

Objective of This Element of Quality Control: 

To provide the firm with reasonable assurance that personnel maintain independence (in fact and in appearance) in all required circumstances, perform all professional responsibilities with integrity, and maintain objectivity in discharging professional responsibilities.

Implementation: The firm (sole practitioner) implements this policy through the following procedures: 

1. Purchasing AICPA Professional Standards annually.

2. Reviewing unpaid fees from clients to ascertain whether any outstanding amounts impair the firm’s independence.
3. Reviewing relevant pronouncements relating to independence, integrity, and objectivity in the Journal of Accountancy and retaining copies of them.
4. Signing a step on each engagement program attesting to her independence and requiring per diem personnel to do the same.
5. Complying with Statements on Standards for Accounting and Review Services with respect to disclosing instances where the firm is not independent in the accountant’s compilation report.
6. Additional implementation procedures, if desired by the firm:
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Objective of This Element of Quality Control:

To provide the firm with reasonable assurance that all personnel have the proficiency to perform their assigned responsibilities. Attributes or qualities that enhance the proficiency of personnel who perform, supervise, or review work include integrity, objectivity, intelligence, judgment, competence, experience, and motivation.  For sole practitioner, this objective is usually met by implementing policies related to:

• Maintenance of technical proficiency
• Participation in continuing professional education

Personnel Management: Maintenance of Technical Proficiency

Policy Statement: I will maintain the degree of technical training and proficiency required in the circumstances.

Implementation: The firm (sole practitioner) implements this policy through the following procedures: 

1. Evaluating the knowledge and expertise required to perform the engagement prior to accepting the client or engagement.

2. Accepting only those engagements that can he performed with professional competence.
3. Additional implementation procedures, if desired by the firm
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Personnel Management: Participation in Continuing Professional Education

Implementation: The firm (sole practitioner) implements this policy through the following procedures: 

1. Developing a professional development program and considering the requirements of the AICPA and state hoards of accountancy.

2. Participating in external professional development programs, including graduate-level and self-study courses.
3. Joining and becoming an active member of professional organizations.
4. Serving on professional committees, writing for professional publications, when appropriate, and participating in other professional activities.
5. Considering changes in the applicable professional standards when determining her professional development program.
6. Additional implementation procedure, if desired by the firm
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Objective of This Element of Quality Control:

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

Acceptance and Continuance: Evaluation of Management Integrity

Policy Statement: I will evaluate factors that have a bearing on management's integrity.

Implementation: The firm (sole practitioner) implements this policy through the following procedures: 

1. Obtaining information such as the following before accepting or continuing a client:
   • Available information regarding the client and its operations from sources such as prior-year reports, internally generated financial statements (if applicable), income tax returns, and credit reports.
   • The nature and propose of the services to he provided.
2. Inquiring of third parties such as bankers, factors, or legal counsel.
3. Communicating with the predecessor accountant when required or suggested by professional standards.
4. Evaluating the information obtained regarding management’s integrity.
5. Additional implementation procedures, if desired by the firm
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Acceptance and Continuance: Evaluation of Ability to Perform Engagement Competently and Consider Associated Risks

Policy Statement: I will evaluate whether the engagement can be completed with professional competence and accordingly undertake only those engagements that can be completed with professional competence and appropriately consider the risk associated with providing professional services in particular circumstances.

Implementation: The firm (sole practitioner) implements this policy through the following procedures: 

1. Considering conditions that require evaluation of a client or specific engagement and obtaining the relevant information to determine whether the relationship should be continued. Conditions include:

   • Establishing a time period for evaluation to be made (before the current year engagement work begins).
   • Significant changes in the client, for example, a major change in ownership, senior client personnel, directors, advisors, the nature of the business, or the financial stability of the client.
   • Changes in the nature or scope of the engagement, including requests for additional services.
   • The existence of conditions that would have caused the firm to reject the client or engagement had such conditions existed at the time of the initial acceptance.
   • Client delinquent in paying fees. (This may also affect the firm’s independence.)
2. Determining if the knowledge and expertise necessary to perform the engagement exists or can reasonably be obtained.
3. Evaluating the information obtained regarding the engagement and making the acceptance decision and documenting her evaluation or conclusion in a memorandum.
4. Evaluating the information obtained regarding the engagement and making the continuance decision.
5. Additional implementation procedures, if desired by the firm
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Acceptance and Continuance: Client Understanding

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

1. Adhering to all requirements set forth in professional standards regarding obtaining an understanding with the client.

2. Requiring that the understanding with the client be documented either through an engagement letter or in a memorandum.
3. Additional implementation procedures, if desired by the firm
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Objective of This Element of Quality Control:

To provide the firm with reasonable assurance that the work performed by engagement personnel meets the applicable professional standards, regulatory requirements, and the firm's standards of quality. Policies and procedures for engagement performance encompass all phases of the design and execution of the engagement. To the extent appropriate and as required by applicable professional standards, these policies and procedures should cover planning, performing, supervising, reviewing, documenting, and communicating the results of each engagement. Policies and procedures should also provide that personnel refer to authoritative literature or other sources and consult, on a timely basis, with individuals within or outside the firm when appropriate (for example, when dealing with complex, unusual, or unfamiliar issues).

General Policies:

• Planning

• Performance, Documentation and Review

• Consultation

Engagement Performance: Planning

Policy Statement: I will plan engagements to meet professional, regulatory, and the firm's requirements.

Implementation: The firm (sole practitioner) implements this policy through the following procedures: 

1. Adhering to professional standards regarding the planning process and the extent of documentation, if applicable. Engagement planning considerations may include, when applicable:

   • Developing or updating background information.
   • Obtaining an engagement letter.
   • Reviewing prior financial statements and accountant’s report.
   • Using work programs.
2. Additional implementation procedures, if desired by the firm
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Engagement Performance: Performance, Documentation and Review

Policy Statement: I will perform, supervise, review, document, and communicate in accordance with the requirements of professional standards, regulatory authorities, and the firm.

Implementation: The firm (sole practitioner) implements this policy through the following procedures: 

1. Requiring the use of purchased practice aids on all appropriate engagements including

   • Maintaining availability of purchased practice aids and AICPA professional standards.
   • Preparing all working papers and checklists in accordance with firm policy in order to document work performed in accordance with professional standards.
   • Reviewing and initialing all engagement working papers in situations where per diem staff are utilized.
2. Additional implementation procedures, if desired by the firm
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Engagement Performance: Consultation

Policy Statement: I will identify areas of specialized situations where consultation is required and will require personnel to refer to authoritative literature and practice aids and to consult, on a timely basis, with individuals within or outside the firm when appropriate (for example, when dealing with complex, unusual, or unfamiliar issues).

Implementation: The firm (sole practitioner) implements this policy through the following procedures: 

1. Maintaining a technical reference library to assist in resolving practice problems. The library is updated as needed.

2. Referring to the AICPA’s Technical Hotline when a practice problem arises for which the firm needs additional expertise.

3. Requiring that documentation of consultation include all relevant facts and circumstances and references to professional literature used in the determination and conclusion reached. This documentation is to be retained in the engagement working papers.
4. Additional implementation procedures, if desired by the firm
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To provide the firm with reasonable assurance that the policies and procedures relating to the other elements of quality control are suit-ably designed and being effectively applied. Monitoring is an ongoing consideration and evaluation process.

General Policies:

• Relevance and Adequacy of QC Policies and Procedures
• Appropriateness of Guidance Materials
• Effectiveness of Professional Development Programs
• Compliance with Policies and Procedures

Monitoring: Relevance and Adequacy of QC Policies and Procedures

Policy Statement: I will consider and evaluate, on an ongoing basis, the relevance and adequacy of its quality control policies and procedures.

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

1. Revise policies and procedures that are ineffective due to changes in professional standards or the nature of the practice.
2. Improve compliance with firm policies and procedures that are related to the other elements of quality control.
3. Additional implementation procedures, if desired by the firm
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Monitoring: Appropriateness of Guidance Materials

Policy Statement: I will consider and evaluate, on an ongoing basis, the appropriateness of its guidance materials and any practice aids.

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

1. Reviewing and determining that the firms purchased practice aids are up-to-date based on the issuance of new professional pronouncements.

   Additional implementation procedures, if desired by the firm

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Monitoring: Effectiveness of the Firm's Professional Development Programs

Policy Statement: The firm will consider and evaluate, on an ongoing basis, the effectiveness of professional development programs.

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

1. Reviewing CPE records to determine whether the programs (AICPA or state society classroom training and self-study programs) are appropriate for the firm’s practice.
2. Reviewing CPE records to determine compliance with the requirements of the AICPA and other regulatory bodies
3. Additional implementation procedures, if desired by the firm
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Monitoring: Compliance with Policies and Procedures

Policy Statement: The firm will consider and evaluate, on an ongoing basis, compliance with its policies and procedures.

Implementation: The firm implements this policy through the performance of the firm's annual inspection, which includes the following procedures: 

1. Summarize findings resulting from such reviews.
2. Place additional emphasis on certain deficient areas in future engagements.
3. Determine if existing policies and procedures should be modified so any deficiencies noted do not recur.
4. Additional implementation procedures, if desired by the firm:
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(Version dated XX XX, XXXX)

Peer Review Guide > QC Document: Sole practitioner with no professional staff