Safeguards to Prevent Ethics Rules Violations

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The Conceptual Framework for AICPA Independence Standards and Guide for Complying with Rules 102-505 identify seven threats to ethics rules violations. These pronouncements also discuss professional, client and CPA firm safeguards to eliminate or mitigate the threats. The quality control safeguard may be the most important for smaller CPA firms.

For smaller CPA firms, especially sole practitioners, meeting quality control standards for attest engagements is increasingly difficult. Staying abreast of new professional standards and providing for thorough internal reviews of engagement performance, for example, are essential ingredients for audit quality and among the most costly for smaller firms.

Increasing the focus on quality control, the AICPA issued SQCS No. 7 which became effective January 1, 2009. This quality control standard incorporated the requirements of previous standards and, among other things, requires documentation of compliance in firm administrative or engagement files. Fortunately, the AICPA has created a practice aid, Establishing and Maintaining a System of Quality Control for a CPA Firm's Accounting and Auditing Practice, which provides a framework for quality control documents for smaller firms. Creating a quality control document, and complying with its provisions, could be a primary safeguard against threats to ethics rules violations.

Please post your comments about what your CPA firm has done to comply with the new quality control standards. Do your think these standards are essential for audit quality? Do you think the standards eliminate or mitigate the threats to ethics rules violations?


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