The American Institute of CPAs (AICPA) has released a practice aid for accounting firms that conduct audits of publicly-owned companies. It expects some of these firms will be taking on increased numbers of new publicly traded clients and professional staff following the Enron collapse. The aid is entitled “Assessing the Effect on a Firm's System of Quality Control Due to a Significant Increase in New Clients and/or Experienced Personnel.”
"In the wake of Enron, many SEC registrants have changed auditors," said Robert J. Kueppers, Chair of the SEC Practice Section. "The resulting influx of new clients and personnel in a short period of time may require a given firm to pay special attention to its quality control systems. We encourage firms to use this guidance to review their systems."
The guidance draws from existing professional standards established by the AICPA and covers the elements of a firm's quality control system that conceivably could be affected by the addition of new clients or personnel including:
- Personnel management, including audit partner rotation and concurring partner review
- Acceptance and continuance of clients and engagements
- Engagement performance, including the completion of audits in progress, re-audits, quarterly reviews, issuance of comfort letters and discovery of possible misstatements in financial statements reported on by a previous auditor
- Quality-control monitoring
Download the practice aid.