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0 Introduction
1. The purpose of this International Standard on Quality Control (ISQC) is to establish
standards and provide guidance on a firms system of quality control for its practices in
the areas of audit, assurance and related services. This ISQC is to be read in conjunction
with Parts A and B of the IFAC Code of Ethics for Professional Accountants (the IFAC
Code). Additional standards and guidance on quality control procedures for specific types
of engagement are set out in other pronouncements of the International Auditing and
Assurance Standards Board (IAASB). ISA 220 Quality Control for Audit Engagements,
for example, establishes standards and provides guidance on quality control procedures
for audit engagements.
2. The firm should establish a system of quality control designed to provide it with
reasonable assurance that the firm and its personnel comply with professional standards
and applicable regulatory and legal requirements, and that reports issued by the firm or
engagement partners are appropriate in the circumstances.
3. A system of quality control is a process that consists of policies and procedures, including
monitoring, designed to achieve the objectives set out in paragraph 2 above.
4. This ISQC applies to all firms; however, individual firms are free to develop differing
policies and procedures suited to their particular circumstances provided they meet the
requirements of this ISQC. The nature, timing and extent of those policies and procedures
will depend on many factors, including the size and operating characteristics of the firm.

2.0 Requirements
2.1 Applying, and Complying with, Relevant Requirements
1. Personnel within the firm responsible for establishing and maintaining the firms
system of quality control shall have an understanding of the entire text of this ISQC,
including its application and other explanatory material, to understand its objective
and to apply its requirements properly.
2. The firm shall comply with each requirement of this ISQC unless, in the
circumstances of the firm, the requirement is not relevant to the services provided in
respect of audits and reviews of financial statements, and other assurance and related
services engagements.
3. The requirements are designed to enable the firm to achieve the objective stated in
this ISQC. The proper application of the requirements is therefore expected to provide
a sufficient basis for the achievement of the objective. However, because
circumstances vary widely and all such circumstances cannot be anticipated, the firm
shall consider whether there are particular matters or circumstances that require the
firm to establish policies and procedures in addition to those required by this ISQC to
meet the stated objective.

3.0 Elements of a System of Quality Control

The firm shall establish and maintain a system of quality control that includes policies
and procedures that address each of the following elements:
(a) Leadership responsibilities for quality within the firm.
The firm should promote an internal culture that recognizes that quality is
essential in performing engagements. Besides that develop, document and
implement quality control policies and procedures and communicate those quality
control policies and procedures to all engagement teams and others within the
firm who need to be aware of them; and give positive recognition to compliance
with its quality control policies and procedures, and set out an appropriate
disciplinary framework for non-compliance with those policies and procedures.

(b) Relevant ethical requirements.

The firm should establish policies and procedures designed to provide it with
reasonable assurance that the firm and its personnel comply with relevant ethical
requirements which means integrity, objectivity; professional competence and due
care, confidentiality, professional behavior; and technical standards.
(c) Acceptance and continuance of client relationships and specific engagements.
Policies and procedures should be established 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 the likelihood of association with a client whose management lacks
integrity is minimized. Establishing such policies and procedures does not imply
that a firm vouches for the integrity or reliability of a client, nor does it imply that
a firm has a duty to any person or entity but itself with respect to the acceptance,
rejection, or retention of clients. However, prudence suggests that a firm be
selective in determining its client relationships and the professional services it
will provide.
(d) Human resources.
A Firm shall establish policies and procedures designed to provide it with
Reasonable Assurance that it has sufficient Personnel with the competence,
capabilities and commitment to ethical principles necessary to perform
engagements in accordance with Professional Standards and applicable legal and
regulatory requirements; and enable the Firm or Engagement Partners to issue
reports that are appropriate in the circumstances.
(e) Engagement performance.
Policies and procedure should exists to ensure that the work performed by
engagement personnel meets applicable professional standards, regulatory,
requirements and the firms standards of quality. Example is the firms director of

accounting and auditing is available

for consultation and must approve all

engagement before their completion.

(f) Monitoring.
Policies and procedure should exists to ensure that the other quality control
elements are being effectively applied. Example is the quality control partners
must test the quality control procedure at least annually to ensure the firm is in

4.1 Issue that related to the quality control of firm : Can a Sole Practitioner Meet Quality
Control Standards?

The AICPA apparently believes a sole practitioner can comply with quality
control standards for an accounting and auditing practice. In its practice aid, Establishing
and Maintaining a System of Quality Control for a CPA Firm's Accounting and Auditing
Practice, it has included a section entitled, "System of Quality Control for a CPA Firm's
Accounting Practice--Sole Practitioner."
This practice aid, which has been revised for Statement on Quality Control
Standards No. 7, A Firm's System of Quality Control, identifies policies and procedures
for each of the six elements of quality control: 1) Leadership Responsibilities, 2)
Relevant Ethical Requirements, 3) Acceptance and Continuance of Clients, 4) Human
Resources, 5) Engagement Performance and 6) Monitoring.
The sole practitioners can easily modify this document by inserting their name
wherever reference is made to "Sole Practitioner, CPA" and they will have very own
quality control document! But is that all there is to it? Not quite. IQCS No. 7
requires documentation of compliance with a firm's quality control policies and
procedures. Required documentation is not just independence forms in administrative








that demonstrates on-the-job application of policies and procedures. A table in the back
of the practice aid identifies the likely location of the compliance documentation.

For a sole practitioner they can hold a planning meeting and "brainstorm"
potential risks of misstatements due to error or fraud a sole practitioner is they can plan
an engagement effectively by considering "what could go wrong?" issues while
completing a planning document or memorandum. Documenting the potential risks and
planned audit responses before fieldwork begins demonstrates compliance with audit
standards, whether done by an engagement team or by a sole practitioner.
To determine the solution how can a sole practitioner comply with the
requirement to review audit documentation when he/she has performed and documented
the auditing procedures is first, perform thorough self-review throughout the engagement
and/or as the final step before report issuance. The second step is documenting the selfreview by completing an Engagement Review Checklist or writing a memorandum
describing the self-review process and the responses to any findings.
The difficult thing is how can the sole practitioner find time to monitor quality
control and perform the required "inspections" of engagements is when an auditor plans
an engagement, one of the first steps is reviewing the prior year's audit documentation.
This review can be considered the sole practitioner's annual inspection of engagements.
With reference to a peer review procedural checklist, a sole practitioner can monitor
his/her own quality control procedures. Documenting findings and any necessary
corrective actions can demonstrate monitoring of quality control procedures for a few, or
even all, of a sole practitioners attest engagements.
Sole practitioner can prevent independence impairment from occurring due to a
"familiarity threat" described in the AICPA's Conceptual Framework for AICPA
Independence Standards when there in close or longstanding relationships with attest
clients, there is a risk a CPAs objectivity and professional skepticism may decrease. In
these circumstances, engagement documentation should be prepared that records the
details of all research and the use of outside consultants to solve accounting, auditing and
reporting problems.

By documenting compliance with quality control procedures in administrative files,

and in engagement files as work is being performed, a sole practitioner can effectively
and efficiently comply with quality control standards.
The advantages for this sole practitioner apply the quality control standard are with
quality control, inspection is intended to prevent faulty products reaching the customer.
This approach means having specially trained inspectors, rather than every individual
being responsible for his or her own work. Furthermore, it is thought that inspectors may
be better placed to find widespread problems across an organization.
In vice versa a major problem is that individuals are not necessarily encouraged
to take responsibility for the quality of their own work. Rejected product is expensive for
a firm as it has incurred the full costs of production but cannot be sold as the
manufacturer does not want its name associated with substandard product. Some rejected
product can be re-worked, but in many industries it has to be scrapped either way
rejects incur more costs,
A quality control approach can be highly effective at preventing defective
products from reaching the customer. However, if defect levels are very high, the
company's profitability will suffer unless steps are taken to tackle the root causes of the
The thing that we need for the necessity of quality control solution are that sole
proprietorship companies have realized that with proper quality control, a drastic
decrease in variation of processes and lesser reliance on resources becomes a distinct
possibility. Just as majority of processes have intricate, multiple steps, quality control is
also applicable on evaluation of products, services, or processes on different tiers.
Usually quality control operations are carried out by a well trained team of
professionals who are specifically hired to identify products and services that dont meet
the companys standards of quality. These standards are devised by the company, FDA, or
ISO to ensure that the business enterprise is conducted according to industry standards.

The primary objective of quality control solutions is to identify problems. Once a

problem is identified, the quality control team may demand a temporary halt in
production. This allows managers the time to figure out the occurrence of problems and
devise solutions.
In some cases, quality control teams may not take the extreme step of stopping
production of the entire batch; the team can decide on putting a stop on executing only a
certain set of processes in which a problem has occurred. Quality management software
is particularly used by the management to ensure that the research, analysis,
manufacturing, release, and implementation cycle of a product is tailored within the
boundaries of specific standards. This helps companies maintain and build upon their
existing systems..