Summary Chapter 2

  1. How are public accounting firms organized?
    Most accounting firms are set up as sole proprietorships or partnerships, although some are set up as limited liability partnerships.
  2. What are some of the largest public accounting firms?
    The four largest firms are Deloitte Touche, KPMG, PricewaterhouseCoopers, Ernst & Young
  3. What market forces ensure that audit and assurance engagements are completed to high standards of quality?
    The biggest threat is that a public accounting firm will be forced out of business due to legal liability. Provincial securities commissions and the CPAB are now involved to ensure that the quality of audits is high. Completion of audits to high ethical standards helps maintain the positive image of auditors. The use of technology in auditing, just as information technology has been adopted by other businesses, helps ensure the effective and efficient completion of audits.
  4. Which organizations develop and maintain the standards that public accountants use?
    In Canada, public accounting standards are the responsibility of the CICA. The CICA develops standards in consultation with many organizations and groups: other accounting organizations in Canada, CPAB, securities and exchange commissions, international and other national standard-setting organizations, individual PAs, and the business community.
  5. How are these standards enforced?
    Quality control inspections called practice inspections are conducted by the professional associations, the provincial institutes/ordre, and the CPAB.
  6. What is quality control, and how is it monitored?
    Quality controls are methods used by a public accounting firm to ensure that it meets its professional responsibilities. Table 2-3 describes some of the characteristics of quality control. Public accounting firms are required to have a quality control manual and to monitor and enforce their quality procedures. Feedback from practice inspections, such as those of the CPAB, help monitor quality controls so that public accounting firms can engage in continuing improvement.
Card Set
Summary Chapter 2
The Public Accounting Profession