Devil's in the details: SQCS No.7: A Firm's System of Quality Control.

• Author: Hein, Marcia J.
• Position: Auditingstandards

On Oct. 10, 2007, the AICPA Auditing Standards Board issued Statement on Quality Control Standards (SQCS) No. 7, A Firm's System of Quality Control, to replace all existing SQCS. The SQCS, which is effective Jan. 1, 2009, deals with a firm's quality control practices in the areas of audits, reviews, compilations and other attestation engagements. It also places an unconditional obligation on a firm to establish a system of quality control that is designed to provide reasonable assurance that a firm and its personnel comply with professional standards and applicable regulatory and legal requirements, and that the reports issued by the firm or engagement partners are appropriate in the circumstances.

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The objectives of SQCS No. 7 are not really different from previous quality control standards. The devil, however, is in the details. The new standard expands current standards and provides guidance consistent with international standards, particularly International Standard on Quality Control (ISQC) 1, Quality Control for Audit, Assurance and Related Services.

A Brief Reminder of Current SQCS

Like all professional standards (FASBs, SASs, SSARs, etc.), the SQCS apply to all CPAs and their firms. Just because these standards are tested only in firms having a system peer review does not mean that they do not apply to everyone else.

Current standards:

* Provide a general overview of a system of quality control.

* Establish five elements of quality control.

* Provide guidance for establishing policies and procedures for each of the quality control elements.

* Discuss techniques to administer a quality control system, such as assignment of responsibilities, communication and documentation of both the design and compliance with the quality control system.

The five elements of quality control are:

1. ) Independence, Integrity and Objectivity

2. ) Personnel Management

3. ) Acceptance and Continuance of Clients and Engagements

4. ) Engagement Performance

5. ) Monitoring

Policies and procedures are developed for each of the five elements. The type and number of policies is dependent on many factors, including the firm's size, structure, etc. Policies may be memorialized in a formal document, or they may be informal and communicated to the appropriate parties verbally.

How is SQCS No. 7 Different?

First and foremost, SQCS No. 7 is far more detailed than current standards. Right after the introduction and definition of a system of quality control are definitions of several terms, such as "accounting and auditing practice,"...