Providing GAQC Web Site Access to Staff and Firm URL Links

Designated Partner for Governmental Audit Quality

Q1	Can any of the firm partners be appointed as the designated audit quality partner (DAQP) with firm-wide responsibility for the firm’s governmental audit practice?
A1	Per note 1 of the membership requirements, a partner is defined as follows:   “…an individual who is legally a partner, owner or shareholder in a CPA firm or a sole practitioner and who performs audit services, concurring reviews (if applicable) or consultations on technical or industry-specific issues with respect to audit clients of the firm. Such individual should be party to any partnership, ownership or shareholder agreement of a CPA firm.”
Q2	How does a sole practitioner satisfy the requirement to designate an audit partner with firm-wide responsibility for the quality of the firm's governmental audit practice?
A2	A sole practitioner can be the designated partner with responsibility for the quality of his or her governmental audit practice.
Q3	The GAQC membership requirement states that the DAQP must be a partner, owner or shareholder in a CPA firm and that such individual should be party to any partnership, ownership or shareholder agreement of a CPA firm.  In the context of this requirement, can a firm’s non-equity CPA partner serve as the DAQP?
A3	Because each firm has so many different classes or levels of partners (such as non-equity partners) and the roles of those partners differ significantly from firm to firm, the GAQC will address this question on a case-by-case basis.  Therefore, you should contact the GAQC at GAQC@aicpa.org regarding situations where your firm would like to designate a non-equity partner to serve as the firm’s DAQP.  Ultimately, the GAQC Executive Committee shall determine whether the substance of the related GAQC membership requirement would be met with a non-equity DAQP candidate.  Such determination by the Executive Committee would be based on the characteristics and responsibilities of the non-equity partner.

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Required Center Webcast

Q4	Our Firm's DAQP was unable to view the live annual Center Webcast due to a scheduling conflict. What can our firm do to ensure we are in compliance with the membership requirement that our DAQP view the Webcast?
A4	The live annual Center Webcast is archived on the Governmental Audit Quality Center's (GAQC) Web site. You can click here to access the Webcast. The Center DAQP should follow the registration instructions for access to the archived Webcast and provide an e-mail address for identification purposes. We encourage the DAQP to view the archived Webcast as soon as possible to ensure that he or she has access to the latest governmental audit quality information. The Center staff will monitor all partners that view the archived Webcast.
Q5	Our firm recently joined the Center and noted that the required annual Center Webcast had already occurred.  How can our firm ensure we are in compliance with the membership requirement that our DAQP view the Webcast?
A5	Even though your firm joined the Center after the live version of the required annual Center Webcast, the DAQC must still view it (see the next question for an exception). The live annual Center Webcast is archived on the GAQC web site. You can click here to access the Webcast. The Center DAQP should follow the registration instructions for access to the archived Webcast and provide an e-mail address for identification purposes.  We encourage the DAQP to view the archived Webcast as soon as possible to ensure that he or she has access to the latest governmental audit quality information. The Center staff will monitor all partners that view the archived Webcast.
Q6	Assuming the firm has joined the Center after the live offering of the annual Center Webcast, how much time does the DAQP have to view the required Webcast?
A6	The DAQP should view the archived version of the annual center Webcast as soon as possible after the firm's enrollment in the Center. However, if the firm joins the Center within three (3) months of the next live offering of the annual Center Webcast, it is not necessary for the DAQP to go back and view the previous archived Webcast. The DAQP can meet the membership requirement in this case by viewing the next live offering of the annual Center Webcast or the related archived version.
Q7	Can the DAQP delegate the viewing of the required GAQC Annual Webcast Update to someone else?
A7	No. The membership requirements are designed to ensure that the DAQP has the best and latest information available to help ensure the quality of the firm's governmental audits. The DAQP is welcome to show the Webcast in an office or conference room so that other staff may view it at the same time.
Q8	Can staff members other than the DAQP view the Webcast?
A8	Yes.  It is a requirement for the DAQP to view the Webcast; however, we encourage the partner to invite other firm staff involved with governmental audits to view the Webcast. This can be accomplished in one of two ways. First, the DAQP can show the live offering of the annual Center Webcast in an office or conference room and invite other staff to watch. Second, staff of member firms can access the archived version of the Webcast via the GAQC Web site (see the section of this document titled “Providing GAQC Website Access to Staff and Firm URL Links” for further information).
Q9	Is continuing professional education (CPE) provided for the required Center Webcast?
A9	Yes.  The Center offers a CPE Option for DAQPs and member firm staff attendance at the live offering of the Webcast. Generally, to obtain CPE for participation in the live Webcast, DAQPs and their staff must register and purchase the CPE Option in advance of the Webcast.  There is no limit on the number of member firm staff participants using the CPE Option.  We also offer a No CPE Option at no cost for DAQPs that do not want the CPE. For the No CPE Option, there is no advance registration requirement.  Also, for the No CPE Option, member firms are limited to one Webcast participant, generally for the DAQP. However, DAQPs are welcome to invite others to their offices or a conference room to view the Webcast together.

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Required Internal Inspection Procedures

Q10	Will a firm's existing system of quality control satisfy membership requirement #6?
A10	In most cases, no. This requirement is intended to lead firms to do something extra in their system of quality control by focusing on the specific policies and procedures applicable to a firm's accounting and auditing practice for governmental audits. Firms that do not have inspection procedures specific to their governmental audit practice as a part of their normal monitoring procedures are required to implement such procedures.
Q11	What inspection procedures would a firm need to perform related to its governmental audit practice?
A11	The nature of inspection procedures will vary based on the firm's quality control policies and procedures and the effectiveness and results of other monitoring procedures. The adequacy of and compliance with a firm's system of quality control are evaluated by performing such inspection procedures as:   ·         Review of selected administrative and personnel records pertaining to the elements of quality control. ·         Review of governmental audit engagement working papers, reports, and clients' financial statements and related supplementary information (for example, the Schedule of Expenditures of Federal Awards). It should be noted that any firm that is a GAQC member is required in all instances to include in its inspection governmental audit engagements. ·         Discussions with the firm's personnel. ·         Summarization of the findings from the governmental audit inspection procedures, at least annually, and consideration of the systemic causes of findings that indicate improvements are needed. See the next question for an exception to performing the inspection in the year of the firm’s peer review. However, note that the firm is still required to perform the other required monitoring procedures and the findings thereof are to be summarized annually. ·         Determination of any corrective actions to be taken or improvements to be made with respect to the specific governmental audit engagements reviewed or the firm's quality control policies and procedures. ·         Communication of the identified findings to appropriate firm personnel, including the DAQP. ·         Consideration of inspection findings by appropriate firm personnel who should also determine that any actions necessary, including necessary modifications to the system of quality control, are taken on a timely basis.
Q12	Does the inspection need to be performed in the firm's peer review year?
A12	No. A peer review does not substitute for monitoring procedures. All firms are required by the Statements on Quality Control Standards to have in place a system to continually monitor their system of quality control and to measure their compliance with that system. One aspect of this monitoring is engagement inspections, however, since the objective of a peer review is similar to that of inspection procedures, a firm's quality control policies may provide that a peer review conducted under standards established by the AICPA may substitute for some or all of its inspection procedures for the period covered by the peer review.
Q13	How would a small firm with one audit partner or a sole practitioner satisfy membership requirement #6?
A13	In small firms qualified individuals (partners or managers) may inspect their own work (on a post issuance basis only), as long as the requirements of the AICPA's Quality Control Standards in QC Section 30, Paragraph 8, Sections A through D are met. That section states that post-issuance review procedures may constitute inspection procedures provided: ·         The review is sufficiently comprehensive to enable the firm to assess compliance with all applicable professional standards and the firm’s quality control policies and procedures. ·         Findings of such reviews that may indicate the need to improve compliance with or modify the firm's quality control policies and procedures are periodically summarized, documented, and communicated to the firm's management personnel having the responsibility and authority to make changes in those policies and procedures. ·         The firm's management personnel consider on a timely basis the systemic causes of findings that indicate improvements are needed and determine appropriate actions to be taken. ·         The firm implements on a timely basis such planned actions, communicates changes to personnel who might be affected, and follows up to determine that the planned actions were taken. Alternatively, some firms may choose to engage an outside-qualified inspector either annually or on a periodic basis.
Q14	How should the firm select the governmental audits to be inspected?
A14	The selection of engagements for inspection should be focused on the firm's governmental practice only (that is, not influenced by the size of the governmental practice in relation to the firm’s entire audit practice). The number of engagements selected for inspection should be sufficient to provide the inspector with a reasonable basis for concluding whether the firm's system of quality control for its governmental audit practice is properly designed, and whether it was being complied with during the year. Engagements selected for review should provide a reasonable cross section of the firm's governmental audit practice with emphasis on engagements that are considered to have higher risk. Examples of the factors to consider when selecting engagements to inspect are: a.      Type of organization (for example, state or local government, federal government, not-for-profit, and certain for-profit organizations that receive federal awards) b.      Types of audits (for example, all audits and attestation engagements performed under Government Auditing Standards; audits performed under the Single Audit Act Amendments of 1996 and OMB Circular A–133, Audits of States, Local Governments and Non-Profit Organizations; program-specific audits as defined under OMB Circular A–133; and other compliance audits and attestation engagements performed under various federal, state, or local agency audit guides.) c.      Experience of personnel assigned d.      Office where the engagement was performed e.      Whether it is the initial year of a governmental audit engagement. The number of practice offices selected for inspection should be sufficient to provide the inspector with a reasonable basis for concluding whether the firm's quality control policies and procedures for its governmental audit practice are adequately complied with throughout the firm. Greater emphasis should be placed on selecting those offices with higher risk. Factors to consider when selecting offices include: a.      The number, size, and geographic distribution of offices b.      The degree of centralization of control and supervision of the firm's governmental audit practice c.      Recently merged or recently opened offices.
Q15	Does the firm need to prepare a separate inspection report for the governmental audits inspected?
A15	No. The firm may prepare a separate report on its inspection of governmental engagements, or it may document the governmental practice inspection scope along with the results of the firm's general monitoring/inspection documentation.
Q16	How long does a firm need to retain its reports on its inspection of governmental engagements?
A16	The report and/or documentation should be retained for a period of time sufficient to enable those performing monitoring procedures and a peer review to evaluate the extent of the firm's compliance with its quality control policies and procedures.
Q17	Is there a checklist to help firms perform inspections?
A17	Yes. Firms may use the checklists from the AICPA Peer Review program to assist them in conducting the inspections. Click here to view specific Peer Review checklists for governmental audits.
Q18	A firm joined the GAQC in April 20X5. The firm uses an April 1 to March 31 period for purposes of its internal inspection program. The firm's 20X5 cycle for performing internal inspections is occurring over the summer 20X5 for the period ending March 31, 20X5. Does the firm need to have its 20X5 inspection program meet membership requirement #6?
A18	No. Membership requirement #6 requires the firm to establish annual internal inspection procedures within three (3) months of its admission date to the GAQC. Therefore, in the situation described in the question above the firm would have to establish its annual inspection procedures by July 20X5. However, those procedures would not have to be applied to inspections occurring during the summer of 20X5. Instead, the firm would apply the procedures to its 20X6 inspection cycle (that is, to engagements occurring from April 1, 20X5 to March 31, 20X6). However, it should be noted that there is nothing to preclude a firm in this situation from applying the procedures it establishes to meet membership requirement #6 to its 20X5 inspection cycle.

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Peer Review

Q19	What peer review information has the Executive Committee determined should be available to the public?
A19	The Executive Committee has determined that Center member firms are required to make publicly available the following information, if applicable, relative to the firm's peer review: ·         Peer review report ·         Letter of comment, if applicable ·         Letter of response, if applicable ·         Letter signed by the reviewed firm indicating that the peer review documents have been accepted with the understanding that the firm agrees to take certain actions, if applicable ·         Letter notifying the firm that certain required actions have been completed, if applicable, and ·         Letter notifying the firm that the peer review has been accepted
Q20	How does a firm make the peer review information available to the public?
A20	Upon admission into the Center, if your firm is a member of the Center for Public Company Audit Firms, the Private Company Practice Section, or the Employee Benefit Plan Audit Quality Center peer review information already is in the AICPA’s public file, so you don’t need to do anything.   If not, you will need to forward the required information. You should e-mail the Center a copy of this information, which can be in the form of a Word or PDF file or, if you prefer, fax it to the GAQC, attention Ms. Cynthia Dillon, at 919-419-4724, within 30 days after joining the Center. Your files will be placed in the AICPA Peer Review Public File where your firm will be identified as a member of the GAQC.
Q21	If a peer reviewer's firm is not a member of the Center, is the Center member firm now required to hire a new firm that is a Center member to perform its peer review?
A21	Not necessarily, but it is suggested that you encourage your peer reviewer's firm to join the Center. The Center's membership requirement states that the governmental audits selected as part of the firm's peer review be reviewed by a peer review team member employed by a Center member firm. This requirement is intended to ensure that the member of the peer review team who reviews your governmental engagements has specialized knowledge of the auditing and reporting requirements for governmental engagements. It is this individual who must be employed by a Center member firm. Accordingly, if the firm you engage to perform your peer review is not a Center member, it may be possible for that firm to add a team member who is employed by a Center member firm for the sole purpose of reviewing your governmental engagements, subject to the existing AICPA peer review team approval procedures.
Q22	If a GAQC member firm decides to use a non-GAQC member firm for its peer review but supplements the peer review firm team with an individual employed by a GAQC member firm to look at governmental audits, does that individual have to have any special qualifications as a peer reviewer to satisfy the GAQC peer review requirement?
A22	Yes. All peer reviewers must be approved by the state societies (or AICPA) administering the peer review. All peer reviewers must also meet the minimum requirements set forth in the standards set by the Peer Review Board or the Center for Public Company Audit Firms Peer Review Committee. Further, generally the reviewer firm must have undergone a "clean" peer review.
Q23	Where can a firm find a listing of GAQC member firms in its state that perform peer reviews?
A23	The AICPA maintains a searchable database titled, AICPA Peer Review Public File, in which you can search for a qualified peer reviewer that is also employed by a GAQC member firm.  The AICPA Peer Review Public File is a reference source for those firms that are looking for a reviewer to perform their peer reviews. The directory lists information on the reviewer’s firm, whether the firm is enrolled in the AICPA Peer Review Program or the Center for Public Company Audit Firms Peer Review Program and whether the firm is a member of the Center for Audit Quality, the Employee Benefit Plan Audit Quality Center, the Governmental Audit Quality Center or the Private Company Practice Section. The directory provides the categories that the reviewer believes they are qualified to review, such as types of audits and specific industries. It is the firm's responsibility to ensure that the reviewer(s) is qualified to perform the review.   Navigate to:  http://peerreview.aicpaservices.org/publicfile/default.asp Click ‘Reviewer Search’ on the left menu bar Input the relevant search criteria (e.g. state or specific member) Check the box next to ‘Governmental Audit Quality Center’ Click ‘Submit’

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Firm Quality Control Policies and Procedures

Note:  Click here to view a free AICPA Audit and Accounting Practice Aid entitled Establishing and Maintaining a System of Quality Control for a CPA Firm’s Accounting and Auditing Practice.

Q24	How does a firm satisfy the Center requirement to establish policies and procedures specific to the firm's governmental audit practice to comply with the applicable professional standards and Center membership requirements?
A24	The Center requirement to establish policies and procedures specific to the firm's governmental audit practice to comply with the applicable professional standards is consistent with AICPA Statement on Quality Control Standards No. 2: System of Quality Control For a CPA Firm’s Accounting and Auditing Practice, which broadly defines a system of quality control (QC System) as a "process to provide the firm with reasonable assurance that its personnel comply with applicable professional standards and the firm's standards of quality." The Center requirement applies this same general quality control standard at the governmental audit level. The firm's auditing policies and procedures should specifically address governmental audits, including the five elements of the general quality control standard as they relate to the firm's governmental audit practice. This requirement is effective within six (6) months of a firm’s admission date.
Q25	What are the five elements of the general quality control standard and how are they related to a firm's governmental audit practice?
A25	The policies and procedures should encompass the following five elements at the governmental audit level:   1. Independence, Integrity and Objectivity.  A firm’s system of quality control should provide reasonable assurance that personnel maintain independence in fact and in appearance.  [Special consideration: In addition to AICPA ethics standards, the Government Accountability Office (GAO) has issued additional standards for determining whether an auditor is independent in Government Auditing Standards.] 2. Personnel Management. The firm’s policies and procedures related to personnel management should provide that firm with reasonable assurance that:   ·       Personnel hired have attributes that allow them to perform competently. ·       Work is assigned to those with the right amount of technical skill and training needed for the assignment. ·       Personnel participate in general and industry-specific continuing education and participate in professional development activities that enable them to fulfill their assigned responsibilities and the requirements of the AICPA, the GAO, and regulatory agencies. ·       Personnel selected for advancement possess the necessary qualifications needed to assume advanced responsibility if called upon to do so. ·       Personnel on engagements performed under Government Auditing Standards meet those standards independence requirements. A firm’s policies and procedures related to the items noted above should be designed to provide a firm with reasonable assurance that audit staff possesses the kinds of competencies that are appropriate given the circumstances of the individual governmental audit engagement. A firm’s policies and procedures would ordinarily require audit staff to gain the necessary competencies through recent experience in governmental auditing. In some cases, however, audit staff will have obtained the necessary competencies through other disciplines, such as in relevant industry and academic positions. 3. Acceptance and Continuance of Clients and Engagements. A firm’s system of quality control should provide reasonable assurance that the firm: ·       Only undertakes engagements that the firm can reasonably expect to be completed with professional competence, and ·       Appropriately considers risks associated with providing service in particular circumstances. 4. Engagement Performance. A firm should have in place policies and procedures that provide it with reasonable assurance that: ·       Engagement work meets professional standards, Government Auditing Standards, regulatory requirements, and the firm’s standards of quality.  ·       All phases of the design and execution are covered, including planning, performing, supervising, reviewing, documenting, and communicating the results of the engagement. ·       Personnel have available and refer to authoritative references, whether literature or other sources, and consult when appropriate with individuals within or outside the firm who have the appropriate level of knowledge, competence, judgment and authority. 5. Monitoring. This standard requires all firms to monitor their system of quality control for suitability of design and effectiveness of application. Monitoring addresses four areas: ·       Relevance and adequacy of the firm’s policies and procedures. ·       Appropriateness of the firm’s guidance materials and practice aids. ·       Effectiveness of professional development programs. ·       Compliance with the firm’s policies and procedures
Q26	Are there any additional matters that must be encompassed by the firm's policies and procedures specific to the governmental audit practice?
A26	Yes. The firm should establish policies and procedures to comply with Center membership requirements, including:   ·         Designating an audit partner to have firm-wide responsibility for the quality of the firm's governmental audit practice.   ·         Having all audit partners of the firm residing in the United States and eligible for AICPA membership be members of the AICPA. ·         Ensuring that the audit partner designated with firm-wide responsibility for the quality of the firm's governmental audit practice meets the continuing professional education requirements of Government Auditing Standards, even if that partner would not otherwise be subject to those CPE requirements.  ·         Ensuring that the audit partner designated with firm-wide responsibility for the firm's governmental audit practice, participate in an annual Center-sponsored Webcast on recent developments in governmental auditing. ·         Performing annual internal inspection procedures that include a review of the firm's governmental audit practice by individuals possessing current experience and knowledge of the accounting and auditing practices specific to governmental audits. ·         Making publicly available information about its most recently accepted peer review as determined by the Executive Committee. ·         Having its governmental audits selected as part of the firms peer review reviewed by a peer review team member who is employed by a Center member firm.
Q27	What quality control policies and procedures should ordinarily be addressed with regard to the competencies for the individual who is responsible for supervising a governmental audit engagement and signing or authorizing an individual to sign the accountants report on such engagement (the practitioner-in-charge)?
A27	Consistent with the general quality control standards (QC Section 40, Personnel Management Element of a Firm’s System of Quality Control- Competencies Required by a Practitioner-in-Charge of an Attest Engagement), the firm's quality control policies and procedures should ordinarily address the following competencies for the practitioner-in-charge of a governmental audit engagement:   a. Understanding of the Role of a System of Quality Control and the Code of Professional Conduct—Practitioners-in-charge of a governmental audit engagement should possess an understanding of the role of a firm’s system of quality control and the AICPA's Code of Professional Conduct, both of which play critical roles in assuring the integrity of the various kinds of accountant’s reports.   b. Understanding of the Service to be Performed—Practitioners-in-charge of a governmental audit engagement should possess an understanding of the performance, supervision, and reporting aspects of the engagement, which is normally gained through actual participation in a governmental audit.   c. Technical Proficiency—Practitioners-in-charge of a governmental audit engagement should possess an understanding of the applicable accounting and auditing professional standards and other regulatory audit requirements (for example, OMB Circular A–133) directly related to the type of entity being audited and the kinds of transactions in which the entity engages.   d. Familiarity with the Industry—To the extent required by professional standards applicable to governmental audits, practitioners-in-charge of an engagement should possess an understanding of the governmental audit industry. In performing a single audit or program-specific audit of federal programs, this understanding would include an understanding of Government Auditing Standards and the requirements of OMB Circular A–133.   e. Professional Judgment—Practitioners-in-charge of a governmental audit should possess skills that indicate sound professional judgment. In performing an audit of financial statements, such skills would typically include the ability to exercise professional skepticism and identify areas requiring special consideration including, for example, the evaluation of the reasonableness of estimates and representations made by management and the determination of the kind of report necessary in the circumstances. In performing a single audit or program-specific audit such skills would typically include the ability to exercise professional skepticism and identify areas requiring special consideration including, for example, the application of the risk-based approach to determining major programs and the evaluation and reporting of noncompliance.   f. Understanding the Organization's Information Technology Systems—Practitioners-in-charge of a governmental audit engagement should have an understanding of how the organization is dependent on or enabled by information technologies; and the manner in which information systems are used to record and maintain financial information.
Q28	A firm has a comprehensive quality control policies and procedures document already in place. Is it necessary to amend the entire document to include specific wording covering the firm's governmental audit practice, or is it acceptable to issue an addendum that addresses how the governmental audit practice quality control will be achieved and how it interfaces with the firm's existing quality control document?
A28	Either method would be acceptable. A firm may amend each section of its existing quality control document to address its governmental audit quality control or, alternatively, it may issue an addendum that addresses how the governmental audit quality control will be achieved and how it interfaces with the firm's existing quality control document. Whichever method is used, the firm should ensure the documented policies and procedures specific to the firm’s governmental audit practice are adequate to comply with the applicable professional standards and Center membership requirements, as discussed above.

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