GAQC mission and membership requirements for firm members
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GAQC mission and membership requirements for firm members

4 years ago · 27 min read

Mission

The AICPA Governmental Audit Quality Center (GAQC) is a voluntary membership center for CPA firms and state audit organizations (SAO) that perform or are interested in performing governmental audits, including single audits, audits under Government Auditing Standards, and audits of state and local government financial statements. The Center was established to promote the quality of governmental audits.

To achieve this goal, the Center has created a community of firms and SAOs that demonstrate a commitment to governmental audit quality and supports members by:

  • Providing members with alerts containing important regulatory developments and breaking news, web events on timely topics, tools, practice aids, and other resources,

  • Maintaining relationships with, and acting as a liaison to, OMB, GAO, and other federal agencies on behalf of members, and

  • Providing information about the Center’s activities to other governmental auditing stakeholders.

The Center is governed by an Executive Committee that establishes general policies of the Center and oversees its activities. It also establishes the requirements for membership in the Center as necessary, subject to AICPA Board of Director’s approval.

The increasing complexity of governmental auditing and increased scrutiny by the federal regulators have resulted in a significant number of changes and issues for auditing firms and CPAs in general. Firms and CPAs will benefit from the assistance of the Center as a resource for improving governmental audit quality. Join the Center

Membership requirements

The following are the membership requirements for CPA firms. If you are a SAO, view your SAO specific membership requirements below:

To be eligible to be a member of the Governmental Audit Quality Center, a firm must:

  1. Designate an audit partner [1] to have firm-wide responsibility for the quality of the firm's governmental audit practice. [2] (Effective at admission date.)

  2. Have all audit partners of the firm residing in the United States and eligible for AICPA membership be members of the AICPA. [3] (Effective at admission date.)

  3. Require the audit partner designated with firm-wide responsibility for the quality of the firm’s governmental audit practice to meet the continuing professional education requirements of Government Auditing Standards, even if that partner would not otherwise be subject to those CPE requirements. (Effective at admission date.)

  4. Require the audit partner designated with firm-wide responsibility for the quality of the firm's governmental audit practice to participate in an annual Center-sponsored web cast on recent developments in governmental auditing. [4] (Effective at admission date.)

  5. Establish policies and procedures specific to the firm's governmental audit practice to comply with the applicable professional standards and Center membership requirements. These policies and procedures must be documented and appropriately communicated. (Effective within 6 months of a firm’s admission date.)

  6. In addition to meeting the quality control standards requirement for monitoring, establish 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. [5]The engagements inspected should be representative of the firm’s governmental audit practice considering the number and different types of governmental audits (e.g., single audits, program-specific audits, and other compliance audits and attestation engagements performed under various federal, state, or local agency audit guides) and the various locations at which those audits are performed. The internal inspection results specific to the firm's governmental audit engagements should be made available to the firm's peer reviewer. Further, the firm's monitoring process should include a review of the firm's compliance with the Center membership requirements. (A firm must establish annual internal inspection procedures within 3 months of its admission date.)

  7. Make publicly available information about its most recently accepted peer review as determined by the Executive Committee .[6] (Effective at admission date.)

  8. Have its governmental audits selected as part of the firm's peer review reviewed by a peer review team member who is employed by a Center member firm. (Effective for peer reviews commencing on or after admission date.)

  9. Periodically file with the Center information about the firm and its governmental audit practice and agree to make such information available for public inspection, as determined by the Executive Committee.[7]

  10. Pay dues as established by the Executive Committee.

  11. Comply with additional requirements as may be established by the Executive Committee and approved by the AICPA Board of Directors.

1 An audit partner refers to 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.

2 A firm's governmental audit practice includes all audits and attestation engagements performed under Government Auditing Standards of federal, state, or local governments; not-for-profit organizations; and certain for-profit organizations (e.g., single audits, program-specific audits, and other compliance audits and attestation engagements performed under various federal, state, or local agency audit guides).

3 Member firms must use best efforts to ensure compliance with this membership requirement. Best efforts include (a) annually advising each audit partner that AICPA membership is mandatory; and (b) taking appropriate corrective action in the event that the firm detects non-compliance. In addition, while only audit partners residing in the United States and eligible for AICPA membership must be members of the AICPA, member firms must encourage all other firm professionals who are eligible for membership in the AICPA to enroll as an individual AICPA member.

4 The partner may either participate in the live Web cast or an archived version that will be available via the Center Web site.

5 A peer review does not substitute for monitoring procedures. 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.

6 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

7 The Executive Committee has determined that Center member firms are required to file with the Center the following information:

  • Firm name and address

  • Indicate whether the firm is a member of the Center for Public Company Audit Firms, Employee Benefit Audit Quality Center and/or PCPS: The AICPA Alliance of CPA Firms

  • Name and contact information of the designated audit partner with firm-wide responsibility for the quality of the firm's governmental audit practice

  • Name and contact information of the firm's designated Center contact administrator (if different from designated partner above)

  • Total number of CPAs in owner's group, CPAs in firm, professional staff, and firm personnel Approximate number of single audits (for example, 1-10, 11-25, 26-50, 51-100, 101-500, over 500) Approximate number of governmental audits, inclusive of single audits (for example, 1-10, 11-25, 26-50, 51-100,101-500, 501-1,000, over 1,000)

Membership requirements frequently asked questions

Designated Partner for Governmental Audit[1] Quality

Q1. Can any of the firm partners be appointed as the Governmental Audit Quality Center (GAQC) 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.

1 Throughout this question and answer document, all of the references to “governmental audits” include all audits and attestation engagements performed under Government Auditing Standards of federal, state, or local governments; not-for-profit organizations; and certain for-profit organizations (e.g., audits performed under the Single Audit Act Amendments of 1996 and OMB Circular A-133, Audits of States, Local Governments and Non-Profit Organizations (referred to as single audits), 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).

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 DAQP has several choices to view the annual Center Webcast after the live event. First, several continuing professional education (CPE) re-broadcasts of the Webcast are offered shortly after the live event. GAQC Alerts are sent directly to member firms with instructions on how to register for rebroadcasts of the Webcast. Second, the Webcast is turned into an on-demand CPE course that can be viewed any time after the live event. Finally, if the Center DAQP is not interested in obtaining CPE for viewing the Webcast, it is archived on the GAQC Web site. Learn more about accessing the archived Webcast after the live event with no-CPE. 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 DAQP must still view it (see the next question for an exception). The previous question (Q4) provides information on how to access the Webcast after the live event.

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 annual center Webcast as soon as possible after the firm's enrollment in the Center (Q4 above provides information on how to access the Webcast after the live event). 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 view the previous annual Center Webcast. The DAQP can meet the membership requirement in this case by viewing the current annual Center Webcast.

Q7. Can the DAQP delegate the viewing of the required Annual Center 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. However, the DAQP should consider making other staff in the firm aware of the Webcast and encourage them to view the live Webcast or access it after the live event using one of the methods described in Q4.

Q8. Can staff members other than the DAQP view the Webcast?

A8. Yes. See the answer to Q7 above.

Q9. Is continuing professional education (CPE) provided for the required Center Webcast?

A9. Yes. The live offering of the Webcast is offered with a CPE Option for DAQPs and member firm staff attendance. There is no limit on the number of member firm staff participants using the CPE Option for the live event. We also offer a No CPE Option at no cost for DAQPs that do not want the CPE. Member firms are generally limited to one Webcast participant for the No CPE Option. As noted in Q4 above, other CPE options are available for viewing the Webcast after the live offering, as well.

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).

  • 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 (SQCS) 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 relating to the performance of internal inspection?

A13. In small firms qualified individuals (partners or managers) may inspect their own work (on a post issuance basis only). Small firms should follow the guidance in paragraphs A72 and A73 of AICPA’s Statement on Quality Control Standards (SQCS).

“In small firms with a limited number of persons with sufficient and appropriate experience and authority in the firm, monitoring procedures may need to be performed by some of the same individuals who are responsible for compliance with the firm’s quality control policies and procedures. This includes review of engagement working papers, reports and clients’ financial statements by the engagement partner or other qualified personnel after the report release date. To effectively monitor one’s own compliance with the firm’s policies and procedures, it is necessary that an individual be able to critically review his or her own performance, assess his or her own strengths and weaknesses, and maintain an attitude of continual improvement. Changes in conditions and the environment within the firm (such as obtaining clients in an industry not previously serviced or significantly changing the size of the firm) may indicate the need to have quality control policies and procedures monitored by another qualified individual. ”Alternatively, some firms may choose to engage a suitably qualified external person or another firm to perform engagement inspections and other monitoring procedures as indicated in paragraph A73 of SQCS 8.

“Having an individual inspect his or her own compliance with a quality control system may be less effective than having such compliance inspected by another qualified individual. When one individual inspects his or her own compliance, the firm has a higher risk that noncompliance with policies and procedures will not be detected. Accordingly, a firm with a limited number of persons with sufficient and appropriate experience and authority in the firm may find it beneficial to engage a suitably qualified external person or another firm to perform engagement inspections and other monitoring procedures.”

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 audit practice only (that is, not influenced by the size of the governmental practice in relation to the firm’s entire 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:

  • Type of organization (for example, state or local government, federal government, not-for-profit, and certain for-profit organizations that receive federal awards or participate in federal programs such as certain banks, credit unions, and housing partnerships)

  • Types of governmental 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.)

  • Experience of personnel assigned

  • Office where the engagement was performed

  • 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:

  • The number, size, and geographic distribution of offices

  • The degree of centralization of control and supervision of the firm's governmental audit practice

  • 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 including checklists for audits and attestation engagements performed under Government Auditing Standards, single audits, financial statement audits of governments, not-for-profits, and healthcare organizations, and audits under the U.S. Department of Housing and Urban Development (HUD) Consolidated Audit Guide.

Q18. Can a firm hire its peer reviewer to perform its annual governmental audit practice internal inspection?

A18. Per PRP Section 2000 (Peer Review Standards Interpretation) Section 21-2, a firm that is hired to perform the peer review may perform that firm's annual internal inspection, except in the year immediately preceding or during the peer review year.

Q19. At what point during the firm's fiscal year should the self-inspection be performed?

A19. The self-inspection may be performed at any time during the year. However, the firm must designate an annual self-inspection period that is the same from year-to-year. For simplicity, the firm may wish to consider using its peer review year-end.

In determining its annual self-inspection period, a firm also should be mindful of the related benefits provided by those inspections. Ideally, the self-inspection would be performed prior to governmental audit season each year, so that information learned from the self-inspection may be applied in the current year audits.

Self-inspections can provide important information about the composition of the firm's governmental audit practice and should point out areas where the firm is deficient. Such information can help the firm more efficiently and effectively plan its governmental audits, including determining timing of the engagements, staffing needs and availability, and necessary changes to audit plans and programs. It also may assist firms in determining staff training needs.

Q20. What fiscal year should be selected for the self-inspection?

A20. The self-inspection should be performed on the most recent fiscal year available.

Q21. A firm joined the GAQC in April 20X8. The firm uses an April 1 to March 31 period for purposes of its internal inspection program. The firm's 20X8 cycle for performing internal inspections is occurring over the summer 20X8 for the period ending March 31, 20X8. Does the firm need to have its 20X8 inspection program meet membership requirement #6?

A21. 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 20X8. However, those procedures would not have to be applied to inspections occurring during the summer of 20X8. Instead, the firm would apply the procedures to its 20X9 inspection cycle (that is, to engagements occurring from April 1, 20X8 to March 31, 20X9). 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 20X8 inspection cycle.

Peer Review

Q22. What peer review information has the Executive Committee determined should be available to the public?

A22. Center member firms are required to make publicly available the following information (as stated in notes 5 and 6 to the membership requirements) relative to the firm's peer review:

  • Peer review report

  • Letter of response

  • 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

Q23. How does a firm make the peer review information available to the public?

A23. Upon admission into the Center, if your firm is a member of the Private Company Practice Section (PCPS) or your state society participates in the Facilitated State Board Access Program, certain peer review information already is in the AICPA's public file, so you don't need to do anything.

If your firm's peer review report is not posted by the state society or by PCPS, then, 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 at or, if you prefer, fax it to us at 919-419-4724 within 30 days after joining the Center. Your files will be placed in the AICPA Peer Review Public File.

Q24. 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?

A24. 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.

Q25. 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?

A25. 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. Further, the reviewer firm must have received a rating of “pass” of his firm’s most recent peer review.

Q26. Where can a firm find a listing of GAQC member firms in its state that perform peer reviews?

A26. 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’s peer review is administered by a state society or by the National Peer Committee 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 PCPS. 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.

  1. Navigate to: http://peerreview.aicpaservices.org/firmfile/docdefault.aspx

  2. Click 'Reviewer Search' on the left menu bar

  3. Input the relevant search criteria (e.g. state or specific member)

  4. Check the box next to 'Governmental Audit Quality Center'

  5. Click 'Submit'

Q27. If a firm's peer review is due in the year the firm joins the Center and the firm has already engaged a firm that is not a member of the Center to perform the firm's peer review, does it have to find another firm to perform the peer review?

A27. No. This requirement is effective for peer reviews commencing after the firm has joined the Center. However, you should discuss with your peer review firm your firm's need to comply with the Center membership requirement and the alternatives to satisfying the requirement.

Firm Quality Control Policies and Procedures

Q28. 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?

A28. 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 Statement on Quality Control Standards (SQCS) No. 8, A Firm's System of Quality Control (AICPA, Professional Standards, vol. 2, QC sec. 10), which broadly defines the objectives of a system of quality control (QC System) as a process to provide a firm with reasonable assurance that:

a. the firm and its personnel comply with professional standards and applicable legal and regulatory requirements and
b. reports issued by the firm are appropriate in the circumstances.

A system of quality control consists of policies designed to achieve the above objective and the procedures necessary to implement and monitor compliance with those policies.

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 six 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.

Q29. What are the six elements of the general quality control standard and how are they related to a firm's governmental audit practice?

A29. The policies and procedures should encompass the following six elements at the governmental audit level:

1. Leadership responsibilities for quality within the firm (the "tone at the top"): The firm should establish policies and procedures designed to promote an internal culture based on the recognition that quality is essential in performing engagements and should establish policies and procedures to support that culture. Such policies and procedures should require the firm's leadership (managing partner or board of managing partners, chief executive officer, or equivalent) to assume ultimate responsibility for the firm's system of quality control. For Center member firms, the firm's DAQP partner should assume ultimate responsibility for the quality of the firm's governmental engagements.

2. 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. The AICPA Code of Professional Conduct establishes the fundamental principles of professional ethics, which include: [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.]

  • Responsibilities

  • The public interest

  • Integrity

  • Objectivity and independence

  • Due care

  • Scope and nature of services

3. Acceptance and Continuance of Clients and Engagements: The firm should establish policies and procedures for the acceptance and continuance of client relationships and specific engagements, designed to provide the firm with reasonable assurance that it will undertake or continue relationships and engagements only where the firm:

  • Has considered the integrity of the client, including the identity and business reputation of the client's principal owners, key management, related parties, and those charged with its governance, and the risks associated with providing professional services in the particular circumstances;

  • Is competent to perform the engagement and has the capabilities and resources to do so; and

  • Can comply with legal and ethical requirements.

The firm should obtain such information as it considers necessary in the circumstances before accepting an engagement with a new client, when deciding whether to continue an existing engagement, and when considering acceptance of a new engagement with an existing client.

4. Human Resources: The firm should establish policies and procedures designed to provide it with reasonable assurance that it has sufficient personnel with the capabilities, competence, and commitment to ethical principles necessary to:

  • Perform its engagements in accordance with professional standards (including Government Auditing Standards if applicable to the engagement) and regulatory and legal requirements, and

  • Enable the firm to issue reports that are appropriate in the circumstances.

  • Such policies and procedures should address the following:

  • Recruitment and hiring, if applicable;

  • Performance evaluation, compensation, and advancement;

  • Determining competencies and capabilities, including time to perform assignments;

  • Professional development; and

  • The estimation of personnel needs

5. Engagement Performance: The firm should establish policies and procedures designed to provide it with reasonable assurance that engagements are consistently performed in accordance with professional standards, Government Auditing Standards, and regulatory and legal requirements, and that the firm or the engagement partner issues reports that are appropriate in the circumstances. Required policies and procedures should address:

  • Engagement performance,

  • Supervision responsibilities, and

  • Review responsibilities

6. Monitoring: The firm should establish policies and procedures designed to provide the firm and its engagement partners with reasonable assurance that the policies and procedures relating to the system of quality control are relevant, adequate, operating effectively, and complied with in practice. Such policies and procedures should:

  • Include an ongoing consideration and evaluation of the firm's system of quality control to determine
    1. The appropriateness of the design and
    2. The effectiveness of the operation of the system of quality control.


  • Assign responsibility for the monitoring process to a partner or partners or other persons with sufficient and appropriate experience and authority in the firm to assume that responsibility.

  • Assign performance of monitoring of the firm's system of quality control to qualified individuals

The purpose of monitoring compliance with quality control policies and procedures is to provide an evaluation of:

  • Adherence to professional standards and regulatory and legal requirements;

  • Whether the quality control system has been appropriately designed and effectively implemented; and

  • Whether the firm's quality control policies and procedures have been operating effectively, so that reports that are issued by the firm are appropriate in the circumstances.

Q30. Are there any additional matters that must be encompassed by the firm's policies and procedures specific to the governmental audit practice?

A30. 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 DAQP 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.

Q31. What quality control policies and procedures should ordinarily be addressed regarding 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)?

A31. The firm should assign responsibility for each engagement to an engagement partner and should establish policies and procedures requiring that the identity and role of the engagement partner are communicated to management and those charged with governance; the engagement partner has the appropriate competence, capabilities to perform the role; and the responsibilities of the engagement partner are clearly defined and communicated to that individual. (SQCS No. 8, paragraph .33). In practice, the competencies necessary for the engagement partner are broad and varied in both their nature and number. Competencies include the following, as well as other competencies as necessary in the circumstances (SQCS No. 8, paragraph. A27):

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 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. This understanding is usually gained through actual participation under appropriate supervision in a governmental audit.

c. Technical Proficiency—Practitioners-in-charge of a governmental audit engagement should possess an understanding of the applicable professional standards (e.g., accounting and auditing standards) and other regulatory audit requirements (e.g., OMB Circular A–133) directly related to the industry in which a client operates, and the kinds of transactions in which the client 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 industry in which the client operates to the extent of the kind of service being performed. In performing an audit or review of financial statements, this understanding would include an industry’s organization and operating characteristics sufficient to identify areas of high or unusual risk associated with an engagement to evaluate the reasonableness of industry-specific estimates.

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 appropriate 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 appropriate 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 to determine when involvement of an IT professional is necessary for an audit engagement.

Q32. 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?

A32. Either method would be acceptable. A firm may amend each section of its existing quality control document to address its governmental audit practice 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.

Providing GAQC Web Site Access to Staff and Firm URL Links

Q33. The GAQC Web site contains certain information that is for members only. How do I give access to this premium content to my staff?

A33. Only the DAQP or individual identified as your firm’s Center administrator contact can provide your staff full access to the entire Center Web site, including the information available only to members. The following is a summary of the process.

Upon enrolling your firm in the Center, you should have received an automatically generated GAQC welcome email. That email included a lengthy firm-specific URL (uniform resource locator) that appeared under a heading entitled "Unique Activation Link". To grant members of your staff full access to the GAQC Web Site, you need to provide them with your firm-specific URL—they can only set up their registration for the Web site as a member of your firm by using your firm-specific URL. For this reason, it is important for you to keep the URL on file for future reference. If you have discarded your original welcome email and firm-specific URL, please send an email to GAQC@aicpa.org and we will send you another copy.

When a member of your staff clicks on your firm-specific URL they will be directed through the GAQC Web site registration process. That process asks them to provide their AICPA.org or CPA2BIZ.com username and password if they have one. If they do not have such a username and password, the site will direct them through the process of obtaining one. If they previously were provided a username and password but have forgotten it, the site includes a link that provides information to assist them in identifying the forgotten information. Once your staff has gone through this initial registration process, they will be able to subsequently access the GAQC Web Site directly using its normal Web address. Thereafter, each time your staff enter the Web site, they should login with the username and password used to register above, which will allow them to access the complete Web site, including the sections for members only. These instructions also apply to gaining access for you (the DAQP) if you find after registering your firm that you do not have access to the member-only content. If you encounter any problems as you go through this process or have any questions, please send us an email at GAQC@aicpa.org.

Q34. We either did not receive the URL or have deleted the welcome email with the URL, how do I get a copy of my firm’s URL?

A34. Simply send an email to GAQC@aicpa.org requesting your firm's URL and we will send you another copy of the original welcome email with your URL.

Q35. I have provided one of my staff with our firm URL to register for the GAQC Web site. She is using what she believes to be her username and password but is having problems logging in to access the member-only content. What should I advise her to do?

A35. Should you or your staff need assistance with the log in process or using the GAQC Web site, please contact the AICPA Service Center at 888-777-7077 or via email at centers@aicpa.org. If you find that you are still having problems after contacting the Service Center, please send another email to GAQC@aicpa.org.

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