furgison & co., cpa, p.c. - secure.emochila.com · updated 10/26/2015 1 furgison & co.,...

Updated 10/26/2015 1

FURGISON & CO., CPA, P.C.

QUALITY CONTROL DOCUMENT Furgison & Co., CPA, P.C.’s quality control policies and procedures for the six elements of quality control are presented below. All employees of the firm are provided copies and are responsible for the understanding, implementing, and adhering to these policies and procedures. Furgison & Co., CPA, P.C. is a member of the AICPA Government Audit Quality Center (the Center) and has agreed to establish policies and procedures specific to the firm’s governmental audit practice (as defined in the membership requirements) to comply with the applicable professional standards and the membership requirements of the Center. These policies and procedures are documented and communicated by this document. As required by the membership requirements of the AICPA Government Audit Quality Center, it is the policy of the firm that all eligible audit partners be members of the AICPA. It is the responsibility of the managing partner to annually advise each audit partner that AICPA membership is mandatory. Also, as required by the membership requirements of the Center, the managing partner annually designates an audit partner to assume firm-wide responsibility for the quality of the firm’s governmental audit practice. It is the firm’s policy to adhere to all applicable unconditional and presumptively mandatory requirements of SQCS No. 8, A Firm’s System of Quality Control, as evidenced by the policies and procedures within this quality control document. Any questions, concerns, or recommendations about the firm’s quality control system should be communicated to the managing partner. LEADERSHIP RESPONSIBILITIES FOR QUALITY WITHIN THE FIRM It is Furgison & Co., CPA, P.C.'s policy to promote a culture of quality that is pervasive throughout the firm’s operations through the development of its system of quality control. Firm management, under the direction of the managing partner, assumes responsibility for the firm’s system of quality control and designs the system to (1) emphasize the importance of performing work that complies with professional standards and applicable legal and regulatory requirements and (2) issue reports that are appropriate in the circumstances. In maintaining a culture of quality, the firm emphasizes the importance of ethics and integrity in every decision that personnel make, particularly at the engagement level. The firm ensures compliance with this policy by implementing the following procedures:

1. The firm dedicates sufficient and suitable resources to the quality control system and quality initiative and assigns the operational responsibility for the firm’s control system to individuals with the experience, ability, and authority to identify, develop, and implement the necessary QC policies and procedures based on their comprehensive understanding of SQCS No. 8. The firm communicates clear, consistent, and frequent actions and messages that emphasize the firm’s quality control policies and procedures. Such actions and messages include—

Providing a copy of the firm’s system of quality control document to all new professional employees and reviewing the document and its importance with them.

Reviewing the firm’s quality control policies and procedures, especially in areas where questions or problems have arisen, with personnel during firm training sessions.

2. The managing partner evaluates client relationships and engagements to ensure that commercial considerations are not placed

ahead of the firm’s commitment to quality control. Additionally, the firm’s performance evaluation, compensation and advancement policy and procedures (covered in the human resources QC document) do not place commercial considerations ahead of the quality of work performed.

3. The managing partner, audit engagement partners, and other partners in the firm demonstrate the importance of quality by

their actions. Such actions include (but are not limited to)—

Making decisions with a focus on the public interest and emphasizing that personnel do the same. Demonstrating the importance of creating and maintaining a good public reputation.

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Ensuring partners and staff have sufficient time and resources to solve engagement challenges. Following the spirit, as well as the letter, of professional, regulatory, and legal standards. Displaying enthusiasm and sincerity in communicating its commitment to a quality initiative. Demonstrating consistency.

4. The engagement partner assumes responsibility for the overall quality of each audit engagement to which he or she is

assigned and sets an appropriate example throughout all stages of the engagement for the other engagement team members to follow.

5. The firm establishes a formal code of conduct that reflects the firm’s core value of quality and guides personnel to make

appropriate decisions throughout their workday. The code of conduct is regularly communicated and reiterated to all employees and is posted in various common areas throughout the office.

6. The firm rewards personnel who demonstrate a commitment to quality through its performance evaluation, compensation, and advancement system, as covered in the human resources QC policies and procedures.

7. The firm does not allow unethical behavior to occur unchallenged and addresses instances of noncompliance with the firm’s

quality control system through swift disciplinary action or, in extreme cases, termination of the offending employee.

8. At least annually, the leadership responsibilities for quality within the firm policy and procedures are reviewed to determine if they are appropriate and operating effectively. See the MONITORING section of this document for further information.

RELEVANT ETHICAL REQUIREMENTS It is Furgison & Co., CPA, P.C.’s policy that all professional personnel be familiar with and follow relevant ethical requirements of the AICPA, contained in the Code of Professional Conduct, the State of New York Board of Accountancy, and the New York State Society of CPAs in performing their professional responsibilities. Furthermore, it is the policy of our firm that, for engagements subject to Government Auditing Standards and other applicable regulatory agencies, all professional personnel be familiar with and adhere to the relevant ethical requirements included in those standards, including any that may be more restrictive. Additionally, when the firm and its professional personnel encounter situations that raise potential independence threats, but such situations are not specifically addressed by the Independence Interpretations of the AICPA Code of Professional Conduct, the situation will be evaluated by referring to the Conceptual Framework for Independence and applying professional judgment to determine whether an independence breach exists. The firm takes appropriate action to eliminate threats to independence or mitigate them to an acceptable level by applying safeguards. If effective safeguards cannot be applied, the firm will withdraw from the engagement or take other corrective actions as appropriate to eliminate the breach. The firm ensures compliance with this policy by implementing the following procedures:

1. All personnel have access to the relevant ethical requirements to which the firm is subject. The firm expects its personnel to

be familiar with those relevant ethical requirements.

2. All professional personnel who work on attest engagements are required to be independent sign a representation letter when hired (and annually thereafter) acknowledging their familiarity with the firm’s relevant ethical requirements policy and procedures, particularly with regard to independence. The signed representation letter also lists known circumstances and relationships that may create a potential threat to independence or violate the firm’s relevant ethical requirements policy.

3. At least 4 hours of acceptable professional ethics CPE is provided for all licensed CPAs at least every three calendar years as

required by the State of New York Board of Accountancy and the New York State Education Department.

4. Certain relevant ethical requirements are addressed by procedures within the work programs and standard forms in the accounting and auditing manuals used by the firm. Such procedures:

a. Determine compliance with relevant ethical requirements on each new and recurring attest client as part of the

acceptance and continuance decision. b. Consider unpaid fees. c. Consider any familiarity threat related to senior personnel recurring on an attest engagement for five years or more.

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d. Annually confirm the independence of another accountant performing work on a group audit or a segment of an review or attestation engagement.

e. Identify nonattest services performed for attest clients and determine if the services threaten independence with respect to that client. Where applicable, this includes determining whether such nonattest (nonaudit) services impair independence under the independence rules in Government Auditing Standards.

f. Consider the firm’s independence of attest clients at which professional personnel have been offered management positions or have accepted offers of employment.

g. Consider whether actual or threatened litigation has an effect on the firm’s independence with respect to the client. h. Determine whether all professional personnel are independent of the financial reporting entity, if the firm is engaged

as the group auditor to report on the basic financial statements of the financial reporting entity. i. Consider whether the firm was party to a cooperative arrangement with a client that was material to the firm or the

client.

5. All professional personnel remain alert for any evidence of noncompliance with relevant ethical requirements during the engagement and are required to promptly notify the engagement partner and managing partner of any circumstances or relationships that may create a potential threat to independence or an independence breach, so that appropriate action can be taken.

6. If a potential threat to independence is identified, the managing partner accumulates and communicates relevant information

to appropriate personnel so (a) firm management and the engagement partner can determine whether they satisfy independence requirements, (b) the engagement partner can take appropriate action to address identified threats to independence, and (c) current independence information can be maintained. For clients of who the firm is not independent, only compilation services are performed and the firm discloses the lack of independence in its accountant’s compilation reports for those clients.

7. All relevant ethical requirements matters (including potential issues from the employee independence representation letters

and those from other sources) are resolved by the managing partner. The managing partner is responsible for determining actions to be taken when professional personnel violate firm independence policies and procedures. Documentation of the resolution of a relevant ethical requirements matter is filed in the client’s permanent workpaper files.

8. If a breach of independence is identified, the breach and the required corrective actions are promptly communicated to (a) the managing partner, (b) the engagement partner, who (along with the firm) needs to address the breach, and (c) other relevant personnel in the firm and those subject to the independence requirements who need to take appropriate action. The engagement partner confirms to the managing partner when required corrective actions related to the independence breach and noncompliance with these policies and procedures has been taken.

9. At least annually, the managing partner reviews the firm’s ethical requirements policy and procedures to determine if they are

appropriate and operating effectively. See the MONITORING section of this document for further information.

ACCEPTANCE AND CONTINUANCE OF CLIENT RELATIONSHIPS AND SPECIFIC ENGAGEMENTS It is Furgison & Co., CPA, P.C.’s policy that, for all compilation, review, audit, and attestation engagements, the acceptability of the client and the engagement be evaluated before the firm agrees to provide professional services. The firm will accept and continue only client relationships and specific engagements when it has determined that the requisite competence and capabilities (including adequate time, resources, and licensure) exist within the firm to perform the engagement and the firm can comply with legal and relevant ethical requirements. Additionally, the firm will only undertake or continue relationships and engagements when the firm has considered the integrity of the client and does not obtain information indicating that the client lacks integrity. The firm ensures compliance with this policy by implementing the following procedures:

1. For each prospective client that requests for the first time a compilation, review, audit, or attestation service, the partner making initial contact with the client is required to complete an engagement acceptance form. The completed form is routed to the managing partner who decides whether to accept or reject the prospective client and who documents that conclusion on the form.

2. For existing attest clients, the managing partner annually reviews the firm’s client list and reevaluates the acceptability of

each client and engagement. Furthermore, the engagement work programs used by the firm (as documented in the

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engagement performance QC element of the firm’s QC document) contain steps requiring the engagement team to consider whether the firm should discontinue providing all or certain services to a client.

3. The managing partner or the engagement partner documents how issues identified during the acceptance and continuance

process, if any, were overcome and resolved so the firm decided to accept or continue the client relationship or specific engagement. Such documentation includes discussion of significant issues, consultations, conclusion, and the basis for the conclusions.

4. If situations occur after the commencement of an engagement and while work is in process that indicate the firm should

consider withdrawing from the engagement, the managing partner is notified of the circumstances. In that situation, the firm considers whether there are any professional, regulatory, or legal requirements for the firm to remain associated with the client and the engagement or to report the withdrawal to regulatory authorities. In addition, the firm considers whether withdrawing from the engagement or discontinuing the client relationship is appropriate. The engagement partner and managing partner jointly decide whether to withdraw from an attest engagement. Significant issues, consultations, conclusions, and the basis for the conclusions are documented when withdrawal from an engagement or from both the engagement and the client relationship occurs.

5. The engagement partner is responsible for ensuring that an engagement letter is obtained for each client. The engagement

letter documents the firm’s understanding with the client regarding the nature, scope, and limitations of the services to be performed, as well as the identification of the engagement partner and his or her role.

6. For audit engagements, the engagement partner is responsible for—

Being satisfied that appropriate acceptance and continuance procedures were followed and that the acceptance and conclusion decisions reached are appropriate.

Promptly communicating information obtained, if any, that would have caused the firm to decline the engagement had it been known initially, to the firm, so that the firm and the engagement partner can take the necessary action.

7. If the firm discovers a potential conflict of interest during the acceptance and continuance decision, the managing partner determines whether it is appropriate to accept or continue the engagement. If the engagement is accepted or continued, the ethical requirements under ET 1.110.010, Conflicts of Interest, are considered, including whether a conflict of interest that might be perceived as impairing objectivity was disclosed and consented to by the client or other appropriate parties.

8. At least annually, the managing partner reviews the firm’s acceptance and continuance of client relationships and specific

engagements policy and procedures to determine if they are appropriate and operating effectively. See the MONITORING section of this document for further information.

HUMAN RESOURCES Overall The success of Furgison & Co., CPA, P.C. is dependent upon its professional staff. It is the firm’s intent to succeed in the marketplace by having partners and staff who possess the competence, capabilities, and commitment to ethical principles to assure that engagements performed by the firm are in accordance with professional standards and applicable legal and regulatory requirements and that appropriate reports are issued in the circumstances. Having effective QC policies and procedures over the human resources element helps to ensure the proficiency of personnel. The activities of our human resources QC system include—

Recruitment and hiring.

Determining competencies and capabilities.

Assignment of engagement teams.

Professional development.

Performance evaluation, compensation, and advancement.

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Policies and procedures for each of these activities are detailed below. At least annually, the managing partner reviews the firm’s human resources policies and procedures to determine if they are appropriate and operating effectively. See the MONITORING element of the firm’s QC system for further information. Recruitment and Hiring It is Furgison & Co., CPA, P.C.’s policy that recruitment and hiring decisions for the professional staff be based on an objective evaluation of the firm’s personnel needs, that candidates possess the appropriate characteristics to perform competently, and that new employees are adequately informed of the firm’s policies and procedures. The firm ensures compliance with this policy by implementing the following procedures:

1. A recruitment and hiring plan is prepared periodically (as necessary) and is approved by the managing partner. The recruitment and hiring plan is communicated to those involved in the recruitment and hiring process.

2. Recruiting techniques and actual employment decisions are made by the managing partner after considering the needs of the firm.

3. An interview is performed for each qualified applicant that is selected by the managing partner.

4. New employees are informed of the firm’s personnel policies and procedures on their first day of employment.

Determining Competencies and Capabilities It is Furgison & Co., CPA, P.C.’s policy to determine whether individual members of the professional staff possess the requisite competencies and capabilities. In making this determination, the firm primarily considers qualitative measures, as opposed to quantitative ones. The firm ensures compliance with this policy by implementing the following procedures:

1. Periodically, the managing partner assesses the competencies and capabilities of engagement partners to help assure engagements are performed in accordance with professional standards and applicable legal and regulatory requirements, and that appropriate reports are issued in the circumstances. The following competencies and capabilities are assessed based on the characteristics of the particular client, industry, and service provided:

a. An understanding of the role of the firm’s QC system and the Code of Professional Conduct.

b. An understanding of the service to be performed.

c. Technical proficiency.

d. A familiarity with the industries served.

e. Professional judgment.

f. An understanding of the organization’s information technology systems.

g. Personal attributes, leadership qualities, and perspective on business issues.

2. The firm determines how engagement partners and other personnel can best obtain additionally needed competencies and capabilities.

3. Performance evaluations are conducted, at least annually, to determine the capabilities and competencies possessed by each

professional staff other than partners.

Assignment of Engagement Teams It is the firm’s policy that each engagement be supervised by an engagement partner with appropriate competence, capabilities, and authority. Additionally, all personnel assigned to engagements possess the necessary competence and capabilities to perform

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engagements that comply with professional standards and applicable legal and regulatory requirements (including licensing requirements) and enable the firm to issue reports that are appropriate in the circumstances. The firm ensures compliance with this policy by implementing the following procedures:

1. In addition to assessing the engagement partner’s competencies and capabilities (see the Determining Competencies and Capabilities section), the managing partner clearly defines and communicates the responsibilities and authority of an engagement partner to that partner, and evaluates the partner’s work load to ensure that he or she has the time to adequately perform the role.

2. The identity and role of the engagement partner are communicated to client management and those charged with governance through a written engagement letter.

3. In an audit engagement, the engagement partner obtains satisfaction that the engagement team (including any external

specialists) meets the objective of the Assignment of Engagement Teams policy of the firm’s Human Resources QC element.

4. The managing partner makes all partner assignments, while staff assignments are determined by the firm’s

engagement partners. All assignments are made after considering the requisite competencies and capabilities needed for the particular client and engagement.

Professional Development It is Furgison & Co., CPA, P.C.’s policy that all professional personnel comply with the continuing professional education requirements of the AICPA, the New York State Board of Accountancy, the AICPA Governmental Audit Quality Center, the U.S. Government Accountability Office, and other regulatory agencies if applicable; that all professional staff maintain an adequate awareness and understanding of current developments in professional standards; that all non-licensed professional staff work toward passing the CPA exam; and that all professional staff assist in the training and development of staff members under their supervision. The firm ensures compliance with this policy by implementing the following procedures:

1. The managing partner, or other designated partner, approves professional staff member CPE prior to staff attendance. An individual CPE Record worksheet is prepared and approved by the managing partner annually.

2. The managing partner, or other designated partner, monitors employee progress toward meeting the CPE plan.

3. All professional personnel are to obtain at least the minimum number of CPE required each year by the New York State

Board of Accountancy and the New York State Education Department (or, alternatively, meet the CPE requirements of the AICPA) in programs that qualify for credit under the CPE rules that govern the firm.

4. Individuals who work on audits subject to the Government Auditing Standards, including planning, directing, performing

audit procedures, or reporting, complete at least 24 hours of CPE every two years that directly relates to government auditing, the government environment, or the specific or unique environment in which the audited entity operates. In addition, auditors who do any amount of planning, directing, or reporting on Yellow Book audits and auditors who are not involved in those activities but charge at least 20% of their time annually to Yellow Book audits are required to also obtain at least another 56 hours (for a total of 80 hours) of CPE that enhances their professional proficiency to perform audits.

5. In accordance with the membership requirements of the AICPA Governmental Audit Quality Center’s membership

requirements, the partner assigned firm-wide responsibility for the quality of the firm’s governmental audit practice meets both the 24-hour and 80-hour CPE requirements. That partner also participates in the annual Center sponsored webcast on recent developments in governmental auditing.

6. Appropriate CPE documentation is maintained for each professional for the most recent five years.

7. The firm maintains a current library and circulates within the firm important news about new or emerging changes in

professional literature or business activities.

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8. The firm recognizes the importance of on-the-job training and encourages personnel with supervisory responsibility to be aware of situations where it can be provided.

9. The firm recognizes the benefit of other professional development activities and encourages personnel at each staff level to

participate in such activities.

Performance Evaluation, Compensation, and Advancement It is Furgison & Co., CPA, P.C.’s policy that performance evaluation, compensation, and advancement decisions for professional personnel be based on a timely and objective evaluation of individual performance, that the professional personnel selected for advancement have the necessary qualifications to fulfill their assigned responsibilities, and that compensation of personnel, including partners, be based on the quality of their work. The firm ensures compliance with this policy by implementing the following procedures:

1. The following personnel levels and related performance criteria are used by the firm:

a. Junior Staff Accountant—Assume responsibility for unaudited financial statement engagements, segments of audits, or the completion of tax returns under the supervision of more experienced staff.

b. Staff Accountant—Assume responsibility for unaudited financial statement engagements, segments of audits, or the completion of tax returns under the supervision of more experienced staff.

c. Senior (In-Charge)—Assume responsibility for the supervision of unaudited financial statement engagements,

audits, and tax return preparation engagements.

d. Manager (Supervisor)—Plan and supervise assigned engagements as well as assist in administrative functions of the office and the development of new practice opportunities.

e. Partner—Assume ultimate responsibility for all assigned engagements, perform assigned administrative duties, and

participate in civic and community activities.

2. All professional staff are orally evaluated by their supervisors at the completion of engagements of approximately 150 or more hours, or more frequently as needed at the discretion of the engagement partner. All professional staff are formally evaluated at least annually at which time an evaluation form is completed.

3. The managing partner annually approves partner compensation and any incentive bonus based upon criteria established by the partner group. Such criteria reward quality service and do not place commercial considerations ahead of the quality of work performed.

4. At least annually, and on an ad hoc basis if necessary, the partners meet as a committee to discuss advancement,

compensation, and termination decisions.

ENGAGEMENT PERFORMANCE Overall Engagement performance encompasses many aspects of performing an engagement, from the initial planning stages to the issuance of the report and assembly of the workpapers. Additionally, it is not uncommon for the firm’s engagement teams to occasionally encounter difficult or contentious issues that result in the need for consultation or that create differences of opinion. The firm believes in a strong quality control system and supports frequent engagement quality control review. While all of these activities are part of the engagement performance element of the QC system, the firm has chosen to differentiate certain activities within this section of the QC document for ease of understanding. The activities are segregated as follows:

Engagement performance and documentation.

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Engagement quality control review.

Consultation and differences of opinion.

Policies and procedures for each of those components of engagement performance are described below. At least annually, the managing partner reviews the firm’s engagement performance policies and procedures to determine if they are appropriate and operating effectively. See the MONITORING section of this document for further information. Engagement Performance and Documentation It is Furgison & Co., P.C.’s policy that all compilation, review, audit, and attestation engagements be properly planned, performed, supervised, reviewed, documented, and reported or communicated in accordance with the requirements of professional standards, applicable legal and regulatory requirements, and the firm. In this regard, the firm’s engagement performance quality control (QC) steps are documented in the firm’s engagement performance bridging documents. The firm uses Thomson Reuters PPC’s accounting and auditing manuals and practice aids as an integral part of its quality control system to assist with engagement performance. The firm ensures the reliability of such materials and their suitability to the firm’s practice, including updating and modifying the materials, if needed, for the firm’s engagements. After evaluating the reliability and suitability of PPC accounting and auditing manuals and practice aids, the firm adopts and integrates within its quality control system the use of such materials as more fully described in the engagement performance bridging documents. The firm’s bridging documents used for its audit, attestation, and compilation and review engagements are located as a supplement to this QC document. This QC document, the PPC manuals, and any other practice aids used by the firm are intended solely to assist us in achieving compliance with professional standards. Accordingly, nothing within this QC document should be construed as (1) requiring a higher level of performance or documentation than the minimum specifically required by our firm’s QC policies and procedures, or (2) overriding the exercise of professional judgment. Engagement Quality Control Review It is Furgison & Co., CPA, P.C.’s policy to evaluate all engagements against criteria established by the firm to determine whether an engagement quality control review should be performed, and to perform an engagement quality control review for all engagements that meet those criteria. Engagement quality control reviews are completed before the report is released. The firm ensures compliance with this policy by implementing the following procedures: 1. The firm established criteria for performance of an engagement quality control review (EQCR). In establishing such criteria the

firm considers- The structure and nature of the firm’s practice. The nature of the engagement, including whether it involves a matter of public interest. Whether unusual circumstances or risks have been identified relating to the engagement, engagement service type,

or industry. Whether laws or regulations require an engagement quality control review to be performed.

2. The firm establishes a different set of criteria for each major service provided (i.e. compilation, review, audit, and attestation

engagement). All engagements are evaluated against the established criteria. An engagement quality control review is performed for all engagements that meet the established criteria. If no engagements meet the criteria established by the firm for EQCR, no reviews are required to be performed.

3. The firm periodically evaluates and makes changes to its EQCR criteria as needed based on changes in the structure and nature of the firm’s practice.

4. Based on the current composition of the firm’s accounting and auditing practice, the firm has concluded that engagement quality control review should be performed for the following attest engagements:

New attest engagements in industries for which the Firm does not have any current experience (i.e. new industries) New attest engagements for levels of service not currently performed by the firm.

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New significant attest engagements (expected budget hours in excess of 250). Existing attest engagement deemed to be high risk. High risk includes the following considerations:

o Concerns about the entity's ability to continue as a going concern; o The client is a transnational entity; o Entities where the auditor's report is qualified (or qualification has received serious consideration); o Engagements which are complex in nature; o Entities in the process of an initial public offering (IPO) or equivalent process, or contemplating such; or entities

subject to, or considering proposing, a merger or acquisition; o Engagements subject to joint audits; o Entities operating in industries which by their nature may be viewed as presenting greater risk, for example,

gambling institutions; o Certain financial –services –related entities, such as regulated depository institutions, and insurance companies.

Engagements other than those are not required to have engagement quality control review performed. 5. Performing an engagement quality control review includes the following procedures-

Having a discussion with the engagement partner about significant findings and issues. Reading the financial statements or other subject matter information and the proposed report. Reviewing selected engagement documentation relating to the significant judgments of the engagement team and the

conclusions reached. Performing an evaluation of the conclusions reached in formulating the report and considering whether the proposed

report is appropriate. Reviewing for appropriateness the resolution and conclusions reached regarding differences of opinion and matters

requiring consultations. Considering the engagement team’s evaluation of the firm’s independence in relation to the specific engagement. The

EQCR may be conducted at various stages throughout the engagement to ensure that significant issues are resolved to the reviewer’s satisfaction before the report is released. The extent of the EQCR may depend upon, among other things, the complexity of the engagement and the risk that the report might not be appropriate in the circumstances.

6. The firm prepares appropriate documentation of the engagement quality control review, including documentation that reflects –

The procedures required by firm policies have been performed. That the EQCR was completed before the report was released. That the reviewer was not aware of any unresolved matters that would have caused him or her to believe that

significant judgments the engagement team made and conclusions they reached were not appropriate. 7. The appointment of engagement partners quality control reviewers requires consideration of the technical qualifications

necessary to perform the role (including the necessary experience and authority), and the degree to which an engagement quality control reviewer can be consulted during the engagement without jeopardizing the reviewer’s objectivity. In selecting appropriate engagement quality control reviewers, the following criteria are followed –

The engagement quality control reviewer is selected by the quality control director or the managing partners. The engagement quality control reviewer has sufficient and appropriate experience, technical expertise, and authority

for the particular engagement to be reviewed. Engagement quality control reviewers maintain appropriate ethical requirements, such as objectivity, due professional

care, and independence. The engagement quality control reviewer satisfies the independence requirements relating to the engagement reviewed.

The engagement quality control reviewer does not make decisions for the engagement team or otherwise participate in the performance of the engagement except in a consulting role; for example, the engagement partner may consult the engagement quality control reviewed during the engagement to establish that a judgment made by the engagement partner will be acceptable to the engagement quality control reviewer. Both the engagement quality control reviewer and the engagement team are careful to maintain the reviewer’s objectivity.

If the objectivity and/or continued eligibility of the engagement quality control reviewer come into question, the engagement partner will communicate the situation to the quality control director or the managing partners. The engagement quality control reviewer will be replaced if the reviewer ability to perform an objective review is likely to have been impaired.

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8. For audit engagements for which the firm’s EQCR criteria stipulate that an EQCR is required, if any, the engagement partner (a) determines that an engagement quality control reviewer has been appointed; (b) discusses with the engagement quality control reviewer the significant findings or issues that arose during the audit, if any; and (c) does not release the auditor’s report until the completion of the EQCR.

9. When a firm does not have qualified personnel to perform the engagement quality control review, the firm contracts with suitable qualified external individuals or other firms to perform the review. The criteria in Procedure 7 are followed in selecting quality external engagement quality control reviewers.

Consultation and Differences of Opinion It is Furgison & Co., CPA, P.C.’s policy that personnel refer to the authoritative literature or other sources when appropriate. It is the firm’s policy that all professional personnel seek consultation, on a timely basis, within or outside the firm, whenever differences of opinion occur or exist uncertainties regarding a technical issue. The firm ensures compliance with this policy by implementing the following procedures:

1. The firm maintains or provides ready access to an adequate and up-to-date reference library that includes materials related to clients served and that should be consulted to assist professional staff in their research of technical issues.

2. Issues requiring consultation are first discussed by members of the engagement team. If further consultation is necessary,

individuals within the firm having appropriate expertise are then consulted.

3. Consultations with individuals outside of the firm who have relevant specialized expertise, including non-accounting or non-auditing specialists, are approved by the managing partner. Before using an outside individual or specialist, the firm evaluates whether the external provider is qualified for the specific purpose of the consultation.

4. All relevant facts are provided to those consulted so they can understand the nature and scope of the consultation.

5. All consultations involving difficult or contentious issues are agreed upon by both the individuals seeking consultation and

the individuals consulted. Such consultations are sufficiently documented to facilitate understanding of the issue for which the consultation was needed, the results of the consultation, the decisions made and the basis for those decisions, and how those decisions were implemented.

6. If a difference of opinion occurs within the engagement team, between the engagement partner and the engagement quality

control reviewer, or with those consulted within or outside the firm, that difference is resolved using Procedures 2, 3, and 4, if possible. If not, the matter is brought to the attention of the managing partner. The managing partner (with the assistance of other practitioners or regulatory entities, if desired) resolves the dispute regarding the proper course of action to be taken by the firm on the issue in question. The conclusion reached to resolve the matter of disagreement and how that conclusion was implemented are documented. In addition, any party to the consultation/difference of opinion who disagrees with the final conclusion may document his or her disagreement with the resolution of the matter. The firm will not release the report until any differences of opinion are resolved.

7. For audit engagements, the engagement partner is responsible for ensuring that appropriate consultation is undertaken on

difficult or contentious matters. Additionally, the engagement partner ensures that (a) members of the engagement team follow the firm’s consultation policies during the course of the engagement, (b) the nature and scope of the consultation are agreed upon with the party consulted, (c) the resulting conclusions are understood by the party consulted, and (d) such conclusions are implemented.

MONITORING It is Furgison & Co., CPA, P.C.’s policy that the quality control system be monitored on an ongoing basis to provide the firm with reasonable assurance that the policies and procedures established by the firm for each of the elements of quality control are relevant, adequate, and operating effectively. Monitoring activities include engagement quality control review (EQCR), inspection, and post-issuance review. EQCR, performed prior to completion of the engagements, assists in providing ongoing consideration and evaluation of the firm’s QC system. The policy and procedures relating to EQCR are addressed in the ENGAGEMENT PERFORMANCE section of this QC document. The retrospective monitoring activities performed by the firm relate to inspection

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and post-issuance review (collectively referred to as inspection/review) and are the primary activities addressed in these monitoring policy and procedures. As an integral part of the monitoring process, inspection/review procedures are performed on all elements of the firm’s quality control system at least annually to determine whether the firm has complied with professional standards, applicable legal and regulatory requirements, and its stated quality control policies and procedures. The firm ensures compliance with this policy by implementing the following procedures:

1. At least annually, the managing partner selects an individual or team to perform inspection/review procedures on the firm’s quality control system. Individuals selected as monitoring team members possess adequate technical knowledge and experience and, when practical, are not directly involved in the administration, supervision, or performance of the QC procedures or engagements each will inspect/review. The monitoring process is planned, performed, and documented using the appropriate monitoring checklist found in the practice aid section of PPC’s Guide to Quality Control as a work program. The engagements selected for inspection are taken from the firm’s complete engagement population, including the governmental audit practice in accordance with the membership requirements of the respective audit quality centers. The monitoring procedures include review of administrative records to assess compliance relating to QC elements other than engagement performance.

2. At the conclusion of the inspection/review, the team captain is responsible for (a) identifying and summarizing the

deficiencies noted, and (b) discussing the results of the inspection/review with the engagement partners and other appropriate personnel responsible for each of the engagements selected for review and determining whether any corrective action needs to be taken or improvements made with respect to those specific engagements. Audit engagement partners consider whether any deficiencies noted in the monitoring team’s communication may affect other audit engagements.

3. The firm pursues one or more of the following actions resulting from its evaluation of the deficiencies noted during

inspection/review— Take appropriate remedial action directed toward the individual engagement or person.

Revise the firm’s quality control policies and procedures.

Discipline individuals who fail to follow the firm’s QC policies and procedures.

Communicate the findings to those responsible for training and professional development.

4. If monitoring procedures indicate that required engagement procedures were not performed or that an issued report is

inappropriate, the firm determines what further actions are needed to comply with relevant professional standards and applicable legal and regulatory requirements. Depending upon the specific situation, the firm may obtain legal advice.

5. At least annually, the firm prepares and distributes a formal monitoring report to engagement partners and the managing

partner. This annual monitoring communication provides a description of (a) the monitoring procedures performed, (b) the conclusions reached from such procedures, and (c) any systemic, repetitive, or other significant deficiencies noted and the corrective actions taken to resolve them. Audit engagement partners consider whether any deficiencies noted in the firm’s communication may affect their audit engagements.

6. In addition, the firm is subject every three years to a peer review in accordance with the requirements of the AICPA and the

New York State Board of Accountancy. The managing partner is responsible for scheduling and coordinating that review. The firm elects to have its peer review count as it inspection for each year in which a peer review is performed.

a. In accordance with the membership requirements of the AICPA Governmental Audit Quality Center, the

engagement letter covering the firm’s peer review requires that the governmental audits selected for review during the firm’s peer review be reviewed by someone who is employed by a member firm of the respective Center. Also information relative to the firm’s most recently accepted peer review is available to the public in accordance with the membership requirements of the respective Center.

Updated 10/26/2015 12

b. The internal inspection/review results (including those specific to the firm’s governmental audit engagements selected for inspection/review) and annual monitoring communication are made available to the firm’s peer review team.

7. Based on the results of the ongoing monitoring of the QC system, the firm’s annual inspection/review, the monitoring

communication, and, if appropriate, the results of the firm’s peer review, the managing partner determines any corrective actions that should be pursued to improve, amend, or revise the QC system.

8. The managing partner periodically reminds personnel during staff meetings that any concerns regarding complaints or

allegations may be communicated to the firm without fear of reprisal. The firm is particularly interested in complaints and allegations about the firm’s noncompliance with professional standards, applicable legal and regulatory requirements, or the firm’s system of quality control. The firm appropriately addresses complaints and allegations by—

Investigating complaints and allegations and involving legal counsel if considered necessary. The firm assigns partners to this process who are trained and knowledgeable about firm procedures and who are not otherwise involved in the engagement relating to the complaint or allegation.

Documenting all complaints and allegations.

9. The firm documents the performance of each element of its QC system on an ongoing basis, as well as in conjunction with

documenting its monitoring of the system. The firm retains documentation evidencing the operation of its QC policies and procedures for a time sufficient to allow those monitoring the QC system, including peer reviewers, to evaluate the firm’s compliance with its system.

Updated 10/26/2015 13

FURGISON & CO., CPA, P.C.

QUALITY CONTROL DOCUMENT SUPPLEMENTS

Supplement No. 1: Engagement Performance Bridging Document with QCM Described – Audits and Examinations of Internal Control (AT501)

Supplement No. 2: Engagement Performance Bridging Document with QCM Described – Attestation Engagements

Supplement No. 3: Engagement Performance Bridging Document with QCM Described – Compilations and Reviews

Copyright 2015 Thomson Reuters/PPC. All Rights Reserved.

GQC-PA-11.2: Engagement Performance Bridging Document with QCM Described—Audits and Examinations of Internal Control(AT 501)

Instructions: This form represents an engagement performance bridging document for audit engagementsand examinations of internal control (AT 501). A bridging document is a term used by the authors to describe aworksheet that illustrates the engagement performance QC steps performed by the firm for a specific type ofengagement. Such a worksheet allows the firm to tailor its procedures to fit the type of engagement and tointerface its QC document into the checklists, forms, and practice aids used by the firm.

The authors have included examinations of internal control (AT 501) on this bridging document because AT501 examinations (also known as integrated audits) are always performed in conjunction with an audit offinancial statements. Due to the close relationship with an audit, the authors felt it more intuitive to include AT501 examinations on the bridging document with audits. However, the authoritative guidance for an AT 501examination resides in the SSAEs, not in the SASs.

This form is designed to be used with PPC’s accounting and auditing manuals and supports various qualitycontrol procedures within the “Engagement Performance and Documentation” section of GQC-PA-11.1, as wellas the Model QC Documents located at GQC-PA-13.1–GQC-PA-13.5. Further information regarding the use ofa bridging document as part of the firm’s QC system is discussed beginning at paragraph 605.15 andcontinuing through paragraph 605.31. The authors recommend that firms using bridging documents to supporttheir engagement performance QC system be familiar with that information.

Updated 10/26/2015

Supplement No. 1: Engagement Performance Bridging Document with QCM Described - Audits and Examinations of Internal Control (AT 501)


ENGAGEMENT PERFORMANCEQUALITY CONTROL STEPS

Person or Group Responsiblefor Completing Step

Auditsa

Examinationsof Internal

Controla

Practice Aids (QCM) Used By Firm

PrimaryResponsibility

SecondaryResponsibility

Description ofPractice Aid Location of Practice Aidb

1. Evaluate whether to accept/continue theengagement,c considering ethicalrequirements; the client’s integrity; andthe firm’s competence, capabilities, time,and resources. Partner (P)

EngagementTeam (ET) Yes Yes

Acceptance Form/Stepon Audit Program

AFI, ALG, ASB, CON, DLR, EBP, HOA, HUD,LSA, NPO, NTE, P43, PHC

2. Obtain an engagement letter. P ET Yes Yes Engagement LetterAFI, ALG, ASB, CON, DLR, EBP, HOA, HUD,

LSA, NPO, NTE, P43, PHC

3. Assign staff based on competence,capabilities, and availability. P ET Yes Yes Step on Audit Program


4. Develop a preliminary audit strategy,including consideration of more than onecomponent, use of specialists, and/orservice organizations. ET P Yes Yes

Understanding the EntityForm/Step on AuditProgram


5. Determine and document planningmateriality and performance materiality. ET P Yes Yes

Materiality Form/Step onAudit Program


6. Hold an engagement team discussionabout the susceptibility of the financialstatements to material misstatement dueto error or fraud. P ET Yes Yes

Team DiscussionForm/Step on AuditProgram


7. Perform preliminary analyticalprocedures. ET P Yes Yes Step on Audit Program


8. Inquire of management and perform otherrisk assessment procedures to obtain anunderstanding of the entity and itsenvironment, including internal control. ET P Yes Yes Risk Assessment Forms


9. Identify and assess risks of materialmisstatement (including fraud risks) anddevelop responses to identified risks. ET P Yes Yes Risk Assessment Forms


10. Prepare an audit plan. ET P Yes Yes Audit ProgramAFI, ALG, ASB, CON, DLR, EBP, HOA, HUD,


11. Develop a time estimate. ET P Opt Opt Budget FormAFI, ALG, ASB, CON, DLR, EBP, HOA, HUD,


12. Obtain partner approval of audit plan andstaff assignments, and, if applicable, timeestimates. P ET Yes Yes Step on Audit Program


13. Test, evaluate, and document design and Internal Control

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Supplement No. 1: Engagement Performance Bridging Document with QCM Described - Audits and Examinations of Internal Control (AT 501) - Con't




Auditsa


Controla





operating effectiveness of internalcontrols. ET P Opt Yes

Internal ControlForms/Step on AuditProgram


14. Perform and document further auditprocedures. ET P Yes Yes Audit Program


15. Supervise procedures (including work ofother auditors). ET P Yes Yes Audit Program


16. Obtain legal representation letters. ET P Yes YesLegal RepresentationLetter


17. Summarize, evaluate, and conclude onthe effect of accumulated misstatements. P ET Yes Yes

Audit DifferenceEvaluation Form


18. Assist in drafting the financialstatements.c ET P Yes Yes Numerous illustrations

AFI, ALG, ASB, CON, DLR, EBP, GFS, HOA,HUD, LSA, NFS, NPO, NTE, OFS, P43, PFS,

PHC

19. Perform final analytical review. ET P Yes Yes Step on Audit ProgramAFI, ALG, ASB, CON, DLR, EBP, HOA, HUD,


20. Complete a presentation and disclosurechecklist and read the financialstatements. ET P Yes Yes Disclosure Checklist

AFI, ALG, ASB, CON, DLR, EBP, GFS, HOA,HUD, LSA, NFS, NPO, NTE, OFS, P43, PFS,

PHC

21. Obtain a management representationletter. ET P Yes Yes Representation Letter


22. Evaluate management’s report on internalcontrol for completeness and propriety. ET P No Yes Step on Audit Program NTE

23. Draft the report(s). ET P Yes Yes Numerous illustrationsAFI, ALG, ASB, CON, DLR, EBP, GAR, HOA,

HUD, LSA, NPO, NTE, P43, PHC

24. Consider and document changes fromthe audit strategy, planning materiality, oraudit plan. ET P Yes Yes Step on Audit Program


25. Review the workpapers. P & ET — Yes Yes

Supervision, Review, andApproval Form/Step onAudit Program


26. Determine that all review points and openitems have been cleared. ET P Yes Yes

Supervision, Review, andApproval Form


27. Obtain an engagement quality controlreview, if required by firm policy. P ET Yes Yes



Updated 10/26/2015





Auditsa


Controla





28. Obtain consultation when appropriate anddocument and implement conclusions. P ET Yes Yes

Accounting andEngagement Issues Form


29. Resolve any differences of opinion anddocument and implement conclusions. P ET Yes Yes

Accounting andEngagement IssuesForm/Step on AuditProgram


30. Determine that all quality controlengagement-level procedures have beenperformed. P ET Yes Yes



31. Prepare required client communications. ET P Yes Yes Step on Audit ProgramAFI, ALG, ASB, CON, DLR, EBP, GAR, HOA,

HUD, LSA, NPO, NTE, P43, PHC

32. Have the partner sign the report ortransmittal letter. P ET Yes Yes



33. Evaluate the staff’s performance. ET P Yes Yes Evaluation Form GQC

34. Maintain the confidentiality, safe custody,integrity, accessibility, and retrievability ofthe workpapers. P ET Yes Yes Step on Audit Program


35. Assemble and retain the workpapers for asufficient period of time (subject tomonitoring review). ET P Yes Yes Step on Audit Program


Notes:

a Opt—Optional.

b AFI—PPC’s Guide to Audits of Financial Institutions, ALG—PPC’s Guide to Audits of Local Governments, ASB—PPC’s Guide to Audits of Nonpublic Companies,CON—PPC’s Guide to Construction Contractors, DLR—PPC’s Guide to Dealerships, EBP—PPC’s Guide to Audits of Employee Benefit Plans, GAR—PPC’s Guideto Auditor’s Reports, GQC—PPC’s Guide to Quality Control, HOA—PPC’s Guide to Homeowners’ Associations, HUD—PPC’s Guide to HUD Audits, LSA—PPC’sPractice Aids for Limited-Scope Audits of Standard 401(k) Plans, NFS—PPC’s Guide to Preparing Nonprofit Financial Statements, NPO—PPC’s Guide to Audits ofNonprofit Organizations, NTE—PPC’s Guide to Nontraditional Engagements, OFS—PPC’s Guide to Tax, Cash, and Other Bases of Accounting, P43—PPC’sPractice Aids for Audits of 403(b) Plans, PFS—PPC’s Guide to Preparing Financial Statements, PHC—PPC’s Practice Aids for Audits of Health Care Entities(Nonprofit and Investor-owned Entities).

c Effective for engagements covering periods beginning on or after December 15, 2014, the Nonattest Services Interpretation of the AICPA revised Code ofProfessional Conduct states that certain activities such as financial statement preparation, cash-to-accrual conversions, and reconciliations are considered

Updated 10/26/2015



outside the scope of an attest engagement and are, therefore, considered to be nonattest services (ET 1.295.010.06). See the discussion of nonattest servicesin section 302.

Updated 10/26/2015



GQC-PA-11.3: Engagement Performance Bridging Document with QCM Described—Attestation Engagements

Instructions: This form represents an engagement performance bridging document for attestationengagements. A bridging document is a term used by the authors to describe a worksheet that illustrates theengagement performance QC steps performed by the firm for a specific type of engagement. Such aworksheet allows the firm to tailor its procedures to fit the type of engagement and to interface its QCdocument into the checklists, forms, and practice aids used by the firm. Note that this bridging documentprovides information for six different types of attestation engagements.

This form is designed to be used with PPC’s accounting and auditing manuals and supports various qualitycontrol procedures within the “Engagement Performance and Documentation” section of GQC-PA-11.1, as wellas the Model QC Documents located at GQC-PA-13.1–GQC-PA-13.5. Further information regarding the use ofa bridging document as part of the firm’s QC system is discussed beginning at paragraph 605.15 andcontinuing through paragraph 605.31. The authors recommend that firms who choose to use bridgingdocuments to support their engagement performance QC system be familiar with that information.

Updated 10/26/2015

Supplement No. 2: Engagement Performance Bridging Document with QCM Described - Attestation Engagements


ENGAGEMENT PERFORMANCEQUALITY CONTROL STEPSa

Person or GroupResponsible forCompleting Step

Engagements Subject toQC Standardsb Practice Aids (QCM) Used By Firm

Forecastsand

ProjectionsOther

AttestationsSOC

1

Descriptionof

Practice AidLocation of

Practice Aidc

PrimaryResponsibil

ity

SecondaryResponsibil

ity

1. Evaluate whether to accept/continue theengagement, considering ethical requirements;the client’s integrity; and the firm’s competence,capabilities, time, and resources.

Partner (P)EngagementTeam (ET)

Yes Yes Yes Yes Yes Yes YesAcceptance Form/Step on Checklist

AFI, CAR, FAP, NTE,PCS

2. Obtain an engagement letter. P ET Yes Yes Yes Yes Yes Yes Yes Engagement LetterAFI, CAR, FAP, NTE,

PCS

3. Obtain a written assertion. P ET No Yes Nod Yes Yes Nod Yes Step on ChecklistAFI, CAR, FAP, NTE,

PCS

4. Assign staff based on competence, capabilities,and availability.

P ET Yes Yes Yes Yes Yes Yes Yes Step on ChecklistAFI, CAR, FAP, NTE,

PCS

5. Evaluate the propriety of a change inengagement scope or step down to a lowerlevel of service.

ET P Opt N/A Opt Opt N/A N/A Opt Step on Checklist Not Illustrated

6. Plan the work, including the involvement ofothers, and obtain background informationabout the entity, officers, accounting practices,etc.

ET P Yes Yes Yes Yes Yes Yes Yes Step on ChecklistAFI, CAR, FAP, NTE,

PCS

7. Evaluate and document materiality andtolerable misstatement.

ET P No Yes No Yes Yes No YesMateriality Form/Step on Checklist

AFI, FAP, NTE, PCS

8. Consider potential fraud implications. ET P No No No Yes Yes No Yes Step on Checklist AFI, CAR, NTE, PCS

9. Identify and assess risks of materialmisstatement and develop responses toidentified risks.e

ET P No Opt No Opt Opt No Yes Step on Checklist AFI, CAR, NTE, PCS

10. Prepare an engagement plan. ET P Yes Yes Yes Yes Yes Yes Yes ChecklistAFI, CAR, FAP, NTE,

PCS

11. Develop a time estimate. ET P Opt Opt Opt Opt Opt Opt Opt — Not Illustrated

12. Obtain partner approval of engagement planand staff assignments, and, if applicable, timeestimates.

P ET Opt Yes Yes Yes Yes Yes Yes Step on ChecklistAFI, CAR, FAP, NTE,

PCS

13. Perform and document the procedures. ET P Yes Yes Yes Yes Yes Yes Yes ChecklistAFI, CAR, FAP, NTE,

PCS

Updated 10/26/2015

Supplement No. 2: Engagement Performance Bridging Document with QCM Described - Attestation Engagements - Con't





Forecastsand

ProjectionsOther

AttestationsSOC

1

Descriptionof


Practice Aidc

PrimaryResponsibil

ity


ity

14. Supervise procedures (including work ofothers).

ET P Yes Yes Yes Yes Yes Yes Yes ChecklistAFI, CAR, FAP, NTE,

PCS

15. Obtain legal representation letters. ET P No Opt No No Opt No No — Not Illustrated

16. Draft (or assist in drafting) the information orsubject matter.

ET P Yes Yes Yes Opt Opt Opt Yes Numerous illustrationsAFI, CAR, FAP,GAR, NTE,PCS

17. Perform analytical procedures. ET P No Opt No Yes Opt No No Step on Checklist AFI, CAR, NTE, PCS

18. Complete a presentation and disclosurechecklist and read the financial Information.

ET P Yes Yes Opt N/A N/A N/A N/A Disclosure Checklist CAR, FAP

19. Obtain a description of the system of internalcontrol.

P ET No No No No No No Yes Step on ChecklistAFI, CAR, FAP, NTE,

PCS

20. Obtain a management representation letter. ET P Yes Yes Yes Yes Yes Yes Yes Representation LetterAFI, CAR, FAP, NTE,

PCS

21. Draft the report. ET P Yes Yes Yes Yes Yes Yes Yes Numerous illustrationsAFI, CAR, FAP,GAR, NTE, PCS

22. Review the workpapers. P & ET — Yes Yes Yes Yes Yes Yes Yes Step on ChecklistAFI, CAR, FAP, NTE,

PCS

23. Determine that all review points and open itemshave been cleared.


PCS

24. Obtain an engagement quality control review, ifrequired by firm policy.

P ET Yes Yes Yes Yes Yes Yes Yes

Supervision, Review,and Approval

Form/TechnicalReviewer Checklist/Step on Checklist


25. Obtain consultation when appropriate anddocument and implement conclusions.


PCS

26. Resolve any differences of opinion anddocument and implement conclusions.


PCS

27. Have the partner sign the report or transmittalletter.

P ET Yes Yes Yes Yes Yes Yes Yes

Supervision, Review,and ApprovalForm/Step on


Updated 10/26/2015






Forecastsand

ProjectionsOther

AttestationsSOC

1

Descriptionof


Practice Aidc

PrimaryResponsibil

ity


ityChecklist

28. Evaluate the staff’s performance. ET P Opt Opt Opt Opt Opt Opt Opt Evaluation Form GCR, GQC

29. Maintain the confidentiality, safe custody,integrity, accessibility, and retrievability of theworkpapers.


PCS

30. Assemble and retain the workpapers for asufficient period of time (subject to monitoringreview).


PCS

Notes:

a Examinations of internal control (AT 501) are addressed on the bridging document at GQC-PA-11.2. The authors have included examinations of internal control(AT 501) on that bridging document because AT 501 examinations (also known as integrated audits) must be performed in conjunction with an audit of financialstatements. Due to the close relationship with an audit, the authors believed it more meaningful to include AT 501 examinations on the bridging document withaudits. However, the authoritative guidance for an AT 501 examination is included in the SSAEs, not in the SASs.

b Opt—Optional.

c AFI—PPC’s Guide to Audits of Financial Institutions, CAR—PPC’s Guide to Compilation and Review Engagements, FAP—PPC’s Guide to Forecasts andProjections, GAR—PPC’s Guide to Auditor’s Reports, GCR—PPC’s Guide to Quality Control—Compilation and Review, GQC—PPC’s Guide to Quality Control,NTE—PPC’s Guide to Nontraditional Engagements, PCS—PPC’s Practice Aids for Reporting on Controls of Service Organizations.

d Obtaining a written assertion is generally not required in an agreed-upon procedures engagement unless specifically required by another attest standard thatapplies to the particular type of agreed-upon procedures engagement being performed.

e For purposes of this bridging document, the term material misstatement means the risk that the subject matter is materially misstated or that the assertion is notpresented fairly in all material respects.

Updated 10/26/2015



GQC-PA-11.4: Engagement Performance Bridging Document with QCM Described—Compilations and Reviews

Instructions: This form represents an engagement performance bridging document for compilation andreview engagements. A bridging document is a term used by the authors to describe a worksheet thatillustrates the engagement performance QC steps performed by the firm for a specific type of engagement.Such a worksheet allows the firm to tailor its procedures to fit the type of engagement and to interface its QCdocument into the checklists, forms, and practice aids used by the firm.

This form is designed to be used with PPC’s accounting and auditing manuals and supports various qualitycontrol procedures within the “Engagement Performance and Documentation” section of GQC-PA-11.1, as wellas the Model QC Documents located at GQC-PA-13.1–GQC-PA-13.5. Further information regarding the use ofa bridging document as part of the firm’s QC system is discussed beginning at paragraph 605.15 andcontinuing through paragraph 605.31. The authors recommend that firms who choose to use bridgingdocuments to support their engagement performance QC system be familiar with that information.

Updated 10/26/2015

Supplement No. 3: Engagement Performance Bridging Document with QCM Described - Compilations and Reviews



Person or GroupResponsible forCompleting Step Practice Aids (QCM) Used By Firm


SecondaryResponsibility Compilationsa,b Reviewsa

Description ofPractice Aid

Location ofPractice Aidc

1. Evaluate whether to accept/continue the engagement,considering ethical requirements; the client’s integrity; and thefirm’s competence, capabilities, time, and resources.

Partner (P)EngagementTeam (ET)

Yes YesAcceptance Form/Step

on ChecklistCAR, CON, DLR, EBP, HOA, NPO, OFS

2. Obtain a signed engagement letter. P ET Yes Yes Engagement Letter CAR, CON, DLR, EBP, HOA, NPO, OFS

3. Assign staff based on competence, capabilities, and availability. P ET Yes YesAcceptance Form/Step on Checklist

CAR, CON, DLR, EBP, HOA, NPO, OFS

4. Evaluate the propriety of a step down to a lower level of service. ET P Yes YesStep-down Checklist/Step

on ChecklistCAR, CON, DLR, EBP, HOA, NPO, OFS

5. Obtain an understanding of the entity and its industry, business,and accounting principles and practices and plan the work.

ET P Yes Yes Step on Checklist CAR, CON, DLR, EBP, HOA, NPO, OFS

6. Consider potential fraud implications. ET P Yes Yes Step on Checklist CAR, CON, DLR, EBP, HOA, NPO, OFS

7. Prepare an engagement plan. ET P Yes Yes Checklist CAR, CON, DLR, EBP, HOA, NPO, OFS

8. Develop a time estimate. ET P Opt Opt Budget Form CAR, CON, DLR, EBP, HOA, NPO, OFS

9. Obtain partner approval of engagement plan and staffassignments, and, if applicable, time estimates.

P ET Yes Yes Step on Checklist CAR, CON, DLR, EBP, HOA, NPO, OFS

10. Perform and document the procedures. ET P Yes Yes Checklist CAR, CON, DLR, EBP, HOA, NPO, OFS

11. Supervise procedures (including work of other accountants). ET P Yes Yes Checklist CAR, CON, DLR, EBP, HOA, NPO, OFS

12. Draft (or assist in drafting) the financial statements. ET P Yes Yes Numerous illustrationsCAR, CON, DLR, EBP, HOA, NFS, NPO,

OFS, PFS

13. Complete a presentation and disclosure checklist (if applicable)and read the financial statements.

ET P Yes Yes Disclosure ChecklistCAR, CON, DLR, EBP, HOA, NFS, NPO,

OFS, PFS

14. Obtain a management representation letter. ET P Opt Yes Representation Letter CAR, CON, DLR, EBP, HOA, NPO, OFS

15. Draft the report. ET P Yes Yes Numerous illustrations CAR, CON, DLR, EBP, HOA, NPO, OFS

16. Review the workpapers. P & ET — Yes Yes Step on Checklist CAR, CON, DLR, EBP, HOA, NPO, OFS

17. If information is incorrect, incomplete, or otherwiseunsatisfactory, obtain revised information/perform additionalprocedures.

ET P Yes Yes Checklist CAR, CON, DLR, EBP, HOA, NPO, OFS

18. Determine that all review points and open items have beencleared.


Updated 10/26/2015

Supplement No. 3: Engagement Performance Bridging Document with QCM Described - Compilations and Reviews - Con't



Person or GroupResponsible forCompleting Step Practice Aids (QCM) Used By Firm


SecondaryResponsibility Compilationsa,b Reviewsa

Description ofPractice Aid

Location ofPractice Aidc

19. Obtain an engagement quality control review, if required by firmpolicy.


20. Obtain consultation when appropriate and document andimplement conclusions.


21. Resolve any differences of opinion and document and implementconclusions.


22. Have the partner sign the report. P ET Yes Yes Step on Checklist CAR, CON, DLR, EBP, HOA, NPO, OFS

23. Evaluate the staff’s performance. ET P Opt Yes Evaluation Form GCR, GQC

24. Maintain the confidentiality, safe custody, integrity, accessibility,and retrievability of the workpapers.


25. Assemble and retain the workpapers for a sufficient period oftime (subject to monitoring review).


Notes:

a Opt—Optional.

b Firms may choose to specify different QC procedures for interim compilations than for final year-end compilations. Firms may add another column to reflectthose differing interim compilation procedures or otherwise somehow indicate how the procedures are different.

c CAR—PPC’s Guide to Compilation and Review Engagements, CON—PPC’s Guide to Construction Contractors, DLR—PPC’s Guide to Dealerships, EBP—PPC’sGuide to Audits of Employee Benefit Plans, GCR—PPC’s Guide to Quality Control—Compilation and Review, GQC—PPC’s Guide to Quality Control, HOA—PPC’sGuide to Homeowners’ Associations, NFS—PPC’s Guide to Preparing Nonprofit Financial Statements, NPO—PPC’s Guide to Audits of Nonprofit Organizations,OFS—PPC’s Guide to Tax, Cash, and Other Bases of Accounting, PFS—PPC’s Guide to Preparing Financial Statements.

Updated 10/26/2015

Supplement No. 3: Engagement Performance Bridging Document with QCM Described - Compilations and Reviews - Con't