Quality control: SSTS No. 9 provides guidance on tax quality control systems.
In one form or another, CPA firms maintain a system of quality control. And if recent events are any indication, it appears that the public and lawmakers also are focusing greater attention on the CPA's quality control system.
SSTS No. 9--Quality Control
The AICPA's exposure draft of proposed Statements on Standards for Tax Services No. 9--Quality Control (Dec. 30, 2005) provides guidance to AICPA members on implementing the original eight standards, which describe members' responsibilities to clients, the public and the tax system.
In addition, SSTS No. 9 will help CPAs comply with recent additions to Circular 230 that emphasize the need for guidance in responding to tax law changes and the public's expectations of CPAs.
These Circular 230 changes have increased the penalties and regulations imposed on CPAs.
While this is an AICPA standard, all CPAs should expect that it may be applied to them. In the absence of other applicable standards, the public and legal community may look to these standards to evaluate one's compliance with, and exercise of, due care.
For example, Circular 230 secs. 10.33 and 10.36 refer to best practices and compliance procedures. It is likely that this quality control standard will be considered during the enforcement of those sections.
Quality Control, Big and Small
Quality control is a key characteristic for all CPA firms. In the smallest offices, CPAs are using some system, such as checklists, workpapers, files or other procedures to document their quality control system. In the largest offices, there are detailed policies and procedures documenting the system of quality control.
SSTS No. 9 recognizes these diverse business and personnel situations wherein CPAs will apply this guidance. A goal of SSTS No. 9 is to provide sufficient ethical guidance, along with flexibility, to address a wide range of applications.
Five Elements of Quality Control
SSTS No. 9 requires the CPA to have a system of quality control and describes an adequate system of quality control as: "a process to provide the member with reasonable assurance that the firm (public practice) or employer's (nonpublic practice) personnel comply with applicable professional standards."
The standard states that any system of quality control should have policies and procedures that address the following:
Integrity and Objectivity -- The standard acknowledges that CPAs may act as advocates for the taxpayer. That advocacy is done in the context of integrity, objectivity and compliance with other professional standards, including the AICPA's Code of Professional Conduct. The code states that "service and the public trust should not be subordinated to personal gain and advantage. Objectivity is a state of mind and a quality that lends value to a tax practice or function."
Personnel Management -- The standard recognizes that the required quality control system will vary significantly based on the proficiency of the personnel. The system must provide reasonable assurance that the firm or personnel are proficient at their assigned tasks. Included in this element is the hiring, monitoring, training and evaluation of personnel.
Acceptance and Continuance of Clients and Engagements -- The standard recommends having policies and procedures for deciding whether or not to accept or continue with a client relationship, or to perform a specific engagement. Included is an evaluation of the firm's competence, the risks involved and the prospective client.
Performance of Professional Services -- The standard recommends that the firm or employer adopt policies and procedures that provide reasonable assurance that the tax services performed meet applicable professional standards. These policies and procedures should address the services provided, personnel, workpapers and documentation, as well as how the firm communicates the results of those services.
Administration, Documentation of a Quality Control System -- The standard states that firms and employers should assign the responsibility for oversight of the quality control policies and procedures to appropriate individuals. The oversight responsibility includes communication to personnel and monitoring their compliance.
Comments Due Aug. 31
CPAs face the dual responsibility of advocating for taxpayers and supporting the tax system. An important part of maintaining this public trust is a system of quality control.
Review the standard by visiting http://tax.aicpa.org/Resources/Professional+Standards+and+Ethics and clicking on "Statements on Standards for Tax Services." Then scroll down to find SSTS No. 9.
Your comments are an important part of the standards-setting process. Comments are due Aug. 31.
Conrad Davis, CPA is a partner at Sacramento-based Ueltzen & Company, LLP, chair of CalCPA's Government Relations Committee, and was a contributor in the drafting of SSTS No. 9.
You can reach him at firstname.lastname@example.org.
By Conrad Davis, CPA
|Printer friendly Cite/link Email Feedback|
|Date:||Jun 1, 2006|
|Previous Article:||No rush to sign: client agreements from government entities not always a fit for CPA firms.|
|Next Article:||CPA day at the Capitol: CalCPA members increase profession's visibility.|