Quality Management: Now What?-QM - Now What

QM - Now What - Case Studies

Pdf Summary

The document presents five case studies on implementing and monitoring a CPA firm’s quality management (QM) system.

1. <strong>Engagement quality reviews (EQRs):</strong> Yellowstone CPAs is a small firm with mostly inexperienced staff, expanding service lines, rapid growth, and prospective larger, federally funded clients. Its current EQR triggers are reviews required by law or regulation, new service levels, and clients with revenue over $100 million. The case asks whether these criteria adequately address the firm’s risks and how firms select reviewers.

2. <strong>System breakdowns:</strong> Two scenarios examine whether firms follow their QM policies in practice. They focus on assessing engagement complexity and available resources before acceptance or continuance, and on providing suitable engagement-team direction, supervision, and review.

3. <strong>Monitoring activities:</strong> Participants are asked to select a key response from each QM component—governance and leadership, ethics, acceptance and continuance, resources, engagement performance, and information and communication—and propose how and how often to test it.

4. <strong>Deficiencies and root-cause analysis:</strong> Yellowstone’s monitoring identifies delayed or compressed schedules, budget overruns, an AUP partner without relevant training, undocumented materiality on a SSARS review, and initially incorrect major-program determinations on two Single Audits. The case asks whether findings indicate system deficiencies, what caused them, and how to remediate both system issues and the nonconforming engagement.

5. <strong>Reassessing quality risks:</strong> Two firms face significant changes. Isle Royale struggles with staffing, workload, and backlogs and may use temporary or outsourced personnel. Grand Canyon has merged with another firm, adding offices, partners, clients, service lines, Single Audits, and a different methodology; monitoring shows inconsistent documentation. The discussion considers which QM components and new risks should be reassessed.

Overall, the cases emphasize adapting quality risks and responses as firms and engagements change, and supporting policies with evidence of consistent implementation.

Keywords

quality management

CPA firm

engagement quality review

monitoring activities

root-cause analysis

quality risks

system deficiencies

Single Audit

engagement acceptance

firm growth