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Understanding PCAOB QC 1000 Paragraph .28: A Key Component for Quality Control in Audits

Understanding PCAOB QC 1000 Paragraph .28: A Key Component for Quality Control in Audits


Paragraph .28 of QC 1000 holds significant implications for firms auditing more than 100 issuers, such as Deloitte, PwC, EY, KPMG, Grant Thornton, BDO, RSM, Crowe, BKD, and Marcum LLP. This section requires these firms to incorporate an External Quality Control Function (EQCF) within their governance structure.


What Does Paragraph .28 State?


Firms must include in their governance an external oversight function composed of individuals with no commercial, familial, or other ties to the firm that could impair their independence. These external members should have the experience, authority, and time to evaluate the firm's quality control system effectively. Their main responsibilities consist of assessing significant judgments and conclusions related to the firm’s quality control.


Impact on Major Accounting Firms


For firms like Deloitte, PwC, EY, KPMG, and others, this means integrating independent external parties into their governance structures. These firms will need to:

  1. Select Qualified Individuals:

  • Carefully choose individuals with the necessary skills and independence.

  1. Define Clear Roles:

  • Clearly outline the EQCF’s responsibilities and authority.

  1. Foster Open Communication:

  • Establish transparent communication channels between the EQCF and firm leadership.

  1. Provide Resources:

  • Ensure the EQCF has access to all necessary information and resources.


By incorporating these external oversight functions, firms can enhance their audit quality and reinforce their commitment to transparency and continuous improvement, thereby strengthening stakeholder trust and confidence in their practices.


In conclusion, while implementing paragraph .28 may be challenging, it provides a valuable opportunity for firms to demonstrate their dedication to high-quality audits and ethical standards.



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