Holtzman Partners, LLP
Quality Control Policies and Procedures
December 2016
Holtzman Partners, LLP has established a system of quality control consisting of policies and procedures designed to achieve specific objectives and to implement, maintain, and monitor compliance with those policies. The firm’s system of quality control has set out to achieve reasonable assurance that the firm and its personnel comply with professional standards and applicable legal and regulatory requirements, and that reports issued by the firm are appropriate in the circumstances.
This Quality Control Policies and Procedures document addresses each of the following elements and is organized as such. Within each section noted below are descriptions of the objectives included in that section and the firm’s related policies to achieve those objectives.
A. Leadership Responsibilities for Quality Within the Firm (the “Tone at the Top”)
B. Relevant Ethical Requirements
C. Acceptance and Continuance of Client Relationships and Specific Engagements
D. Human Resources
E. Engagement Performance
F. Monitoring
A. Leadership Responsibilities For Quality Within The Firm (The “Tone at the Top”)
Objective 1: Quality control policies and procedures are required to be documented and communicated to personnel, including the message that each individual has a personal responsibility for quality and to be familiar with and to comply with these policies and procedures.
The Firm implements this objective by:
Policy A1: The Firm maintains a written quality control document, which is updated annually and distributed to all firm personnel.
· The firm assigns specific personnel to the Audit Quality Team annually, who are responsible for maintaining and updating the Quality Control Policies and Procedures document. Once updated, the document is distributed to all personnel through email or by manual process, and confirmation acknowledgement and/or signatures are obtained from each employee for receipt and understanding of such document. The document is available for review at all times as it is included in the Audit Quality Review binder on the share drive.
A. Leadership Responsibilities For Quality Within The Firm (The “Tone at the Top”) (continued)
Policy A1 (continued): The Firm maintains a written quality control document, which is updated annually and distributed to all firm personnel.
· Personnel are invited and encouraged to provide feedback and suggestions as to how to improve the document and the Firm’s system of quality control at any time throughout the year.
· Personnel are reminded verbally at all staff meetings of the importance of providing quality services to our clients.
employee benefit plan audit practice: We note this objective is met for the EBP audit practice through Policy A1 noted above, which applies to the entire practice, inclusive of EBP audits.
Objective 2: Quality control policies and procedures support an internal culture based on the recognition that quality is essential in performing engagements.
The Firm implements this objective by:
Policy A2: Firm management assumes ultimate responsibility for the Firm’s system of quality control.
· Kat Peterson is Executive Director in charge of Audit Quality and ensures that the firm performs annual audit quality reviews on a selection of client attest engagements. The firm assigns specific personnel to the Audit Quality Team annually, who are responsible for:
o Selecting client attest engagements for the annual Audit Quality Review;
o Assigning personnel to review those engagements using AICPA PRP section checklists; and
o Reviewing the results of the AQRs and compiling the results to be communicated to partners and staff during annual firm-wide training so as to improve audits going forward.
employee benefit plan audit practice: We note this objective is met for the EBP audit practice through Policy A2 noted above, which applies to the entire practice, inclusive of EBP audits.
B. Relevant Ethical Requirements
Objective 1: Quality control policies and procedures provide the firm with reasonable assurance that the firm and its personnel comply with relevant ethical requirements when discharging professional responsibilities. Relevant ethical requirements include independence, integrity, and objectivity. These requirements include regulations, interpretations, and rules of the AICPA, state CPA societies, state boards of accountancy, state statutes, the U.S. Government Accountability Office, and any other applicable regulators.
The Firm implements this objective by:
Policy B1: Personnel adhere to applicable independence, integrity, and objectivity requirements such as those in regulations, interpretations, and rules of the AICPA, state CPA societies, state boards of accountancy, state statutes, the U.S. Government Accountability Office (GAO), Department of Labor (DOL), Federal Deposit Insurance Corporation (FDIC), and any other applicable regulators.
· The firm maintains access to AICPA professional standards and current guidance materials through a subscription to Accounting Research Manager online.
· The firm designates a quality assurance partner to review relevant pronouncements relating to independence, integrity, and objectivity, monitor compliance, answer questions, and resolve matters.
o Gretchen Leifeste has been assigned partner in charge of independence matters.
o In addition, before accepting a new engagement, each partner will ensure independence of the client and the engagement team assigned.
· The firm identifies circumstances for which documentation of the resolution of matters is appropriate.
o The Firm analyzes independence in its client acceptance/continuance process. The partner documents this in a work step in an audit workpaper within the audit binder. Based on client acceptance/retention procedures and our independence circularization, we resolve pertinent issues and document their resolution.
· The firm assigns responsibility to specified individuals for obtaining written representation from personnel, upon hire and on an annual basis, concerning whether they are familiar and in compliance with professional standards and the Firm’s policies and procedures regarding independence, integrity, and objectivity.
o Cathy Wilson, HR Manager, provides each new hire with a list of clients to review and sign an independence confirmation. Sara Wheeler, Manager, updates written independence statements as necessary annually. On each engagement, the team ensures knowledge of professional standards through discussions with new team members.
B. Relevant Ethical Requirements (continued)
Policy B1 (continued): Personnel adhere to applicable independence, integrity, and objectivity requirements such as those in regulations, interpretations, and rules of the AICPA, state CPA societies, state boards of accountancy, state statutes, the U.S. Government Accountability Office (GAO), Department of Labor (DOL), Federal Deposit Insurance Corporation (FDIC), and any other applicable regulators.
· The firm assigns responsibility to specified individuals for reviewing these independence representations for completeness, and for resolving reported exceptions.
o The Audit Quality Review team is responsible for reviewing and updating independence representations from employees annually.
· A partner, or an individual designated by the partner, periodically reviews unpaid fees from clients to ascertain whether any outstanding amounts impair the Firm’s independence.
o Partners, Executive Directors, Senior Managers, and Managers review unpaid fees from clients at least monthly. Lisa Green, COO, and the partners handle collections. All individuals involve work together to ascertain whether any outstanding amounts impair the Firm’s independence.
Policy B2: The Firm’s senior management sets a tone for the organization that stresses the importance of ethical values, especially as they pertain to accounting and auditing engagements, and communicates related policies and procedures to Firm personnel.
The Firm implements this policy by:
· Providing each of its professional personnel with access to applicable professional and regulatory literature and advising them that they are expected to be familiar with that literature.
o All audit personnel are provided access to our CCH Accounting Research Manager online. This subscription provides us access to all relevant literature and a weekly email update delivering to each individual recent changes in Professional Standards.
· Providing current guidance materials regarding independence, integrity, objectivity, and ethics to all professional personnel. Such guidance covers the Firm’s independence and ethics policies and the independence and ethical requirements of all applicable regulators.
o The Firm requires all licensed professionals to comply with the ethics requirements of the Texas State Board of Public Accountancy. The firm also ensures that all audit professionals are aware of the US independence standards through annual independence communications. All personnel have access to Accounting Research Manager online, which contains the AICPA's professional standards and code of professional conduct.
B. Relevant Ethical Requirements (continued)
Policy B2 (continued): The Firm’s senior management sets a tone for the organization that stresses the importance of ethical values, especially as they pertain to accounting and auditing engagements, and communicates related policies and procedures to Firm personnel.
o Informing personnel on a timely basis of those entities to which independence policies apply, by:
§ Preparing and maintaining a list of entities with which Firm personnel are prohibited from having a business relationship.
§ Making the list available to personnel so they may evaluate their independence (including personnel new to the Firm).
§ Notifying personnel on a timely basis of changes to the list and/or changes in new and revised regulations, interpretations, and rulings.
Policy B3: The Firm establishes procedures to help mitigate possible threats to independence and objectivity.
The Firm implements this policy by:
· Assigning a second partner, who is not otherwise associated with the engagement, to perform a concurring review of all audit and attest engagements.
· Designing and implementing compensation systems that (a) reward partners and staff involved in the accounting and auditing practice for the quality of their work and their compliance with professional standards, and (b) provide disincentives for behavior that might be perceived as impairing the independence or objectivity of their work, for example, the cross-selling of certain consulting services.
o Our Firm’s compensation structure is based on the provision of quality to our clients. We pay our employees market rates for their services. Under no circumstances do we provide incentives for cross-selling consulting services to our clients.
employee benefit plan audit practice: We note this objective is met for the EBP audit practice through Policies B1 through B3 noted above, which apply to the entire practice, inclusive of EBP audits. For Policy B3, concurring review is performed on all engagements by Valorie Foster, an EBP tax specialist, or an experienced EBP senior manager or partner.
B. Relevant Ethical Requirements (continued)
Objective 2: The firm, when acting as principal auditor, confirms the independence of another firm performing parts of an engagement.
The Firm implements this objective by:
Policy B4: The Firm establishes procedures for confirming the independence of other firms who are performing part of an engagement.
· The firm uses practice aids that prescribe the form, content, and frequency of independence representations to be obtained.
o Any independence certifications obtained are signed by the other firm(s) and maintained within the audit binder.
employee benefit plan audit practice: We note this objective is not applicable for EBP engagements.
Objective 3: Before the firm performs nonattest services for accounting and auditing clients, the firm determines that the requirements described in Ethics Interpretation 101-3, “Providing Non-attest Services to Attest Clients,” under rule 101, “Independence,” have been met.
The Firm implements this objective by:
Policy B5: The Firm establishes procedures for confirming independence when performing nonattest services for attest clients.
· The firm uses practice aids that walk through independence considerations when performing nonattest services to accounting and auditing clients.
o The practice aids are completed by the audit team and maintained in the audit binder.
employee benefit plan audit practice: We note this objective is met for the EBP audit practice through Policy B5 noted above, which applies to the entire practice, inclusive of EBP audits.
C. Acceptance and Continuance of Client Relationships and Specific Engagements
Objective 1: Quality control policies and procedures for acceptance and continuance of client relationships and specific engagements provide the firm with reasonable assurance that the firm and its personnel will undertake or continue relationships and engagements only where it has considered the integrity of the client, is competent to perform the engagement, can comply with the legal and ethical requirements, and has reached an understanding with the client regarding the services to be performed.
Objective 2: The firm evaluates whether the engagement can be completed with professional competence; undertakes only those engagements for which the firm has the capabilities, resources, and professional competence to complete; and evaluates, at the end of specific periods or upon occurrence of certain events, whether the relationship should be continued.
The Firm implements these objectives by:
Policy C1: The Firm evaluates factors that have a bearing on client management’s integrity.
· Informing personnel of the Firm’s policies and procedures for accepting and continuing clients, including those outlined in the Firms’ practice aids.
· Making inquiries of client management about the nature and purpose of the services to be provided.
· Making inquiries of the client’s bankers, factors, attorneys, credit services, and others who have business relationships with the entity.
o The Firm documents its client acceptance/continuance for each engagement on its standard CCH-created checklist maintained within each electronic audit binder and signed off by the partner in the electronic engagement binder.
C. Acceptance and Continuance of Client Relationships and Specific Engagements (continued)
Policy C2: The Firm (a) evaluates whether the engagement can be completed with professional competence, (b) undertakes only those engagements that can be completed with professional competence, and (c) considers the risk associated with providing professional services in particular circumstances.
· Evaluating whether the Firm has obtained or can reasonably expect to obtain the knowledge and expertise necessary to perform the engagement.
· Specifying conditions that trigger the requirement to reevaluate a specific client or engagement. The following are examples of such conditions:
o Significant changes in the client, for example a major change in senior client personnel, ownership, advisors, the nature of its business, or the financial stability of the client.
o Changes in the nature or scope of the engagement, including requests for additional services.
o Changes in the composition of the Firm, for example, the loss of and inability to replace key personnel who are particularly knowledgeable about a specialized industry.