The following comments summarize the beliefs of some practitioners about quality control and practice inspection: Quality control and practice inspection are quasigovernmental methods of regulating the profession. There are two effects of such regulation. First, it gives a competitive advantage to national public accounting firms because they already need formal structures to administer their complex organizations. Quality control requirements do not significantly affect their structure. Smaller firms now need a more costly organizational structure, which has proven unnecessary because of existing partner involvement on engagements. The major advantage smaller public accounting firms have traditionally had is a simple and efficient organizational structure. Now that advantage has been eliminated because of quality control requirements. Second, quality control and practice inspection are not needed to regulate the profession. Elements of quality control have always existed, at least informally, for quality firms. Three things already provide sufficient assurance that informal quality control elements are followed without practice inspection. They are competitive pressures to do quality work, legal liability for inadequate performance, and a code of professional ethics requiring that PAs follow generally accepted auditing standards.
REQUIRED
a. State the pros and cons of these comments.
b. Evaluate whether control requirements and practice inspection are worth their cost.