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Chapter 2

The Audit Standards' Setting Process

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57 views

Chapter 2

The Audit Standards' Setting Process

Uploaded by

nada
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 11

Chapter 2

The Audit
Standards’ Setting
Process

Copyright © 2014 Pearson Education

1
Describe the nature of CPA firms,
what they do, and their structure.

2-2
Copyright © 2014 Pearson Education
The legal right to perform audits is granted
to CPA firms by regulation in each state.

CPA firms also provide many other services to


their clients, such as tax and advisory services.

CPA firms continue to develop new products and


services—such as financial planning, business
valuation, forensic accounting, and information
technology advisory services.
2-3
Copyright © 2014 Pearson Education

 Accounting and bookkeeping services


The financial statements are to be given to a third party, the client
may engage the CPA to compile financial statements that are
accompanied by a compilation report, which indicates the CPA
assembled the statements but provides no assurance to third
parties.

 Tax services

 Management consulting services

2-4
Copyright © 2014 Pearson Education
Six organizational structures are available to CPA firms:
 Proprietorship
 General Partnership
 General Corporation
 Professional Corporation
 Limited Liability Company
 Limited Liability Partnership

2-5
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Partners review all audit


Average Experience areas and makes
significant decisions. The
10+ years partner signs the audit
Partners
report.
Managers help plan the audit,
Managers 5-10 years manage the audit, review the
audit work and work with the
client to resolve any issues
identified.
Seniors and In-
Charge Auditors 2-5
Seniors are responsible for
the field work and supervise
the staff.
Staff Assistants 0-2
Staff perform most of the audit
field work.
2-6
Copyright © 2014 Pearson Education
2
Describe the key functions
performed by the AICPA.

2-7
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Performs the following services for CPAs:


 Sets professional requirements
 Conducts research
 Publishes materials related to services
performed

Empowered to set standards (guidelines)


and rules

2-8
Copyright © 2014 Pearson Education
1. Auditing standards
The Auditing Standards Board (ASB) of the AICPA is responsible
for issuing pronouncements on auditing matters in the U.S. ASB
pronouncements are called Statements on Auditing Standards
(SASs). The AICPA auditing standards are also referred to as U.S.
Generally accepted auditing standards (GAAS).
2. Compilation and review standards
The Accounting and Review Services Committee is responsible for
issuing pronouncements of the CPA’s responsibilities when a CPA is
associated with financial statements of privately owned companies
that are not audited.
They are called Statements on Standards for Accounting and
Review Services (SSARS).
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Copyright © 2014 Pearson Education

3. Other attestation standards


Statements on Standards for Attestation Engagements are
standards that may be used to provide assurance on nonfinancial
information, and are also used to develop standards for specific
attestation services.

4. Code of Professional Conduct


The AICPA Professional Ethics Executive Committee sets rules of
conduct that CPAs are required to meet.

2-10
Copyright © 2014 Pearson Education
3
Understand the role of
international auditing standards
and their relation to U.S.
auditing standards

2-11
Copyright © 2014 Pearson Education

IFAC is the worldwide organization


for the accountancy profession.

The International Auditing


and Assurance Standards Board
IAASB works to improve the
uniformity of auditing practices and
related services throughout the world.

International Standards on Auditing (ISAs)

2-12
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4
Use U.S. auditing standards (GAAS)

2-13
Copyright © 2014 Pearson Education

GAAS
Auditing standards provide requirements and application and other explanatory
material to aid auditors in fulfilling their professional responsibilities in the audit
of historical financial statements.

2-14
Copyright © 2014 Pearson Education
5
Identify quality control standards and practices
within the accounting profession.

2-15
Copyright © 2014 Pearson Education

Methods used by a CPA firm to ensure that the firm


meets its professional responsibilities to clients and
others

 Leadership responsibilities for quality


 Relevant ethical requirements
 Acceptance and continuation of clients
and engagements
 Human resources
 Engagement performance
 Monitoring

2-16
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17
Copyright © 2014 Pearson Education

6
Peer Review

2-18
Copyright © 2014 Pearson Education
The review by CPAs of another CPA firm’s
compliance with its quality control system.

The purpose of a peer review is to determine and


report whether the CPA firm being reviewed has
developed adequate quality control policies and
procedures and follows them in practice.

19
Copyright © 2014 Pearson Education

7
Audit Practice And Quality Centers

2-20
Copyright © 2014 Pearson Education
The Center for Audit Quality (CAQ) is a public
policy organization affiliated with the AICPA
serving investors, public company auditors, and
the capital markets. The Center’s mission is to
foster confidence in the audit process and to
make public company audits even more reliable
and relevant for investors.

21
Copyright © 2014 Pearson Education

22
Copyright © 2014 Pearson Education

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