Chapter 1

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Author:
blemus
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72365
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Chapter 1
Updated:
2011-03-13 23:43:01
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Accountants Roles
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Midterm 1
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  1. What is GAAS?
    • General Accepted Accounting Standards
    • Standards that provide a measure of audit quality and the objectives to be achieved in an audit
    • Measures of the quality of the auditors performance
    • 10 standards- 3 general, 3 field work and 4 standards of reporting
    • Binding on members of the AICPA
  2. What is SAS
    • Statements on Auditing Standards
    • Codified within the framwork of the 10 standards of GAAS
  3. Who establishes Generally Accepted Auditing Standards?
    • AICPA
    • American Institue of Certified Public Accountants
  4. What is the PCAOB and Who is it Created By?
    • Public Company Accounting Oversight Board
    • Created by Sarbanes-Oxley Act of 2002.
    • The PCAOB is required to cooperate with the AICPA and other groups in setting auditng standards and may adopt other proposals.
  5. Who does the PCAOB Cooperate with ?
    AICPA
  6. What is the PCAOB authorized to do
    Authorized to amend, modify, repeal, or reject any such standards of the AICPA
  7. What is the AICPA
    • American Institute of Certified Public Accountants.
    • Establish Standards
    • SAS-Statements on Auditing Standards
    • SSAE's- Statements on Standards for Attestation Engagements, which are guidance for attesting to information.
    • Research and Publication
    • Continuing Professional Education
    • Self-Regulation
    • Code of Professional Conduct-ethical rules for CPA's
  8. PCAOB Role
    • SEC has oversight authority of the 5 member board
    • Adopt auditing , attestaion, quality control, ethics and independent standards relating to the preperation of audit reports for the SEC regristrants
    • Oversee and discipline CPA's and CPA firsm taht audit public companies
  9. Non Assurance Services
    • Tax services
    • Management Consulting services
    • other
  10. Assurance Services
    • Attestation Services
    • ex: audit of financial statements, examinations of internal contol
  11. What does it mean to Attest?
    To provide assuance as to its relaiability
  12. Attest Engagement
    A practitioner is engaged to issue or does issue an examination, a review or an agreed upon procedures report on subject matter or assertion about subject matter that is the reponsibiltiy of another party (e.g Management)
  13. What creates the demand for audit
    • Audits lend credibility to infomation by reducing information risk, the risk that infomation is materially mistated.
    • Audits do not directly address business risks
  14. What is Information Risk?
    The risk that infomation is materially misstated
  15. What is Business Risk?
    the risk that a company will not be able to meet its financial obligations due to economic conditions or poor management decisions.
  16. Audit of FS of an Entity
    • Covers the balance sheet and related statements of income, retained earnings and cash flows
    • Goal is to determine if prepared in conformity with GAAP
  17. Integrated Audits
    • Assurance on both the financial statements and effectiveness of internal control over financial reporting.
    • SOX requires integrated audits
  18. Suitable Criteria
    • Standards established or developed by group of experts.
    • Ex: internal control audit- standards established by a committee of experts on internal control
    • Ex: Financial statements Audit- Standards of GAAP
  19. Financial Statement Audit
    • Auditors gather evidence and provide a high level of assurance that FS follow GAAP
    • Audit involves searching and verifying accounting records
    • Evidence necessary to issue an audit report that states auditors opinion
  20. Audit Evidence
    Focuses on whether the financial statements are presented in accordance with GAAP
  21. SEC
    Created as a result of the financial crisis during the great depression

    • Objectives
    • Protect investors and public requiring full disclosure of financial information by companies offering stock to public
    • Prevent fraud or deceit in sales of stocks.
  22. Compliance Audits
    Ex: Government Grants
  23. Operational Audits
    • Ex: Effectiveness of operations of Receiving Department of a manufacturing Company
    • Ex: efficiency of energy consumption or facility storage.
  24. Internal Auditors
    • employed by a company as an employee
    • Perform operational and compliacne audits
    • address internal controlr
  25. GAO Auditors
    Perform Compliance: operational and financial audits of government agencies
  26. Types of Professional Services
    • Attestation and Assurance
    • Tax
    • Consulting
    • Accounting
    • Personal Financial Planning
    • Litigation Support
    • Fraud Investigation

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