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
What is SAS
Statements on Auditing Standards
Codified within the framwork of the 10 standards of GAAS
Who establishes Generally Accepted Auditing Standards?
American Institue of Certified Public Accountants
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.
Who does the PCAOB Cooperate with ?
What is the PCAOB authorized to do
Authorized to amend, modify, repeal, or reject any such standards of the AICPA
What is the AICPA
American Institute of Certified Public Accountants.
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
Code of Professional Conduct-ethical rules for CPA's
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
Non Assurance Services
Management Consulting services
ex: audit of financial statements, examinations of internal contol
What does it mean to Attest?
To provide assuance as to its relaiability
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)
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
What is Information Risk?
The risk that infomation is materially misstated
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.
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
Assurance on both the financial statements and effectiveness of internal control over financial reporting.
SOX requires integrated audits
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
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
Focuses on whether the financial statements are presented in accordance with GAAP
Created as a result of the financial crisis during the great depression
Protect investors and public requiring full disclosure of financial information by companies offering stock to public
Prevent fraud or deceit in sales of stocks.
Ex: Government Grants
Ex: Effectiveness of operations of Receiving Department of a manufacturing Company
Ex: efficiency of energy consumption or facility storage.
employed by a company as an employee
Perform operational and compliacne audits
address internal controlr
Perform Compliance: operational and financial audits of government agencies