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
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.
- 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
- 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
- Tax services
- Management Consulting services
- Attestation 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
Types of Professional Services
- Attestation and Assurance
- Personal Financial Planning
- Litigation Support
- Fraud Investigation