Kế toán, kiểm toán - Chapter 1: The role of the public accountant in the american economy

The Role of the Public Accountant in the American EconomyChapter 1The Attest FunctionManagementSubjectMatterSuitableCriteriaThe CPAGathers EvidenceSubjectMatter*The AttestReportIssuesReport*May be management’s assertion about the subject matter.2 Attestation Engagements Type ofEngagement Level ofAssuranceNature of ReportProceduresExaminationReviewAgreed-upon procedures HighestModerate orLimitedVaries with proceduresExpresses opinionExpressesnegativeassuranceStates findingsSufficient to limitattestation risk tolow levelGenerally limited toinquiry & analyticalproceduresProcedures agreed-upon with the specified users3Audit of Financial StatementsManagementPreparesFinancial StatementsCriteria (e.g., GAAP)The AuditorsGathers EvidenceFinancialStatementsThe Auditors’ReportIssuesReport4What Creates the Demand for Audits?Audits lend credibility to information by reducing information risk, the risk that information is materially misstatedFinancial statement misstatements arise due to--Accidental errorsLack of knowledge of accounting principlesUnintentional biasDeliberate falsificationAudits do not directly address business risk, the risk that a company will not be able to meet its financial obligations due to economic conditions or poor management decisions5History of the Attest Function PeriodDevelopmentsAudit ObjectiveNature of AuditAncient - 1850Audits of city states, individuals & venturesDetection of fraudDetailed; No reliance on controls1850-1905Industrial revolution resulted in the need for corporate audits Detection of fraud & clerical errorsSome testing; No reliance on controls1905-1940Development of stock markets - increased emphasis on earningsDetermination of fairness; detection of fraud & errorsIncreased emphasis on testing; Slight reliance on controls1940-1975Development of auditing standardsDetermination of fairnessSubstantial reliance on controls1975-1985Criticism by Congress; Increased self-regulationDetermination of fairnessInternal control determines scope of audit1985-1995Increased demands for reporting on compliance & internal controlDetermination of fairnessRisk assessment determines audit scope; must assess risk of fraud1995-PresentPanel on Audit Effectiveness; Sarbanes-Oxley Act of 2002 Determination of fairness Business risk approach to audits6The Accounting Profession’s Credibility Crisis2000—The Panel on Audit Effectiveness made a variety of suggestions to improve audits.2001—Enron Bankruptcy2002—WorldCom Fraud2002—Sarbanes-Oxley Act 2003—Public Company Accounting Oversight Board began operations7Types of AuditsAudits of Financial StatementsCompliance AuditsOperational Audits8Types of AuditorsExternal AuditorsInternal AuditorsGAO AuditorsTax Auditors9AICPA’s Traditional RoleEstablishes StandardsResearch and PublicationContinuing Professional EducationSelf-RegulationCPA ExaminationNote: The standards setting and regulation roles have been taken over by the SEC and the PCAOB with respect to auditors of public companies. 10Types of Professional ServicesAttestation and AssuranceTaxConsultingAccounting Personal Financial PlanningLitigation supportFraud Investigation11Typical Structure of a National CPA FirmPartnersManagersSeniorsStaff12