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Sample Page: Auditing
Sample Page: Auditing
INTRODUCTION
During engagement with nonpublic Statements on Auditing Standards Statements on Standards for Statements on Standards for
company, accountant is subject to: (SAS) issued by AICPA. Attestation Engagements (SSAE) Accounting and Review Services
issued by AICPA. (SSARS) issued by AICPA.
◯ SAS sections have the prefix AU-C. SSAE sections have the prefix AT. SSAR sections have the prefix AR.
Sarbanes-Oxley Act (SOX) of 2002 established the Public Company Accounting Oversight Board (PCAOB). To conduct an audit of a public company,
SOX requires the auditor to register with the PCAOB.
Attest engagement Engagement to report about whether a subject matter or assertion is in conformity with selected criteria.
● Attest engagement requires independence.
● Audits, reviews and agreed-upon procedures are all classified as attest engagements.
○ According to SSARS, compilations are also classified as attest engagements. Compilations do not require independence, though
they do require that CPA disclose as to independence.
Audit Attest engagement in which practitioner obtains reasonable assurance that subject matter is in conformity with applicable financial reporting
framework, where subject matter is a historical financial statement(s). Auditor conducts audit in accordance with generally accepted auditing standards
(GAAS)—this is the overarching auditor responsibility. GAAS is the body of SAS sections.
Basis for determination Auditor’s determination is based on auditor obtaining reasonable assurance that FS are free from material
misstatement, whether due to fraud or error. Reasonable assurance is defined as a high level of assurance, but
not absolute.
◯ Materiality Total misstatement large enough to influence economic decisions of users on the basis of FS. ◯ Accounting principles rule
Departure from “applicable financial reporting framework” is permitted if it would be misleading to use framework (e.g. new legislation, new type of
business transaction). Auditor describes the departure and why it would be misleading.
Client responsibility