Name : Zakya

Student id : 2110531034

Chapter: THE CPA PROFESSION

@Certified public accounting firms
The audits of all general use financial statement in US are done by CPA firms. The legal right
to conduct an audit is granted to a public accounting firm with regulations in each state. CPA
firms also provide many other services to their clients, such as consulting and tax
services,except certain governmental organization.

Activities CPA firms

1. Accounting and bookkeeping services. A client with limited accounting staff will ask
the CPA to prepare their financial statement. Sometime the CPA firm is engaged by
the client to help them prepare the financial statement for internal use. In many cases
where the financial statements will be provided to a third party, the client may ask the
CPA to compile the financial statements accompanied by the compiled report,
indicating that the CPA is compiling the report but providing no guarantee to the third
party. part. In other situations, the client may engage the CPA to provide assurance
on the report by conducting a review or even an audit of the financial statements.
2. Tax services. CPA firms prepare tax returns for audit and nonaudit client.
3. Management consulting and risk advisory services. Provide certain service to make
the client run a business effectively.
Structure of CPA firms
1. General partnership. This organizational structure has also become less popular as
state law has approved other forms of ownership that offer liability protection.
2. General corporation. The advantage of a corporation is that shareholders are
responsible only to the extent of their investment in the corporation. Most CPA
companies do not organize as public companies because they are prohibited by law in
most states.
3. Professional corporation. Professional corporation (PC) provide professional services
and are owned by one or more shareholders.
4. Limited liability company. A limited liability company (LLC) combines the most
beneficial attributes of a general company and a general partnership.
 5. Limited liability partnership. A limited liability company (LLP) is owned by one or
more partners. It is structured and taxed like a general partnership, but the personal
liability protection of an LLP is less than that of a general corporation or LLC.
sarbanes-oxley act and public company accounting oversight board
The Sarbanes-Oxley Act establishes the Public Company Accounting Oversight Board
(PCAOB), appointed and overseen by the SEC. PCAOB provides oversight for auditors of
public companies; establish auditing, attestation, and quality control standards for audits of
public companies; and conduct inspections of audit work, as well as quality control at the
audit firm that performs these audits. As a result of the 2010 Dodd-Frank financial reform
law, broker-dealer auditors registered with the Securities and Exchange Commission must
also register with the PCAOB, be subject to inspection, and must comply with PCAOB
certification and PCAOB auditing standards.
security and exchange commission
In terms of relationships, the SEC and FASB have a close bond in setting standards. In the
US, the main legal authority for preparing financial reports and standards is the Securities and
Exchange Commission. But the SEC has delegated this responsibility to the Financial
Accounting and Standards Board.
american institute of certified public accountants(AICPA)
The association sets standards in financial statement auditing, private practice, quality control
of public accounting firms, business judgment, financial planning, and professional ethics. It
also penalizes members accused of wrongdoing in active professional practice.
International and US auditing standards
Because the ISAs have been developed by industry professionals, they provide clear
guidelines for auditors to follow. This can create a more cost-effective model for many
companies, as they can use someone internally to perform an internal audit, rather than
having to incur the expense of hiring someone externally.
organization of US auditing standards
The principles underlying the audit provide a framework to help the auditor meet the
following two objectives when performing an audit of financial statements:
1. Obtain reasonable assurance about whether the financial statements as a whole are free
from material misstatement, whether due to fraud or error, that enables the auditor to express
an opinion as to whether the financial statements are fairly presented in all respects. in
accordance with the applicable financial reporting framework; your
2. Report financial statements and communicate them as required by GAAS, based on the
auditor's findings.

When the PCAOB initially adopted ASB standards as interim standards, they adopted the
framework existing at that time. This framework was referred to as the 10 generally accepted
auditing standards (GAAS), classified into three categories: general standards, standards of
field work, and reporting standards.

The purpose of an audit is to provide financial statement users with an opinion issued by the
auditor on whether the financial statements are presented fairly, in all mate- rial respects, in
accordance with the applicable financial reporting framework.

Purpose of an audit: provide and opinion by evaluating a financial statement.

Responsibilities Possess appropriate competence and capabilities ,Comply with ethical

requirements ,Maintain professional skepticism and exercise professional judgment.

Performance Obtain reasonable assurance about whether financial statements are free of
material misstatement ,Plan work and supervise assistants ,Determine and apply materiality
level or levels ,Identify and assess risks of material misstatement based on under- standing of
entity and its environment, including internal controls ,Obtain sufficient appropriate audit
evidence.

Reporting Express opinion on financial statements in a written report ,Whether financial

statements are presented fairly in accordance with financial reporting framework.

Quality control
Quality control consists of the methods used to ensure that the company fulfills its
professional responsibilities to customers and others. This method includes the organizational
structure of the KAP and the procedures established by the KAP.
Elements of quality control
 Leadership responsibility for quality within the company ("tone at the top")
 Relevant ethical requirements
 Acceptance and continuation of customer relationships and special commitments.
 Human Resources
 Engagement Performance
 Surveillance or monitoring.