ACC231-PPT-CH2-modified-week 5

Auditing and Assurance Services
Seventeenth Edition, Global Edition
Chapter 2
The CPA Profession
Week 5
Copyright © 2020 Pearson Education Ltd. All Rights Reserved.

Learning Objectives
2.1 Describe the nature of CPA firms and what they do
2.2 Describe the structure of CPA firms
2.3 Understand the role of the Public Company Accounting Oversight
Board and the effects of the Sarbanes–Oxley Act on the CPA
profession
2.4 Summarize the role of the Securities and Exchange Commission in
accounting and auditing
2.5 Describe the key functions performed by the AICPA
2.6 Understand the role of international auditing
standards and their relation to U.S. auditing standards
2.7 Use U.S. auditing standards as a basis for further
study
2.8 Identify quality control standards and practices within
the accounting profession
Learning Objective 2.6
Understand the role of international

auditing standards and their relation
to U.S. auditing standards

International and U.S. Auditing
Standards
International Standards on Auditing (ISAs)

are issued by the International Auditing
And Assurance Standards Board (IAASB) of
the International Federation of Accountants
(IFAC).

International and U.S. Auditing
Standards
IFAC is the worldwide organization for

the accountancy profession
The IAASB works to improve the uniformity

of auditing practices and related services
throughout the world

AICPA Auditing Standards
Auditing standards for private companies and

other entities in the United States are established by
the Auditing Standards Board (ASB ) of the AICPA
These standards are referred to as Statements on

Auditing Standards (SASs )
The AICPA auditing standards are also referred to as

U.S. generally accepted auditing standards (GAAS )

PCAOB Auditing Standards
Standards issued by the PCAOB apply only to

the audits of U.S. public companies and other
SEC registrants, including brokers and dealers
The PCAOB also considers international auditing

standards (ISAs) when developing new standards

Relation of U.S. and International
Auditing Standards

Types of Practice Standards
Public Private Governmental Foreign

Client
Companies Companies Entities Companies
Rule- Public Company AICPA Auditing U.S. Government IFAC

making Accounting Standards Accountability International
body Oversight Board (ASB) Office (GAO) Auditing
Board and
(PCAOB) Assurance
Standards
Board
(IAASB)
Standards PCAOB Auditing Statements on Government International
Standards Auditing Auditing Standards
(ASs) Standards Standards on Auditing
(SASs) (The “Yellow (ISAs)
Book”)
Website www.pcaobus.org www.aicpa.org www.gao.gov www.ifac.org

Use U.S. auditing standards as a

basis for further study

Organization of U.S. Auditing
Standards
 Historically, auditing standards have been organized
along 10 GAAS that fall into three categories:
(1) General standards
(2) Standards of field work
(3) Reporting standards
 As part of Clarity Project, ASB issued a new Preface to

the Codification of Auditing Standards which contains
the “Principles Underlying an Audit in Accordance
with Generally Accepted Auditing Standards”
(referred to as the Principles).
Standards
The principles underlying an audit provide a framework to
help auditors fulfill the two objectives:
 Obtain reasonable assurance about whether the

financial statements as a whole are free from material
misstatement, whether due to fraud or error
 Report on the financial statements, and communicate

as required by GAAS, in accordance with the auditor’s
findings

Standards
 The principles are not requirements and do not
carry authority, but they provide structure for
the Codification.
 The structure is organized around the following

principles:
❖ Purpose of an audit
❖ Responsibilities
❖ Performance
❖ Reporting
Comparison of 10 Basic Standards
with Principles
General Standards Responsibilities Principle

(PCAOB) (AICPA)
1. Training and proficiency
Auditors are responsible for:
•competence and
2. Independence in mental capabilities
attitude •ethical requirements
(independence and due
3. Due professional care care)
•professional skepticism
and professional judgment

2-14
with Principles
Standards of Fieldwork Performance Principle
1. Planning and supervision To obtain reasonable
assurance:
2. Understanding of entity •Plan work and supervise
and environment to assistants
assess risk of material
•Determine and apply
misstatement
appropriate materiality
levels
3. Obtain sufficient
appropriate evidence •Identify and assess risks of
material misstatement
•Obtain sufficient
appropriate evidence
2-15
with Principles
Standards of Reporting Reporting Principle
1. Financial statements in • Express an opinion or state
accordance with GAAP that an opinion cannot be
2. GAAP applied expressed
consistently (only report if • Opinion is based on
not consistent) conformity of financial
3. Adequacy of disclosures statements with
(only report if not applicable financial
adequate) reporting framework
4. Express or disclaim an
opinion
2-16
Standards of Performance
 The AICPA principles and the auditing standards
should be viewed by practitioners as minimum
standards of performance rather than as
maximum standards or ideals
 Auditor must not always need to follow them

blindly
 If an auditor believes that the requirement of a

standard is impractical or impossible to perform,
the auditor is justified in following an alternative
course of action
Identify quality control standards and

practices within the accounting profession

Quality Control
 Quality control comprises the methods used to ensure
that the CPA firm meets its professional responsibilities to
clients and others
 The system of quality control should include policies and

procedures that address six elements
 Public accounting firms must be enrolled in an AICPA-

approved practice-monitoring program, also known as
peer review, which is the review by CPAs, of another
CPA firm’s compliance with its quality control system.
 Unless a firm has a peer review, all members of the CPA

firm lose their eligibility for the AICPA.
Elements of Quality Control
https://www.youtube.com/watch?v=LQuTlcww7IA&t=1s

Elements of Quality Control
1. Leadership responsibilities for quality
within the firm
2. Relevant ethical requirements
3. Acceptance and continuation of clients

and engagements
4. Human Resources
5. Engagement performance
6. Monitoring
Quality Control
The AICPA has established audit practice and
quality centers as resource centers to improve
audit practice quality:
 TheCenter for Audit Quality (CAQ) is a

public policy organization affiliated with the
AICPA serving investors, public company
auditors, and the capital markets
 The Private Companies Practice Section

provides practice management information
to firms of all sizes
Relationships Among Auditing Standards,
Quality Control, AICPA Practice Centers,
and Peer Review

Ways the Profession and Society Encourage
CPAs to Conduct Themselves at a High Level

ACC231-PPT-CH2-modified-week 5

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

ACC231-PPT-CH2-modified-week 5

Uploaded by

Copyright:

Available Formats

Auditing and Assurance Services

Seventeenth Edition, Global Edition

The CPA Profession

Copyright © 2020 Pearson Education Ltd. All Rights Reserved.

Understand the role of international

Copyright © 2020 Pearson Education Ltd. All Rights Reserved.

International Standards on Auditing (ISAs)

Copyright © 2020 Pearson Education Ltd. All Rights Reserved.

IFAC is the worldwide organization for

The IAASB works to improve the uniformity

Copyright © 2020 Pearson Education Ltd. All Rights Reserved.

Auditing standards for private companies and

These standards are referred to as Statements on

The AICPA auditing standards are also referred to as

Copyright © 2020 Pearson Education Ltd. All Rights Reserved.

Standards issued by the PCAOB apply only to

The PCAOB also considers international auditing

Copyright © 2020 Pearson Education Ltd. All Rights Reserved.

Copyright © 2020 Pearson Education Ltd. All Rights Reserved.

Public Private Governmental Foreign

Rule- Public Company AICPA Auditing U.S. Government IFAC

Website www.pcaobus.org www.aicpa.org www.gao.gov www.ifac.org

Use U.S. auditing standards as a

Copyright © 2020 Pearson Education Ltd. All Rights Reserved.

 As part of Clarity Project, ASB issued a new Preface to

 Obtain reasonable assurance about whether the

 Report on the financial statements, and communicate

Copyright © 2020 Pearson Education Ltd. All Rights Reserved.

 The structure is organized around the following

General Standards Responsibilities Principle

Copyright © 2020 Pearson Education Ltd. All Rights Reserved.

 Auditor must not always need to follow them

 If an auditor believes that the requirement of a

Identify quality control standards and

Copyright © 2020 Pearson Education Ltd. All Rights Reserved.

 The system of quality control should include policies and

 Public accounting firms must be enrolled in an AICPA-

 Unless a firm has a peer review, all members of the CPA

Copyright © 2020 Pearson Education Ltd. All Rights Reserved.

2. Relevant ethical requirements

3. Acceptance and continuation of clients

 TheCenter for Audit Quality (CAQ) is a

 The Private Companies Practice Section

Copyright © 2020 Pearson Education Ltd. All Rights Reserved.

Copyright © 2020 Pearson Education Ltd. All Rights Reserved.

You might also like