Auditing Standard

s
By Group 1
 MEMBERS

1/ Muhammad Ihsan Wafiq

2/ Musaffa Kamal

3/ Fachri Zaimil Mulyana

Nature, Activities and Str
ucture of CPA Firms
CPA stands for Certified Public Accountants
 CERTIFIED PUBLIC ACCOUNTING FIRMS

Except for certain governmental

The legal right to perform audits is
01 organizations, the audits of all general
use financial statement in the United
States are done by CPA firms
02 granted to CPA firm by regulation of each
state.

CPA firm also provide many other

03 services to their clients, such as tax and
advisory services
 CATEGORIZE OF CERTIFIED PUBLIC ACCOUNTING FIRMS

Big Four International

Firms

National firms

Regional and Large Local

Firms

Small Local Firms

 ACTIVITIES OF CPA FIRMS

TAX SERVICES

ACCOUNTING AND MANAGEMENT

BOOKKEEPING SERVICES CONSULTING SERVICES
 STRUCTURE OF CPA FIRMS

Three main factors influence the

organizational structure of all
firms.

The need for The importance of a The increased

independence from structure to encourage litigation risk
clients competence. faced by
. auditors
.
 STRUCTURE OF CPA FIRMS (Cont.)

ORGANIZATIONAL STRUCTURE

PROPRIETORSHIP PROFESSIONAL
CORPORATION

GENERAL LIMITED LIABILITY

PARTNERSHIP COMPANY

GENARAL LIMITED LIABILITY

CORPORATION PARTNERSHIP
 STRUCTURE OF CPA FIRMS (Cont.)

Staff Levels and Responsib

ilities
STAFF ASSISTANT 0-2 Years
Performs most of the detailed audit
work.

SENIOR / IN-CHARGE 2-5 Years

Coordinates and responsible for the audit field work,
AUDITOR including supervising and reviewing staff work.

5-10 Years
MANAGER Helps the in-charge plan and manage the audit, reviews the in-charge’s
work, and manages relations with the client. A manager may be
responsible for more than one engagement at the same time.

PARTNER 10+ Years

Reviews the overall audit work and is involved in significant audit
decisions. A partner is an owner of the firm and therefore has the
ultimate responsibility for conducting the audit and serving the client..
Role of PCAOB and the Effe
cts of Sarbanes-Oxley Act
on the CPA Profession
PCAOB means Public Company Accounting Oversight Board
 The Sarbanes–Oxley Act established the Public Company
Accounting Oversight Board (PCAOB), appointed and
overseen by the SEC. The PCAOB provides oversight for
auditors of public companies, establishes auditing and
quality control standards for public company audits, and
SARBANES- performs inspections of the quality controls at audit firms
performing those audits.
OXLEY ACT AND
PUBLIC
COMPANY
ACCOUNTING
OVERSIGHT The PCAOB conducts inspections of registered accounting firms to
assess their compliance with the rules of the PCAOB and SEC,
BOARD professional standards, and each firm’s own quality control policies.
The PCAOB requires annual inspections of accounting firms that audit
more than 100 issuers and inspections of other registered firms at
least once every three years. Any violations could result in
disciplinary action by the PCAOB and be reported to the SEC and
state accountancy boards.
Securities Exchange and Co
mmissions
Generally exists to guide investors with providing reliable information for investment decisions
Securities and Exchange Commission
The Securities and Exchange Commission (SEC), an agency of the federal governme
nt, assists in providing investors with reliable information upon which to make inves
tment decisions.

The Securities Act of 1933 requires most companies planning to issue new securitie
s to the public to submit a registration statement to the SEC for approval

The Securities Exchange Act of 1934 provides additional protection by requiring pu

blic companies and others to file detailed annual reports with the commission.
Important Reports Required

Form S-1 Form 8-K Form 10-K Form 10-Q

“S” forms apply to This report is filed to This report must be This report must be
the Securities Act report significant filed annually within filed quarterly for
of 1933 and must events that are of 60 to 90 days after all publicly held
be completed and interest to public the close of each companies.
registered with the investors fiscal year, depending
SEC when a on the size of the
company plans to company.
issue new securities
to the public.
YOUR TEXT
American Institute of Cert
ified Public Accountant (A
ICPA)
Sets professional requirements for CPAs
AICPA
The American Institute of Certified Public Accountants (AICPA) sets professional req
uirements for CPAs, conducts research, and publishes materials on many different s
ubjects related to accounting, auditing, attestation and assurance services, manage
ment consulting services, and taxes.

The AICPA sets standards and rules that all members and other practicing CPAs mus
t follow.
Four major areas in which the AICPA has authority
to set standards and make rules are as follows:
1. Auditing standards. The Auditing Standards Board (ASB) is responsible for issuing prono
uncements on auditing matters for all entities other than publicly traded companies. AS
B pronouncements are called Statements on Auditing Standards (SASs).
2. Compilation and review standards. The Accounting and Review
Services Committee is responsible for issuing pronouncements of the CPA’s responsibili
ties when a CPA is associated with financial statements of privately owned companies that a
re not audited. They are called Statements on Standards for Accounting and Review Service
s (SSARS), and they provide guidance for performing compilation and review services.
• In a compilation service, the accountant helps the client prepare financial statements with
out providing any assurance.
• In a review service, the accountant performs inquiry and analytical procedures that provid
e a reasonable basis for expressing limited assurance on the financial statements.
Four major areas in which the AICPA
has authority (cont.)
3. Other attestation standards. Statements on Standards for Attestation Engagemen
ts provide a framework for the development of standards for attestation engageme
nts.
4. Code of Professional Conduct. The AICPA Professional Ethics Executive Committe
e sets rules of conduct that CPAs are required to meet.
In addition to writing and grading the CPA examination, AICPA also publishes a vari
ety of materials, including journals such as the Journal of Accountancy, industry au
dit guides for several industries, periodic updates of the Codification of Statements
on Auditing Standards, and the Code of Professional Conduct.
International Standards on
Auditing (ISAs)
Generally exists to guide auditors in carrying out their responsibilities of auditing financial state
ments
What is ISAs
ISAs was established to set one universal guidelines that firms should follow when conducting a
financial audit. It was issued by International Auditing and Assurance Standards Board (IAASB) of
International Federation of Accountants (IFAC).
FURTHER INFORMATION O
N ISA
• Creates universal standards for businesses and auditors
—both internal and external.
• Provides convenience for auditors in applying the same
principles when dealing with multinational firms.
• Unlike AICPA, ISA is applicable to all entities outside of
United States.
Generally Accepted Auditin
g Standards (GAAS)
Divided into three parts of ten points.
WHAT IS GAAS?
GAAS is guidelines that auditors must follow when doing
audits of a company’s financial reports. It ensures
accuracy, verifiability and consistency of the audits.

It is divided into three parts and ten points:

1. General Standards – standards of qualifications to

be an auditor
2. Standards of Fieldwork – guidelines on how to
carry out the work
3. Standards of Reporting – concerns information to
take into account before issuing audit reports
General Standards
Standards that must be met in order to be qualified for the job

Auditors must have adequate technical training and

1 proficiency to carry out the job

Auditors must always remain independent in all matters

2 regarding the auditing task

Auditors must exercise due professional care both in the

3 auditing task and in the preparation of the report
Standards of
Standards of conducting the job
Fieldwork
All works need to be adequately planned, and any assistants working on the
1 job must be properly supervised.

Auditors must obtain clear understanding of the client; this includes the
2 environment and internal controls. This is used to assess any risk of material
misstatement and determine the nature, timing and extent of tests.

Auditors must obtain evidence through appropriate measures; investigations,

3 observations, inquiries and confirmations.
Standards of
Things to take into consideration when preparing the reports
Reporting

Auditors must state whether or not The information from the

1 the financial statements presented are
based on the generally accepted
3
accounting principles (GAAP).
financial statements are deemed
adequate unless stated otherwise
in the auditor reports.

Auditors are to include their

Auditors must report any instances
where the principles have not been
2 applied in the current period in
4
relation to the previous period.
opinion regarding the financial
statements, taken as a whole. If it
can not be expressed, auditors must
state the reason in the auditor’s
reports.
Quality Control Standards
Ensures that firms meet its professional responsibilities to clients
KEY POINTS OF QUALITY
CONTROL
• Established to provide guidance for a firm’s
responsibilities of quality controls for audits and
reviews of financial information.
• Quality control only provides assurance that the
auditing standards are followed, not guarantee.
• It is similar to auditing standards, but it is not the
same. Quality control is established for the whole CPA
firm, while auditing standards are for individual
engagements.
 Elements of Quality Control

Leadership responsibilities Acceptance and continuation

Ethical Requirements
for qualities within the firm of client relationships
All personnel must maintain
Firms should endorse the Establishing procedures to
independence, integrity and
importance of quality and decide whether or not to
objectivity in performing
establish policies and continue a client relationship.
responsibilities.
procedures that support it. Done to minimize the risk of
working with client with no
management integrity.
 Elements of Quality Control
Human resources
Establish procedures to assure
that all personnel are qualified
and have adequate trainings.
Engagement performance Monitoring
Procedures that ensure that Monitoring done to establish
all work performed meets procedures that all quality
the relevant professional control elements are met.
standards. Such as having all
engagements approved
beforehand.
Accounting Standards in In
donesia
Accounting standards in Indonesia is very similar to GAAS
 THE 10 ACCOUNTING STANDARDS IN INDONESIA
Accounting standards in Indonesia is very similar to the Generally Accepted Auditing
Standards (GAAS). It has been implemented in the country since 1 st of August 2001.

Standar Umum (General Standar Pekerjaan Lapangan Standar Pelaporan (Reporting

Standard) (Fieldwork Standard) Standard)

1. Auditors must be competent 1. Adequate planning and 1. Financial statements must be

with adequate technical
training.
2. Auditors must be
independent and not biased.
3. Auditors must always use
their professionalism during
work.
supervision of assistants.
2. Complete understanding of
internal control.
3. Evidence must be gathered
through appropriate
measures.
presented according to the
accounting principles.
2. Application of principles
must be consistent.
3. Information must be
adequate.
4. Must include auditor’s
expression of opinion
ACCOUNTING STANDARD
(CONT.)
• The standards are tightly interconnected where not
fulfilling one standard would affect the others.
• Materiality and auditing risk concepts act as a basis to
the standards.
• Cash transactions are more vulnerable to frauds,
therefore audits must be done in a conclusive and
effective manner to reduce the chances of it
happening.
• The ten standards are not limited to only financial
statement auditing, as long as it is relevant.
Thank you for list
ening
Please do not hesitate to ask any questions!