MODERN AUDITING

7th Edition
William C. Boynton
California Polytechnic State
University at San Luis Obispo

Raymond N. Johnson
Portland State University

Walter G. Kell
University of Michigan
Developed by:
Gregory K. Lowry, MBA,
CPA John Wiley & Sons, Inc.
Saint Paul’s College
 CHAPTER 1
AUDITING AND THE
PUBLIC ACCOUNTING PROFESSION

 Introduction to Contemporary Auditing

 The Public Accounting Profession: A
Historical Perspective
 CPA Vision Project
 Services Performed by CPA Firms
 Organizations Associated with the Public
Accounting Profession
 Regulatory Framework for Ensuring
Quality Services
 Auditing Defined

Auditing is a systematic process of

objectively obtaining and evaluating
evidence regarding assertions about
economic actions and events to
ascertain the degree of
correspondence between those
assertions and established criteria
and communicating the
results to interested users.
Comparative Summary of Types of Audits
Figure 1-1
 Types of Auditors

1. Independent Auditors
2. Internal Auditors
3. Government Auditors
 The Roots of Auditing
 The beginning of the company audit
can be linked to British legislation
during the industrial revolution in the
mid-1800s.
 The British influence migrated to the
United States in the late 1800s as
English and Scottish investors sent
their own auditors to check on the
condition of American companies in
which they had heavily invested.
 Rise of the U.S. Profession
1896 New York became the first state to
pass legislation providing for the
licensing of CPAs.
1917 The AICPA was established.
1921 All 48 states had passed CPA-
licensing legislation.
1932 The NYSE began requiring all listed
corporations to obtain an audit
certificate from an independent
CPA.
 Rise of the U.S. Profession
1934 The passage of the Securities Act
of 1933 and the Securities
Exchange Act of 1934 added to
the demand for audit services for
publicly owned companies.
1940s 3 important important changes in
audit practice had evolved.
1980s The required knowledge in all
professional fields was growing
rapidly.
 Rise of the U.S. Profession
1980s The accounting profession
developed new attestation
standards.
1990s A time of transition began for
both the accounting and auditing
professions.
 CPA Vision Project
Figure 1-2
Vision Statement CPAs are trusted professionals
who enable people and organizations to shape their
future. Combining insight with integrity, CPAs
deliver value by:
1. Communicating the total picture with clarity
and objectivity,
2. Translating complex information into critical
knowledge,
3. Anticipating and creating opportunities, and
4. Designing pathways that transform vision into
realities.
Core Purpose CPAs... Making sense out of a
changing and complex world.
CPA Vision Project
Figure 1-2

Vision Elements
 The Accountant’s Value Chain
Figure 1-3

Transforming Vision
into Reality

Anticipating and Creating Decisions

Opportunities
Transforming Complex Knowledge
Information into
Knowledge
Information
Communicating the
Total Picture
Data

Business Events
 Universe of CPA Services
Figure 1-4

Consulting
Compilation

Assurance
International Technology

Audit/Attestation

Financial Planning
 Services Performed
by CPA Firms
Assurance Services are independent professional
services that improve the quality of information,
or its context, for decision makers.
1. Auditing
2. Risk assessment services
3. Performance measurement services
4. Elder care assurance
5. Accounting and compilation services
 Services Performed
by CPA Firms
Attest Services are ones in which the CPA firm
issues a written communication that expresses a
conclusion about the reliability of a written
assertion that is the responsibility of another
party.
1. Audit service
2. Examination
3. Review
4. Agreed-upon procedures
Organizations Associated with the Public
Accounting Profession
Figure 1-5
 Regulatory Framework for
Ensuring Quality Services
1. Standard Setting — Quality Control
Standards
2. Firm Regulation
3. Self-Regulation
a. Division for CPA Firms
b. Quality Review Division
4. Government Regulation
 Quality Control Elements

1. Independence, Integrity, and

Objectivity
2. Personnel Management
3. Acceptance and Continuance of
Clients and Engagements
4. Engagement Performance
5. Monitoring
 CHAPTER 1
AUDITING AND THE
PUBLIC ACCOUNTING PROFESSION
 Copyright
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