132CHAPTER 2

132CHAPTER 2 - WELCOME TO ECON 132- AUDIT PROFESSIONAL...

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1 Bob Anderson, UCSB CHAPTER 2-1 PROFESSIONAL STANDARDS: CHAPTER 2 WELCOME TO ECON 132- AUDIT Bob Anderson, UCSB Intro & Chapter 2-2 Question When a CPA firm completes an audit of a business and issues a report, does it express an opinion on the client’s accounting records, financial statements, or both? Give reasons. Solution: The auditors' report expresses an opinion on the client's financial statements, not on the accounting records. A major purpose of the audit is to give outsiders assurance that the financial statements are reliable. The client's accounting records are important to the public accounting firm only because they constitute evidence supporting the financial statements. The CPAs also gather evidence from outside the company and from internal sources other than the accounting records. Bob Anderson, UCSB Intro & Chapter 2-3 AICPA GAAS REMEMBER THAT AICPA AUDITING STANDARDS ONLY APPLY TO NON-PUBLIC ENTITIES THERE ARE 10 STANDARDS, WHICH FALL INTO THREE CATEGORIES: 1.GENERAL STANDARDS ± The firm and planning 2.STANDARDS OF FIELDWORK ± Performing the audit 3.STANDARDS OF REPORTING ± Issuance of the Opinion Bob Anderson, UCSB Intro & Chapter 2-4 Generally Accepted Auditing Standards (issued by AICPA) General Standards ± Adequate t echnical training and proficiency as an auditor. ± I ndependence in mental attitude is to be maintained by the auditor. ± Due p rofessional care is to be exercised.
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2 Bob Anderson, UCSB Intro & Chapter 2-5 Standards of Fieldwork ± Work is to be adequately p lanned and properly supervised ± Sufficient understanding of i nternal control is to be obtained ± Sufficient competent e vidential matter is to be obtained to afford a reasonable basis for the opinion Generally Accepted Auditing Standards (issued by AICPA) Bob Anderson, UCSB Intro & Chapter 2-6 Standards of Reporting ± State whether the financial statements are presented in accordance with G AAP ± Identify circumstances in which such principles have not been c onsistently applied ± Informative d isclosures are adequate unless otherwise stated in the report ± Report should clearly state the degree of responsibility being assumed by the auditors by expressing an o pinion or stating that one cannot be expressed, and the reason therefor Generally Accepted Auditing Standards (issued by AICPA) Bob Anderson, UCSB Intro & Chapter 2-7 BOILED DOWN: Audit purpose is to perform sufficient work to reduce “audit risk” to a sufficiently low level. AUDIT RISK: The risk that a MATERIAL misstatement may go undetected.
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This note was uploaded on 08/06/2008 for the course ECON 132A taught by Professor Anderson during the Spring '08 term at UCSB.

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132CHAPTER 2 - WELCOME TO ECON 132- AUDIT PROFESSIONAL...

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