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Unformatted text preview: Chapter 02 - Professional Standards CHAPTER 2 Professional Standards LEARNING OBJECTIVES Review Checkpoints Exercises, Problems, and Simulations 1. Name the various practice standards for internal, governmental, and independent auditors and accounting firms and identify their sources. 1 51 2. Understand generally accepted auditing standards (GAAS) and explain how GAAS affect the audit team’s responsibilities. 2, 3 3. Describe how the audit examination is affected by the fundamental principles of responsibilities and performance. 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16 46, 47, 48, 49, 50, 55 (partial), 56 (partial), 59, 61 (partial), 62 4. Understand the principle of reporting and identify the basic contents of the auditors’ report. 17, 18, 19, 20 52, 53, 55 (partial), 56 (partial), 61 (partial) 5. Identify the need for attestation standards and explain how attestation standards differ from generally accepted auditing standards. 21, 22 54 6. Understand the role of a system of quality control and monitoring efforts in enabling accounting firms to meet appropriate levels of professional quality. 23, 24, 25, 26, 27 57, 58, 60 2-1 Chapter 02 - Professional Standards SOLUTIONS FOR REVIEW CHECKPOINTS 2.1 For independent (external) auditors of financial statements, practice standards are issued by the AICPA Auditing Standards Board (in the form of Statements on Auditing Standards) and the Public Company Accounting Oversight Board (in the form of Auditing Standards). Statements on Auditing Standards are appropriate for the audits of nonpublic entities, while Auditing Standards are appropriate for the audits of public entities. For governmental auditors, the Government Accountability Office issues Government Auditing Standards (also known as the “Yellow Book”). For internal auditors, the Institute of Internal Auditors issues Statements of Internal Auditing Standards (also known as the “Red Book”). For fraud auditors, the Association of Certified Fraud Examiners issues Professional Standards and Practices for Certified Fraud Examiners. For auditors in other countries, the IFAC International Auditing and Assurance Standards Board issues International Standards on Auditing and Assurance. 2.2 Generally accepted auditing standards are standards that identify necessary qualifications and characteristics of auditors and guide the conduct of the audit examination. Generally accepted accounting principles represent the requirements for the preparation and presentation of financial statements and accompanying footnote disclosures. These two types of standards are related to one another because a primary objective of a GAAS audit is to allow auditors to conclude whether an entity’s financial statements are prepared and presented in conformity with GAAP....
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- Spring '10
- Accounting, Financial audit, Auditor's report, professional standards