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Unformatted text preview: Chapter 1 Homework 1.1 The “crisis of credibility” happened because prior to the Sarbanes-Oxley Act of 2002 the most significant legislative act was in 1933-1934 with the Securities & Exchange (SEC) because of the development of the Stock Market which increased earning potential and thus also increased areas for errors and fraud reporting and exposure. Then in 2001 was the scandal of Enron bankruptcy and then came Worldcom’s bankruptcy and fraud in 2002 which exposed a huge area in auditing and financial reporting that could have collapsed the market if left unattended. The Sarbanes-Oxley Act of 2002 was put in place to protect the public from these types of fraudulent activities as well as in 2003 PCAOB began operations to also monitor and oversee these exposed areas. 1.2 Assurance services describes a broad range of information enhancement services that are provided by a CPA and the two distinct types are 1) those that increase the reliability of information and 2) those that involve putting the information into a form or context that facilitates decision making. 1.3 The most common type of attest engagement is an examination or audit of the financial statements. Following the GAAP principal it is advised by management that the financial statements reflect correct reporting, principals and procedures. It is up to the CPA during an audit to attest this and make their findings report based on the discovery. 1-25 The major responsibilities of the PCAOB (Public Company Accounting Oversight Board) are to develop and oversee accounting profession and enforce standards for public accounting firms that issue securities with the SEC. Also it is in place to eliminate significant portion of the accounting professions system of self regulation this is mainly due to all the fraudulent activities exposed by Enron, Worldcom and Arthur Anderson LLP which displayed egregious acts of fraudulent activities and unethical business practices. . It is also has responsibilities to register firms, perform inspections of firms, conduct investigations and disciplinary proceedings of firms and sanction registered firms. 1-28 (a) Answer is (3) – Attest services are a subset of assurance services which provides assurance as to its reliability. There are several different assurance services that can be provided and the attest services are just one of them. (b) Answer is (1) – Client management because it is their company and financial information so they should be responsible for reporting it. It is the auditor’s responsibility to come in so they should be responsible for reporting it....
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- Spring '11
- Accounting, UCI race classifications, Tour de Georgia, PCAOB, SarbanesOxley Act