CHAPTER 2 THE CPA PROFESSION - CHAPTER 2 THE CPA PROFESSION...

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CHAPTER 2 THE CPA PROFESSION LEARNING OBJECTIVES After studying this chapter, you should be able to 2-1 Describe the nature of CPA firms, what they do, and their structure. 2-2 Understand the role of the Public Company Accounting Oversight Board and the effects of the Sarbanes–Oxley Act on the CPA profession. 2-3 Summarize the role of the Securities and Exchange Commission in accounting and auditing. 2-4 Describe the key functions performed by the AICPA. 2-5 Discuss the nature of United States and international auditing standards. 2-6 Use generally accepted auditing standards as a basis for further study. 2-7 Identify quality control standards and practices within the accounting profession. Good Auditing Includes Good Client Service “It had been a good week,” thought Jeanine Wilson, as she drove out of the parking lot of Solberg Paints on Friday afternoon. Just a few months earlier, she graduated from State University and sat for the CPA examination. Still, Jeanine did not think her transition to professional life had been all that smooth, and she was surprised at how much there still was to learn. But she had made great progress on the Solberg job. John Hernandez was the audit senior on the Solberg Paints audit, and he had a reputation as a patient teacher and supervisor. Jeanine was not disappointed. At the start of the engagement, John told her, “Don’t be afraid to ask questions. If you see anything that seems unusual, let’s discuss it. And most importantly, if you have any ideas that will help the client, bring them up. The client expects us to deliver more than an audit report.’’ “I’d say I delivered,” thought Jeanine. She found an error in the way the company had calculated LIFO inventory that was going to save the client a significant amount of taxes. But her biggest contribution almost did not happen. Jeanine read as much as she could about paint manufacturers and learned about some new production control methods that seemed like they could apply to Solberg. She was afraid to bring it up, thinking that she couldn’t possibly know anything that the client didn’t already know, but John encouraged her to discuss it with the client. The result was that the client wanted to meet further with Jeanine’s firm to better understand how they could improve their production processes. Friday was the last day of field work on the audit, and the partner, Bill Marlow, was at the client’s office to complete his review of the audit files. Jeanine was surprised to hear him say to her, “What are you doing on the 15th? We’re going to meet with the client to discuss our audit findings. You’ve made a real contribution on this audit, and I’d like you
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to be there.” Jeanine tried not to show her excitement too much, but she couldn’t hide the smile on her face. “Yes, it had been a good week.” We learned in the first chapter that auditing plays an important role in society by
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