3air_im01 - 1 CHAPTER 1 Professional Practice LEARNING...

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CHAPTER 1 Professional Practice LEARNING OBJECTIVES Review Checkpoints Exercises and Problems 1. Distinguish auditing from accounting . 1, 2, 3, 4 36, 37 2. Chronicle the historical development of auditing standards, including the criticisms of the profession and its responses. 5, 6 3. Define and explain auditing, especially its role in information risk reduction. 7, 8, 9 34, 35, 39, 40 4. Describe the audits and auditors in governmental, internal, and operational auditing. 10, 11, 12, 13 38, 41 5. List and explain the requirements for becoming a PA. 14, 15, 16, 17 6. Describe the accounting and auditing activities of various professional organizations. 18, 19, 20, 21 43 7. Describe the organization of public accounting firms, and identify the various services they offer. 22, 23, 24 Ashton Behavioral Case 42 POWERPOINT SLIDES PowerPoint slides are included on the website. Please take special note of: * Overview of Financial Statement Auditing * Objectives of Audit Auditor’s Report SOLUTIONS FOR REVIEW CHECKPOINTS 1.1 The conditions of complexity, remoteness and consequences produce demands by outside users for financial reports. They cannot produce the reports for themselves because of these conditions. Company managers and accountant produce them. 1.2 To attest means to lend credibility or to vouch for the truth or accuracy of the statements that one party makes to another. The attest function is a term often applied to the activities of independent PAs when acting as auditors of financial statements. 1
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2 Since financial statements are prepared by managers of an entity who have authority and responsibility for financial success or failure, an outsider may be skeptical that the statements are objective, free from bias, fully informative, and free from material error--intentional or inadvertent. The attest opinion of an independent-PA auditor helps resolve those doubts because the auditor's success depends upon his independent, objective, and competent assessment of the conformity of the financial statements with GAAP. The auditor's role is to lend credibility to the statements, hence the outsider will likely seek his independent attest opinion. 1.3 Client: the company, board of directors, agency, or some other person or group who retains (hires) the auditor. Usually the party who pays the fee. Auditee: the entity (e.g., business firm, hospital, city government) whose financial information is under audit. Auditors: report to the client on the auditee's financial or control information. 1.4 Auditors performing auditing gather evidence related to the assertions management makes in financial statements and render a report. Accountants performing accounting record, classify, and summarize (report) a company's assets, liabilities, capital, revenue, and expense in financial statements.
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This note was uploaded on 02/08/2012 for the course IAF IAF520 taught by Professor Aldcorn during the Winter '08 term at Seneca.

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3air_im01 - 1 CHAPTER 1 Professional Practice LEARNING...

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