Chapter 2 - Regulatory Environment

3 auditors must obtain sufficient evidence as basis

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3. Auditors must obtain sufficient evidence as basis of opinion. n Reporting standards: 1. Auditors must state whether financials are in accordance with GAAP. 2. Auditors must identify circumstances where consistency has not been observed. 3. Auditors must report if disclosures are not adequate.
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+ Statement on Auditing Standards (SAS) n ASB issues SASs n Two codification numbers n SAS number n AU number n Beginning with 2 – interpretations of general standards n Beginning with 3 – interpretations of fieldwork standards n Beginning with 4,5,6 – interpretations of reporting standards n Example: SAS 99 – Consideration of fraud in the financial statements (AU 316)
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+ SAS n Applicable to audits of private companies n Specificity is not high n SASs are perceived as minimum standards of performance rather than maximum standards or ideals n Can be found for free on the AICPA website n http ://www.aicpa.org/Professional+Resources/Accounting+and+Auditing/Au
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+ Auditing Standards (AS) n Issued by PCAOB n Apply to public companies n Currently 15 AS n For a standard to become effective has to be approved by SEC n Attempt by PCAOB to get closer to ISAs n Can be found for free on the PCAOB website: n http://pcaobus.org/Standards/Auditing/Pages/default.aspx
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+ International Standards on Auditing (ISA) n Issued by International Auditing and Assurance Standards Board (IAASB) n International Federation of Accountants (IFAC) n ISAs similar to GAAS however there are some differences n ISAs do not overrule governing of the auditing profession within each country n Many can be downloaded for free from the IFAC’s website n http ://www.ifac.org/Store/Category.tmpl?Category=Auditing%2C%20Assura
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+ PCAOB Pending Changes n Auditor’s Discussion and Analysis? n audit risks identified in the audit, audit procedures and results, and auditor independence n Analysis of management’s judgments and estimates, accounting policies and practices, and difficult or contentious issues, including “close calls.” n More Emphasis Paragraphs? n significant management judgments and estimates, areas with significant measurement uncertainty and other areas that the auditor determines are important n Info Outside the Financial Statements? n management’s discussion and analysis (MD&A) or other information (for example, non-GAAP information or earnings releases)
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+ Quality Control Standards n Quality Controls – methods used to ensure that the firm meets its professional responsibilities to clients and others. n Firms have to establish quality control polices (SAS 25) – no specific guidance on what these should be. n Quality Control Standards Committee (established 1978 by AICPA) established 6 elements of quality control. n Peer review – part of quality control n Administered by state CPA boards n Every 3 years n Different from PCAOB reviews
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+ Components of Quality Control
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+ Coming Up… n Continue with Chapter 2 + Case 2 n Thursday, 2/7 n Audit Planning: Risk Assessment n selected readings for Tuesday, 2/12
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3 Auditors must obtain sufficient evidence as basis of...

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