-Immanuel Kant, 1775

1. “In law a man is guilty when he violates the rights of another. In ethics he is guilty if he only thinks of doing so.” -Immanuel Kant, 1775

2. Professional Responsibility Defining Assurance Quality

3. The Expectation Gap • Disparity between the expectations of financial statement users and the actual level of assurance provided by the auditor • Fraud detection vs “due care” • “Going Concern” expectations

4. The Expectation Gap • S & L Collapse (1980s) • $550 Billion taxpayer bailout • Congressional Investigations • Treadway Commission • AICPA Code of Conduct revised • Nine new SASs • Mandatory CPE • 150 hour education requirement

5. Quality Defined • GAAS (Generally Accepted Auditing Standards) & SAS (Statements on Auditing Standards)

6. GAAS • General • Adequate Technical Training & Proficiency • Independence • Due Care performing the exam & preparing the report • Field Work • Work adequately planned & supervised • Understanding of Internal Control • Sufficient, Competent Evidence

7. GAAS • Reporting • IAW GAAP • Consistency • Adequate Disclosure • Expression of Opinion

8. Quality Defined • GAAS (Generally Accepted Auditing Standards) & SAS (Statements on Auditing Standards) • SSAE (Statements on Standards for Attestation Engagements) • Nonaudit compliance and attest services

9. Attestation Standards • Complement audit standards • Conditions for the performance of non-audit attest services, e.g.: • Special compliance engagements • Internal control reports

10. Quality Defined • GAAS (Generally Accepted Auditing Standards) • SAS (Statements on Auditing Standards) • SSAE (Statements on Stds for Attestation Engagements) • SSAR (Statements on Stds for Acctg & Review Svcs)

11. SSAR (Statements on Stds for Acctg & Rev. Svcs) • Compilations or Reviews of the Financial Statements • Significantly less scope than audits • Inquiry & analytic procedures • Excludes: • Internal control evaluation • Confirmation, etc.

12. Quality Defined • GAAS (Generally Accepted Auditing Standards) • SAS (Statements on Auditing Standards) • SSAE (Statements on Stds for Attestation Engagements) • SSAR (Statements on Stds for Acctg & Review Svcs) • TX (Statements on Responsibilities in Tax Practice) • CS (Statements on Standards for Consulting Services)

13. Quality Defined • GAAS (Generally Accepted Auditing Standards) • SAS (Statements on Auditing Standards) • SSAE (Statements on Stds for Attestation Engagements) • SSAR (Statements on Stds for Acctg & Review Svcs) • TX (Statements on Responsibilities in Tax Practice) • CS (Statements on Standards for Consulting Services) • AICPA Code of Conduct

14. AICPA Code of Conduct • Principles • Framework for Rules • Rules • Binding on all members • Interpretations & Rulings • Further clarification

15. Code of Conduct-Principles • Professional Responsibility • Public Interest • Integrity • Objectivity & Independence • Due Care • Scope & Nature of Services

16. Code of Conduct-Rules • 101/102 • Independence/Integrity & Objectivity • 201/202/203 • GAAS/Compliance w/GAAS & GAAP • 301/302 • Confidentiality & Contingent Fees • 501/502/503/505 • Acts Discreditable/Advertising/Commissions & referral fees/ Form & Name of Practice