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Categories of CPA firms

Categories of CPA firms. Big 4 National firms Large regional firms Local firms. Data for Largest CPA Firms. Fiscal Year 2007 Revenue Prof. Revenue % Rank Firm $ million Staff A&A Tax MAS/ Other

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Categories of CPA firms

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  1. Categories of CPA firms • Big 4 • National firms • Large regional firms • Local firms

  2. Data for Largest CPA Firms • Fiscal Year 2007 • Revenue Prof. Revenue % • RankFirm $ million Staff A&ATaxMAS/ Other • 1 Deloitte & Touche 9,850 29,725 44 22 34 • 2 Ernst & Young 7,561 20,200 70 29 1 • 3 PwC 7,464 22,541 59 27 14 • 4 KPMG 5,357 15,164 48 23 29 • 5 RSM McGladrey 1,389 5,949 42 33 25 • 6 Grant Thornton 1,075 3,938 59 26 15 • 7 BDO Seidman 589 1,976 65 23 12 • Source: Accounting Today

  3. Consulting Units Separate • The Big 5 began disposing of their consulting practices well before Sarbanes-Oxley, partially to address concerns over independence and conflicts of interest • Dispositions • Deloitte Consulting had planned to go private and be renamed Braxton • PwC sold its consulting practice to IBM for $3.5 billion • Ernst & Young consulting sold to Cap Gemini in Feb. 2000 • Andersen Consulting separated from Andersen in Aug. 2000, went public, and renamed Accenture • KPMG Consulting went public in Feb. 2001, and was renamed BearingPoint • Declared Ch. 11 in Feb. 2009 and units sold off, including sales to Deloitte and PwC

  4. Changes in the Profession • Mergers in the Big 8/6 • Growth in consulting • Spinoffs of consulting • Demise of Andersen • Reduction in non-Big 4 national firms • Fewer firms perform audits • What forces are behind these changes?

  5. Changes in the Profession • Globalization • Specialization • Growth in consulting; followed by disposition • Legal liability • Sarbanes-Oxley Act • Increased audit fees to attest to internal control • Expanded tests for fraud

  6. Role of PCAOB • Public Company Accounting Oversight Board (PCAOB) established by Sarbanes-Oxley Act • Responsible for auditing and quality control standards for public company audits • Also inspects registered accounting firms • Auditing Standards • PCAOB sets auditing standards for public company audits • Auditing Standards Board (ASB) of AICPA sets standard for private companies • PCAOB adopted existing ASB standards as interim standards

  7. U.S. and International Auditing Standards Applicable to entities outside the United States International Standards on Auditing (ISAs) Applicable to private entities in the United States U.S. Generally Accepted Auditing Standards (GAAS) Applicable to U.S. Public Companies and other SEC registrants PCAOB Auditing Standards

  8. Generally Accepted Auditing Standards General Reporting Fieldwork Planning and Supervision Understand Entity and Internal Control Sufficient Evidence Training Independence Professional Care GAAP Consistency Adequate disclosure Opinion on FS as a whole

  9. Relation of SAS to GAAS • GAAS are the 10 standards • Measures of the quality of auditor performance • Statements on Auditing Standards (SAS) interpret GAAS • Have the status of GAAS • Established by Auditing Standards Board of AICPA • Auditing Standards for public companies now set by the Public Company Accounting Oversight Board (PCAOB)

  10. MC 2-16 (b) • Which of the following best describes what is meant by the term generally accepted auditing standards? • 1. Acts to be performed by the auditor. • 2. Measures of the quality of auditor • performance • 3. Procedures to be used to gather evidence to • support financial statements. • 4. Audit objectives generally determined on • audit engagements.

  11. Structure of the Profession • Historically, self-regulatedthrough voluntary membership in the AICPA and the Division of Firms • SEC Practice Section (SECPS) • Private Companies (PCPS) • Auditors ofpublic companies subject to oversight by PCAOB and SEC

  12. Peer Review • Every firm must have a system of quality control (SAS #25) • Peer review is a compliance auditof firm’s quality controlsystem • Firms in AICPA have peer review every three years • Other firms have quality review (lesser scope)

  13. Government Regulation • CPAs are licensed by the statein which they practice

  14. Ways the Profession and Society Encourage CPAs to Conduct Themselves at a High Level GAAS and interpretations CPA examination Continuing education requirements Quality control Conduct of CPA firm personnel Legal liability Peer review Ch. 5 Division of CPA firms PCAOB and SEC Code of Professional Conduct Ch. 4

  15. MC 2-17 (a) • A CPA firm is reasonably assured of meeting its responsibility to provide services that conform with professional standards by: • 1. Adhering to generally accepted • auditing standards. • 2. Having an appropriate system of • quality control. • 3. Joining professional societies that enforce • ethical conduct. • 4. Maintaining an attitude of independence in • its engagements.

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