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THE AUDITING PROFESSION. CHAPTER 1. WHAT IS AUDITING?. THE ACCUMULATION AND EVALUATION OF EVIDENCE ABOUT INFORMATION TO DETERMINE AND REPORT ON THE DEGREE OF CORRESPONDENCE BETWEEN THE INFORMATION AND ESTABLISHED CRITERIA.
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THE AUDITING PROFESSION CHAPTER 1
WHAT IS AUDITING? • THE ACCUMULATION AND EVALUATION OF EVIDENCE ABOUT INFORMATION TO DETERMINE AND REPORT ON THE DEGREE OF CORRESPONDENCE BETWEEN THE INFORMATION AND ESTABLISHED CRITERIA.
GATHERING EVIDENCE ABOUT THE CORRESPONDENCE BETWEEN REPRESENTATIONS OF ANOTHER AND ESTABLISHED CRITERIA FOR MAKING SUCH REPRESENTATIONS AND ISSUING A REPORT
AUDITING AND ACCOUNTING • ACCOUNTING IS CONSTRUCTIVE • CREATING REPORTS • AUDITING IS ANALYTICAL • DETERMINE “FAIRNESS” OF REPORTS
TYPES OF AUDITS • AUDITS OF FINANCIAL INFORMATION • PRESENTATION COMPARED TO CRITERIA • OPERATIONAL AUDITS • EFFICIENCY AND EFFECTIVENESS • IMPROVE OPERATIONS • COMPLIANCE AUDITS • FOLLOWING RULES • TAX AUDITS • LAWS, REGULATIONS
TYPES OF AUDITORS • EXTERNAL • CPAS • GAO • IRS • BUREAU OF STATE AUDITS • INTERNAL • EMPLOYEES OF ENTITIES BEING AUDITED
WHY HAVE AUDITS? • CONTROL MECHANISM • COMPLIANCE WITH RULES • REDUCE LOSSES • FRAUD • INEFFICIENCIES • ENHANCE CONFIDENCE • ADD CREDIBILITY TO NUMBERS • REDUCE INFORMATION RISK
INFORMATION RISK • RISK THAT INFORMATION IS UNRELIABLE • REMOTENESS OF INFORMATION • BIASES OF PROVIDER • VOLUMINOUS DATA • COMPLEXITY • REDUCTION IN RISK • USER VERIFIES INFO • AUDITED INFORMATION
CERTIFIED PUBLIC ACCOUNTANT • EDUCATIONAL REQUIREMENT • IN CALIFORNIA • BS IN SOMETHING • 30 SEMESTER UNITS OF ACCT, LAW, BUS • EXAM • UNIFORM IN ALL STATES • EXPERIENCE • IN CALIFORNIA • 2 YEARS WORKING FOR CPA • 500 HOURS OF ATTESTATION WORK
PROFESSION OF PUBLIC ACCOUNTING • WHAT IS A PROFESSION? • OCCUPATIONAL GROUPING • GENERAL CHARACTERISTICS • SPECIALIZED KNOWLEDGE BASED ON THEORY • LICENSE • RESPONSIBILITY TO PUBLIC • CODE OF ETHICS • CULTURE OF PROFESSIONAL
STRUCTURE OF PROFESSION • INTERNATIONAL CPA FIRMS • “BIG-5” • ARTHUR ANDERSEN • KPMG PEAT MARWICK • PRICEWATERHOUSECOOPERS • DELOITTE AND TOUCHE • ERNST AND YOUNG • AUDIT 95% OF PUBLIC COMPANIES
NATIONAL FIRMS • GRANT THORNTON • BDO SIEDMAN • REGIONAL FIRMS • MOSS ADAMS • LOCAL FIRMS • PERRY-SMITH • TATE, PROPP, BEGGS & SUGIMOTO
WHAT DO CPAS DO? • ATTESTATION ENGAGEMENTS • AUDITS • REVIEWS • OPINIONS ON OTHER INFO • ACCOUNTING AND BOOKKEEPING • TAX • CONSULTING
AMERICAN INSTITUTE OF CPAS • ESTABLISH STANDARDS • AUDITING STANDARDS • ETHICS STANDARDS • ACCOUNTING AND REVIEW SERVICES STANDARDS • TAX PRACTICE STANDARDS • CONSULTING PRACTICE STANDARDS
GENERALLY ACCEPTED AUDITING STANDARDS • GENERAL STANDARDS • ADEQUATE TECHNICAL TRAINING • INDEPENDENCE IN MENTAL ATTITUDE • DUE PROFESSIONAL CARE • FIELD WORK STANDARDS • PLANNING AND SUPERVISION • INTERNAL CONTROL • SUFFICIENT, COMPETENT EVIDENCE
REPORTING STANDARDS • REPORT SHALL STATE WHETHER STATEMENTS ARE IN ACCORD WITH GAAP • REPORT SHALL IDENTIFY INCONSISTENCIES • REPORT SHALL INDENTIFY INADEQUATE DISCLOSURES • REPORT SHALL EXPRESS OPINION OR TELL WHY NO OPINION WAS FORMED
STATEMENTS ON AUDITING STANDARDS • INTERPRETATIONS OF GAAS • GUIDANCE ON APPLICATION • 87 SASs • SOPs • AUDITING PROCEDURES
INSURING QUALITY • ELEMENTS OF QUALITY CONTROL • DIVISION OF FIRMS • SEC PRACTICE SECTION • ADHERE TO QUALITY CONTROL • MANDATORY PEER REVIEW • CONTINUING EDUCATION • PARTNER ROTATION • CONCURRING PARTNER REVIEW • PROSCRIPTION OF SERVICES • REPORT ON DISAGREEMENTS • REPORT ON CONSULTING • PRIVATE COMPANIES PRACTICE SECTION • PEER REVIEW
SECURITIES AND EXCHANGE COMMISSION • REGULATE SECURITIES MARKETS • ESTABLISH REPORTING STANDARDS FOR REGISTERED COMPANIES • REQUIRES AUDITS BY CPAS • ESTABLISHED BY SEC ACTS OF 1933 AND 1934