A1:2 - Professional Standards

Question 1

What is the Public Company Accounting Oversight Board (PCAOB)?

Answer 1

The PCAOB was established pursuant to the Sarbanes-Oxley Act of 2002.

The PCAOB establishes auditing and related professional practice standards to be used in the preparation and issuance of audit reports for issuers.

Question 2

What are Generally Accepted Auditing Standards for non-issuers?

Answer 2

Generally accepted auditing standards for the audits of non-issuers are issued by the AICPA’s Auditing Standards Board (ASB) in the form of Statements on Auditing Standards (SASs).

Question 3

What is a quality control system?

Answer 3

A quality control system consists of policies and procedures designed, implemented, and maintained to ensure that the firm complies with professional standards and appropriate legal and regulatory requirements, and that any reports issued are appropriate in the circumstances.

Question 4

What is the IFAC Code of Ethics for Professional Accountants?

Answer 4

The International Ethics Standards Board for Accountants (IESBA), a standard setting board of the International Federation of Accountants (IFAC), establishes the IFAC Code of Ethics for Accountants.

Question 5

What are the three levels of the GAAS hierarchy?

Answer 5

1. AICPA Statements on Auditing Standards (SASs) and PCAOB Auditing Standards.
2. Interpretive Publications
3. Other Auditing Publications.

Question 6

What is the AICPA Code of Professional Conduct?

Answer 6

The AICPA Code of Professional Conduct provides members with guidelines for behavior in the conduct of their professional affairs.

In addition, it provides assurance to the public that the profession intends to maintain high standards and enforce compliance with these standards by its members.

Question 7

What is professional skepticism?

Answer 7

Professional skepticism is the recognition that circumstances may exist that cause the financial statements to be materially misstated.

Question 8

In an audit, professional judgment is necessary when making decisions about:

Answer 8

1. Materiality
2. Audit risk
3. Nature, extent, and timing of audit procedures
4. Evaluating whether sufficient, appropriate evidence has been obtained
5. Evaluating management’s judgments in applying the applicable financial reporting framework
6. Drawing conclusions based on the audit evidence obtained.