Accounting vs Auditing

Question 1

What is Financial Accounting?

Answer 1

it focuses primarily on the preparation and distribution of the general-purpose, historical financial statements (balance sheet, income statement, statement of cash flows, and statement of retained earnings), which are representations of management

Question 2

Who are Financial Statements distributed to?

Answer 2

Actual or potential shareholders and creditors, major customers and suppliers, employees, regulators, and others for their decision-making needs

Question 3

What is Auditing?

Answer 3

Is to provide an impartial (independent) report on the reliability of management’s financial statements

Question 4

What’s the purpose of an audit?

Answer 4

The purpose of an audit is to provide financial statement users with an opinion by the auditor on whether the financial statements are presented fairly, in all material respects, in accordance with the applicable financial reporting framework. An auditor’s opinion enhances the degree of confidence that the intended users can place in the financial statements

Question 5

What’s the role of Standards in auditing?

Answer 5

The criteria by which quality will be evaluated

Question 6

Depending on the nature of the reporting entity determines which particular accounting standards must be followed under the label of U.S. GAAP, what are they?

Answer 6

1 Federal governmental entities follow pronouncements of the Federal Accounting Standards Advisory Board (FASAB).
2State and local governmental entities follow pronouncements of the Governmental Accounting Standards Board (GASB).
3 Other entities (such as corporations) follow pronouncements of the Financial Accounting Standards Board (FASB).

Question 7

Depending on the nature of the reporting entity determines which auditing standards are applicable to an audit of the entity’s financial statements, what are they?

Answer 7

1 Governmental Entities
2 Public companies (issuers)
3 Private companies (nonissuers)

Question 8

Which auditing standards do Governmental entities use?

Answer 8

When required by law, regulation, or agreement, Generally Accepted Government Auditing Standards (GAGAS), issued by the U.S. Government Accountability Office (GAO) are applicable

Question 9

Which auditing standards do Public companies (issuers) use?

Answer 9

The auditing standards of the Public Company Accounting Oversight Board (PCAOB) are Applicable

Question 10

Which auditing standards do Private companies (nonissuers) use?

Answer 10

The auditing standards of the AICPA’s Auditing Standards Board are applicable; these pronouncements collectively are referred to by the AICPA as generally accepted auditing standards (GAAS