CH 2 Flashcards
What are the activities of CPA firm
1) Accounting and bookkeeping services
2) Tax services
3) Management consulting services
What are three main factors that influence the organizational structure of all CPA firms
1) The need for independence from clients
2) The importance of a structure to encourage competence
3) The increased litigation risk faced by auditors
Define Proprietorship
one business owner
Define General Partnership
form of organization that has multiple owners
Define General Corporation
Advantage of a corporation is that shareholders are liable
Define Professional Corporation
provides professional services and is owned by on or more shareholders
Define Limited liability Company
LLC combines the most favorable attributes of a general corporation and a general partnership
Define Limited liability partnership
owned by one or more partners. It is structured and taxed like a general partnership, but the personal liability protection of an LLP is less than that of a general corporation or an LLC.
Define Sarbanes Oxley act
Act is considered by many observers to be the most important legislation affecting the auditing profession since 1930s.
The provisions of the act apply to publicly held companies and their audit firms
Established PCAOB
PCAOB
the organization is overseen by SEC
PCAOB provides oversight for auditors of public companies, establishes auditing and quality control standards for public company audits ,and performs inspections of the quality controls at audit firms
SEC
a federal agency of the government that assists in providing investors with reliable information upon which to make investment decisions.
AICPA
performs the following services for CPAs
1) sets professional requirements
2) conducts research
3) Publishes materials related to performed
4) develops specialist certifications to market and ensure quality of services
What are specific reports that are sent to SEC
form s-1 ( general form without specifics)
form 8-K ( report significant events that are public interests)
form 10-k (financial and auditing report must be filed annually)
form 10-Q ( report must be filed quarterly for all publicly held companies)
What are AICPA’s standards and rules?
1) auditing standards ( ASB who offer pronouncements)
2) Compilation and review standards ( ARSC issues CPA’s responsibilities)
3) Other attestation standards ( a framework for develop types of attestation services)
4) Code of Professional Conduct ( professional ethics that AICPA created as rule of conduct for CPAs)
What are ASB’s pronouncements?
SAS ( statements on auditing standards)
What is the difference between ASB’s and ARSC’s pronouncements?
ARSC’s pronouncements are called SSARS.
What are GAAS’s three categories?
general standards
standards of field work
Reporting standards
What are principles provde a framework to conduct an audit of financial statements?
1) auditor is required to express opinion on whether the financial statement are presented fairly
2) report financial statements
Who represents international standards on auditing?
1) IFAC is the world wide organization for the accountancy profession
IAASB works to improve the uniformity of auditing practices and related services throughout the world
What are PCAOB auditing general standards?
1) adequate training and proficiency
2) Independence in mental attitude
3) Due professional care
What are PCAOB auditing standards of field work?
1) Proper planning and supervision
2) understanding of the entity
3) Sufficient appropriate evidence
What are AICPA’s principles?
1) purpose of auditing
2) Responsibilities
3) Performance
4) Reporting
What are PCAOB’s auditing procedures?
1) statements prepared in accordance with GAAP
2) Circumstances when GAAP not followed
3) Adequacy of disclosures
4) Expression of opinion on financial statements
What are elements of quality control?
1) Leadership to enhance quality
2) Relevant ethical requirements
3) Acceptance and continuation of clients and engagements
4) Human resources
5) Engagement performance
6) Monitoring
