Chapter 2 Flashcards
CPA firms provide
Audit services as well as other attestation and assurance services.
CPA firms also provide
accounting and bookkeeping services, tax services, and management consulting and risk advisory services.
CPA are licensed by
the state in which they practice in
Three factors that affect the structure of all CPA firms
The need for independence from clients
The importance of a structure to encourage competence
The increased litigation risk faced by auditors
Six main organizational structures
- Proprietorship
- General Partnership
- General Corporation
- Professional Corporation
- Limited Liability Companies
- Limited Liability Partnership
Staff Assitant
0-2 years experience, preforms most of the detailed work
Senior or in-charge auditor
2-5 years experience, coordinates and is responsible for the performance of audit procedures, including supervising and reviewing staff work.
Manger and Senior Manger
5-10 Years, helps the in-charge plane and manage the audit, reviews the in-charge’s work, it manages relations with the client. A manager may have to deal with multiple crap
Partner
10+ Years, Owns firms and oversees everyone and is ultimate responsibility for the audit and serving clients.
Sarbanes-Oxley Act established what in 2002?
The Public Company Accounting Oversight Board (PCAOB)
What does PCAOB do?
Provides oversight to public audit companies including:
- Establishing auditing, attestation, and quality control standards for public company audits.
- Performing inspections of audit engagements and quality controls.
What is SEC
Securities exchange commission(SEC) is a federal government agency that assists in the providing investors with reliable information upon which to make investing decisions.
ISA, IAASB and IFAC stand for?
International Standards on Auditing, The International Auditing and Assurance Standards Board and International Federation of Accountants
ISA applies to what
Entities outside of the US
AICPA Auditing standards are
Applicable to private entities in the US
PCAOB Auditing standards are
Applicable to US Public companies and other SEC registrants including broker-dealers.
Principles of an Audit
Purpose, Responsibilities, Performance and Reporting
AICPA stands for
American Institute of Certified Public Accountants:
ASB stands for
Auditing Standards Board
SAS stands for
Statement on Auditing Standards
SSARS stands
Statements on Standards for Accounting and Review Services
The Big four:
Deloitte, PwC, Ernst & Young, KPMG
Big Four are what type of organizational structure
Limited Liability Partnership
Form S-1
“S” forms must be completed prior to issuing new securities to the public
Form 8-K
report significant events of interest to investors
Form 10-K
annual report with detailed financial information, including audited financial statements
Form 10-Q
quarterly report containing certain financial information and auditor reviews of financial statements
GAAS
Generally Accepted Auditing Standards
Purpose of an Auditor for nonpublic company
To provide an (one) opinion about the financial statement
Responsibilities of an Auditor for nonpublic company
Possess appropriate competence and capabilities
Comply with ethical requirements
Maintain Professional skepticism and exercise professional judgment.
Performance of an Auditor for nonpublic company
Obtain reasonable assurance about whether financial statements are free of material misstatements
Plan work and supervise assistants
Determine and apply materiality level or levels.
Identify and assess risks of materials mistreatments based on understanding of entity and its environment, including internal controls.
Obtain sufficient appropriate audit evidence.
Reporting of an Auditor for nonpublic company
Express opinion on financial statements in a written report
Whether financial statements were presented fairly in accordance with financial reporting framework
