Chapter 2 Notes Flashcards
Big four international firms
four largest CPA firms in the United States
national firms
national accounting firms
regional and large local firms
smaller local firms
accounting and bookkeeping services
involves the preparing of financial statements
tax services
preparing tax returns for clients
management consulting services
services aimed to help clients improve their companies
SOX
states that a company’s auditor can’t be its consultant
things that influence structure of all firms
the need for independence from clients
the importance of a structure to encourage competence
the increased litigation risk faced by auditors
proprietorship
firms with one owner
general partnership
same as a proprietorship except it has multiple owners
general corporation
involves shareholders who all own parts of the company
professional corporation
similar to a LLC, certain states grant liability protection to these types of companies
limited liability company
mix between a partnership and a corporation, it gets rid of liability for owners
limited liability partnership
owned by one or more partners, taxed like an LLC, but partners are not liable for the actions of other partners and people not under their supervision
hierarchy
partners/shareholders 10+ years managers 5-10 years supervisors seniors 2-5 years staff assistants 0-2 years
Public Company Accounting Oversite Board (PCAOB)
appointed and overseen by the SEC, provides oversite for auditors and establishes auditing and quality control standards for public company audits, and performs inspections of the quality controls at audit firms performing those audits
Securities and Exchange Commission (SEC)
a federal agency, assists in providing investors with reliable info upon which to make investment decisions
Form S-1
must be submitted to issue securities
Form 8K
report filed to report events that are of significant interest to public investors
Form 10K
This must be filed annually within 60-90 days after the close of each fiscal year, depending on the size of the company
Form 10Q
this reports must be filed quarterly for all publicly held companies.
American Institute of Certified Public Accountants (AICPA)
set rules and standards that CPA’s must follow:
- auditing standards: the ASB issues Statements on Auditing Standards (SASs)
- compilation and review standards: ARSC is responsible for issuing Statements on standards for accounting and review services (SSARS) this is for private companies
- Other attestation standards: SSAE provides a framework for how attestation engagements should go
- code of professional conduct: the ethics committee sets rules of conduct that CPAs are required to meet
international standards on auditing (ISAs)
issued by the IAASB which is a part of IFAC, the worldwide organization for the accounting profession
generally accepted auditing standards (GAAS)
describe standards for audits, based on principles that help fulfill two objectives:
- obtain reasonable assurance that the financial statements as a whole are free from material mis-statement
- report on the financial statements, and communicate as required by the GAAS in accordance with the auditor’s findings
Clarified Codification
organized around four principles:
- purpose of audit
- personal responsibilities of the auditor
- auditor actions in performing the audit
- reporting
pg 56
im on it
