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Assurance Services and Auditing Research Assurance Services and Auditing Research

Assurance Services and Auditing Research - PowerPoint Presentation

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Assurance Services and Auditing Research - PPT Presentation

Chapter 8 Assurance services Independent professional services that improve the quality of information or its context for decision makers Adds value to the user not just the report Three party contracts the client the assurer and the third party to whom the accountant is providin ID: 526872

auditing standards audit services standards auditing services audit accounting professional assurance statements gaas public attest attestation international information report

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Slide1

Assurance Services and Auditing Research

Chapter 8Slide2

Assurance services

“Independent professional services that improve the quality of information, or its context, for decision makers”

Adds value to the user, not just the report

Three party contracts – the client, the assurer, and the third party to whom the accountant is providing assuranceSlide3

Consulting services and standards

Attestation and audit services are special types of assurance services

In an attest engagement, the CPA reports on the reliability of a written assertion that is managements responsibility

Consulting is not part of assurance services

Two party contact: client, consultant, accountant

CPA develops findings, conclusions, and recommendationsSlide4

Attest engagements and guidelines

Audit and attest services – Generally Accepted Audit Standards (GAAS), Statements on Auditing Standards (SAS) – Auditing standard boards (ASB)

Accounting and review services – Statements on Standards for Accounting and Review – Accounting and Review Services Committee (ARSC)

Accountant’s services on prospective financial information – Statements on Standards for Accountant’s Services on Prospective Financial Information – Auditing Standards BoardSlide5

Attest engagements and guidelines

Other attest services – Statements on Standards for Attest Engagement – ASB, ARSC, and the management consulting services executive committee

Audit and attest services for public companies – Auditing and Related Professional Practice Standards – Public Company Accounting Oversight Board (PCAOB)Slide6

Attestation standards

General Standards

Adequate technical training and proficiency

Adequate knowledge

Services shall be performed only if the subject matter is capable of being evaluated

Independence in mental attitude

Due professional careSlide7

Attestation standards (contd.)

Fieldwork

Adequately planned, and assistants properly supervised

Sufficient evidence to provide a reasonable basis for conclusionSlide8

Attestation standards (contd.)

Standards of Reporting

Report shall identify subject matter

Conclusion shall be reported

Reservations shall be reported

Report shall state the use of the report is restricted to specified partiesSlide9

Auditing standard-setting environment

Audits add credibility to financial information

Auditor conducts audit in conformity with GAAP and in conjunction with auditing standards

Attestation services and standards

In the past, only audit opinions

Now expanded to include opinions on internal controlsSlide10

Auditing standards

Auditing standards provided measures of the quality of performance

Audit procedures refer to the specific acts or steps to perform in an audit

Procedures change, standards remain constant

10 broad requirements referred to as GAAS

In addition, to GAAS, there are Statements of Auditing Standards (SAS)

interpret GAASSlide11

Generally Accepted Auditing Standards (PCAOB)

General standards

Adequate technical training

Independence

Due professional careSlide12

GAAS (contd.)

Field work

Adequately planned and assistants supervised

Sufficient understanding of the business and internal controls to plan the audit and determine the nature, timing and extent of procedures

Sufficient competent evident matter to form an opinionSlide13

GAAS (contd.)

Standards of reporting

Report shall state if in accordance with GAAP

Shall report if not consistent

Informative financial statement disclosures

Written expressionSlide14

Auditing standard-setting process

Previously, set by ASB

SOX transferred standard setting responsibility to PCAOB for public company auditSlide15

Auditing standard-setting process

There is a standards hierarchy

Primary support

General application

Special application to certain entities

Secondary authoritative supportSlide16

Public Company Accounting Oversight Board (PCAOB)

Legal responsibility to establish GAAS, attestation, ethics, and quality control standards for accounting firms who audit public companies

Non-public companies still follow the AICPA’s mission:

Develop auditing, attestation and quality control standards for non-issuer engagements

Contribute to the development and issuance of high-quality national and international auditing and assurance standards

Respond to the needs for practical guidance in implementing professional standardsSlide17

International Auditing

International Federation of Accountants (IFAC)

International Auditing Practices Committee (IAPC)

International Standards on Auditing (ISAs)

International Practice Statements (IAPs)

International Auditing and Assurance Standards Board (IAASB)Slide18

AICPA Professional Library

Professional standards, accounting trends and techniques, technical practice aids, auditing and accounting guides, and audit alerts

Home tab – lists the literature available in the database

Once select a certain literature, can query

Results tab – click on the link to find the resultSlide19

Code of Professional Conduct

Minimum level of conduct

Three sections-according to a members practice-public, business, other

Principles, rules, interpretations

Includes a conceptual framework-threats and safeguards approachSlide20

Hierarchy of the AICPA’s Code of Professional Conduct

Level 1 – Principles

provided framework for development

Level 2 – Rules

Serve as the enforceable part of the Code

Level 3 – Interpretations of the Rules of Conduct

Have been adopted by the professional ethics division’s ethics committee

Provide guidelines as to the scope and application of rulesSlide21

Auditing in the public sector

GAO – Government Auditing Standards – “Yellow book

Applicable to all governmental organizations

Measure effectiveness of the expenditures, not just identify the amounts spent

Include compliance auditing

Three levels of auditing

GAAS

Government Auditing Standards (aka generally accepted government auditing standards)

Federal audit requirements – OMB Circular A-133 Audits of States, Local Governments, and Non-Profit OrganizationsSlide22

Accounting Services

Compilation – a service presenting, in the form of financial statements, information that is the representation of management without expressing any assurance on the statements.

Review – a service performing inquiry and analytical procedures that provide the accountant with a reasonable basis for expressing limited assurance on the statementsSlide23

Role of judgment in accounting and auditing research

Judgment in: substance of transaction, adequacy of disclosure, materiality thresholds

Auditor gathers information, evaluates and judges, then expresses an opinion

Many pronouncements provide only guidelines or alternatives, requiring judgment.

Critical thinking skills are crucial