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Proficient Guidelines

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  1. Professional Standards

  2. Generally Accepted Auditing Standards General Standards • Adequate technical training and proficiency • Independence in mental attitude is to be maintained • Due professional care is to be exercised

  3. Generally Accepted Auditing Standards Standards of Field Work • Work is to be adequately planned and properly supervised • Sufficient understanding of the entity and its environment, including internal control, is to be obtained • Sufficient appropriate evidential matter is to be obtained to afford a reasonable basis for the opinion

  4. Generally Accepted Auditing Standards Standards of Reporting • State whether the financial statements are presented in accordance with GAAP • Identify circumstances in which such principles have not been consistently applied • Informative disclosures are adequate unless otherwise stated in the report • Report should clearly state the degree of responsibility being assumed by the auditors by expressing an opinion or stating that one cannot be expressed, and the reason therefore.

  5. Statements OnAuditing Standards (SASs) • SASs are issued by the Auditing Standards Board and are considered interpretations of GAAS. • SASs receive their authority from Rule 202 of the Code of Professional Conduct. • GAAS and the SASs are considered to be minimum standards of performance for auditors. • SASs are organized under two numbering systems • Original SAS number (chronologically organized) • AU number (organized by topic)

  6. Statements OnAuditing Standards (SASs) • The AU classification system • Introduction (100) • General Standards (200) • Standards of Field Work (300) • Standards of Reporting 1-3 (400) • Standards of Reporting 4 (500) • Other Types of Reports (600) • Special Topics (700) • Compliance Auditing (800) • Special Reports of the Committee on Auditing Procedures (900)

  7. Auditor Responsibility for the Detection of Errors and Fraud • Assess the risk of errors and fraud that may cause the financial statements to contain a material misstatement. • Based on that assessment, plan and perform the audit to obtain reasonable assurance that material misstatements, whether caused by errors or fraud, will be detected. • Exercise due care in planning, performing and evaluating the results of audit procedures, and the proper degree of professional skepticism to achieve reasonable assurance that material misstatements due to error or fraud will be detected.

  8. Auditor Responsibility for the Detection of Illegal Acts • Those that could have a direct and material effect on financial statement amounts--same as for errors and fraud. An audit obtains reasonable assurance of detecting these types of illegal acts. • Those with an indirect effect on financial statement amounts: • Be aware of possible occurrence. • If information comes to the auditor’s attention, apply audit procedures directed at determining whether an illegal act has occurred. An audit does not provide assurance that indirect-effect illegal acts will be detected.

  9. The GAAP Hierarchy • Authoritative Body Pronouncements • Pronouncements of Bodies Composed of Expert Accountants, That Are Exposed for Public Comment • Pronouncements of Bodies of Expert Accountants That Are Not Exposed for Public Comment • Widely Recognized Practices and Pronouncements • Other Accounting Literature

  10. The Attestation Standards • 11 Standards • 5 General Standards • 2 Field Work Standards • 4 Reporting Standards • Generalized form of the auditing standards

  11. The Attestation Standards General Standards • Adequate technical training and proficiency • Independence in mental attitude • Due professional care • Adequate knowledge in the subject matter • Subject matter should be capable of evaluation or measurement against criteria

  12. The Attestation Standards Standards of Field Work • Work is to be adequately planned and properly supervised • Sufficient evidence shall be obtained to support conclusion *No requirement for a sufficient understanding of internal controls.

  13. The Attestation Standards Standards of Reporting • Identify the subject matter and state the character of the engagement • State the practitioner’s conclusion • State all of the practitioner’s significant reservations • The report should contain a statement restricting its use to parties who have agreed upon the criteria or procedures

  14. The Attestation Standards Attestation Standards Financial Forecasts and Projections Pro Forma Financial Information Internal Control Compliance With Laws, Regulations, and Contracts Management’s Discussion and Analysis Applying Agreed-Upon Procedures

  15. Elements of Quality Control • Independence, Integrity, and Objectivity • Personnel Management • Acceptance and Continuance of Clients and Engagements • Engagement Performance • Monitoring

  16. Regulation of the Public Accounting Profession—Public Companies • Public Company Accounting Oversight Board (PCAOB) • Created as a result of SARBOX and overseen by the SEC • Registration of public accounting firms that audit public companies • Establish or adopt auditing, quality control, ethics, independence and other standards for auditors of public companies • Conduct periodic inspections of registered public accounting firms • Securities and Exchange Commission (SEC) • Administers legislation related to securities and other financial matters.

  17. Regulation of the Public Accounting Profession—Nonpublic Companies • American Institute of Certified Public Accountants • Peer review/inspection program • Ethics investigations • State Boards of Accountancy • Registration of all CPAs and CPA firms • Ethics investigations

  18. The Standard Auditors’ Report • Title • Addressee • Content • Introductory Paragraph • Scope Paragraph • Opinion Paragraph • Signature • Date

  19. The Standard Auditors’ Report Introductory Paragraph We have audited the accompanying balance sheet of XYZ Company as of December 31, 20XX, and the related statements of income, retained earnings, and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

  20. The Standard Auditors’ Report Scope Paragraph We conducted our audit in accordance with generally accepted auditing standards [auditing standards generally accepted in the United States of America]. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

  21. The Standard Auditors’ Report Opinion Paragraph • In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of XYZ Company as of December 31, 20XX, and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles [accounting principles generally accepted in the United States of America]. • Note: As a result of the Sarbanes-Oxley Act of 2002, auditors are required to also provide assurance on internal control for public companies.

  22. International Auditing Standards • International Federation of Accountants( IFAC) • Worldwide organization of national accounting bodies (i.e., the AICPA) of over 100 countries. • International Auditing and Assurance Standards Board (IAASB) • Committee of the IFAC that issues International Standards on Auditing (ISAs)

  23. International Audit Report International vs. U.S. Standard Report • Scope paragraph • Audit in accordance with International Standards on Auditing instead of U.S. GAAS • Opinion paragraph • May substitute phrase “give a true and fair view” for “present fairly, in all material respects.” • May indicate that financial statements comply with either International Accounting Standards or relevant country’s standards. • Signature • Signed by individual auditor, firm or both.