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THE AUDITING PROFESSION

THE AUDITING PROFESSION. CHAPTER 1. WHAT IS AUDITING?. THE ACCUMULATION AND EVALUATION OF EVIDENCE ABOUT INFORMATION TO DETERMINE AND REPORT ON THE DEGREE OF CORRESPONDENCE BETWEEN THE INFORMATION AND ESTABLISHED CRITERIA.

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THE AUDITING PROFESSION

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  1. THE AUDITING PROFESSION CHAPTER 1

  2. WHAT IS AUDITING? • THE ACCUMULATION AND EVALUATION OF EVIDENCE ABOUT INFORMATION TO DETERMINE AND REPORT ON THE DEGREE OF CORRESPONDENCE BETWEEN THE INFORMATION AND ESTABLISHED CRITERIA.

  3. GATHERING EVIDENCE ABOUT THE CORRESPONDENCE BETWEEN REPRESENTATIONS OF ANOTHER AND ESTABLISHED CRITERIA FOR MAKING SUCH REPRESENTATIONS AND ISSUING A REPORT

  4. AUDITING AND ACCOUNTING • ACCOUNTING IS CONSTRUCTIVE • CREATING REPORTS • AUDITING IS ANALYTICAL • DETERMINE “FAIRNESS” OF REPORTS

  5. TYPES OF AUDITS • AUDITS OF FINANCIAL INFORMATION • PRESENTATION COMPARED TO CRITERIA • OPERATIONAL AUDITS • EFFICIENCY AND EFFECTIVENESS • IMPROVE OPERATIONS • COMPLIANCE AUDITS • FOLLOWING RULES • TAX AUDITS • LAWS, REGULATIONS

  6. TYPES OF AUDITORS • EXTERNAL • CPAS • GAO • IRS • BUREAU OF STATE AUDITS • INTERNAL • EMPLOYEES OF ENTITIES BEING AUDITED

  7. WHY HAVE AUDITS? • CONTROL MECHANISM • COMPLIANCE WITH RULES • REDUCE LOSSES • FRAUD • INEFFICIENCIES • ENHANCE CONFIDENCE • ADD CREDIBILITY TO NUMBERS • REDUCE INFORMATION RISK

  8. INFORMATION RISK • RISK THAT INFORMATION IS UNRELIABLE • REMOTENESS OF INFORMATION • BIASES OF PROVIDER • VOLUMINOUS DATA • COMPLEXITY • REDUCTION IN RISK • USER VERIFIES INFO • AUDITED INFORMATION

  9. CERTIFIED PUBLIC ACCOUNTANT • EDUCATIONAL REQUIREMENT • IN CALIFORNIA • BS IN SOMETHING • 30 SEMESTER UNITS OF ACCT, LAW, BUS • EXAM • UNIFORM IN ALL STATES • EXPERIENCE • IN CALIFORNIA • 2 YEARS WORKING FOR CPA • 500 HOURS OF ATTESTATION WORK

  10. PROFESSION OF PUBLIC ACCOUNTING • WHAT IS A PROFESSION? • OCCUPATIONAL GROUPING • GENERAL CHARACTERISTICS • SPECIALIZED KNOWLEDGE BASED ON THEORY • LICENSE • RESPONSIBILITY TO PUBLIC • CODE OF ETHICS • CULTURE OF PROFESSIONAL

  11. STRUCTURE OF PROFESSION • INTERNATIONAL CPA FIRMS • “BIG-5” • ARTHUR ANDERSEN • KPMG PEAT MARWICK • PRICEWATERHOUSECOOPERS • DELOITTE AND TOUCHE • ERNST AND YOUNG • AUDIT 95% OF PUBLIC COMPANIES

  12. NATIONAL FIRMS • GRANT THORNTON • BDO SIEDMAN • REGIONAL FIRMS • MOSS ADAMS • LOCAL FIRMS • PERRY-SMITH • TATE, PROPP, BEGGS & SUGIMOTO

  13. WHAT DO CPAS DO? • ATTESTATION ENGAGEMENTS • AUDITS • REVIEWS • OPINIONS ON OTHER INFO • ACCOUNTING AND BOOKKEEPING • TAX • CONSULTING

  14. AMERICAN INSTITUTE OF CPAS • ESTABLISH STANDARDS • AUDITING STANDARDS • ETHICS STANDARDS • ACCOUNTING AND REVIEW SERVICES STANDARDS • TAX PRACTICE STANDARDS • CONSULTING PRACTICE STANDARDS

  15. GENERALLY ACCEPTED AUDITING STANDARDS • GENERAL STANDARDS • ADEQUATE TECHNICAL TRAINING • INDEPENDENCE IN MENTAL ATTITUDE • DUE PROFESSIONAL CARE • FIELD WORK STANDARDS • PLANNING AND SUPERVISION • INTERNAL CONTROL • SUFFICIENT, COMPETENT EVIDENCE

  16. REPORTING STANDARDS • REPORT SHALL STATE WHETHER STATEMENTS ARE IN ACCORD WITH GAAP • REPORT SHALL IDENTIFY INCONSISTENCIES • REPORT SHALL INDENTIFY INADEQUATE DISCLOSURES • REPORT SHALL EXPRESS OPINION OR TELL WHY NO OPINION WAS FORMED

  17. STATEMENTS ON AUDITING STANDARDS • INTERPRETATIONS OF GAAS • GUIDANCE ON APPLICATION • 87 SASs • SOPs • AUDITING PROCEDURES

  18. INSURING QUALITY • ELEMENTS OF QUALITY CONTROL • DIVISION OF FIRMS • SEC PRACTICE SECTION • ADHERE TO QUALITY CONTROL • MANDATORY PEER REVIEW • CONTINUING EDUCATION • PARTNER ROTATION • CONCURRING PARTNER REVIEW • PROSCRIPTION OF SERVICES • REPORT ON DISAGREEMENTS • REPORT ON CONSULTING • PRIVATE COMPANIES PRACTICE SECTION • PEER REVIEW

  19. SECURITIES AND EXCHANGE COMMISSION • REGULATE SECURITIES MARKETS • ESTABLISH REPORTING STANDARDS FOR REGISTERED COMPANIES • REQUIRES AUDITS BY CPAS • ESTABLISHED BY SEC ACTS OF 1933 AND 1934

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