...Nature and Functions of Auditing August 31st, 2012 Write a 700- to 1,050-word paper in which you explain the nature and functions of auditing. Relate your explanation to the audit functions in your organization, or an organization with which you are familiar. In your paper, be sure to address the following: • Describe the elements of the Generally Accepted Auditing Standards (GAAS). • Describe how these standards apply to financial, operational, and compliance audits. • Explain the effect that the Sarbanes-Oxley Act of 2002, and the Public Company Accounting Oversight Board (PCAOB), will have on audits of publicly traded companies. Discuss the additional requirements that are placed on auditors from this Act, and the actions of the PCAOB. This paper discusses the nature and functions of auditing addressing the elements of the Generally Accepted Auditing Standards (GAAS), how these standards apply to financial, operational, and compliance audits, the effect that the Sarbanes-Oxley Act of 2002 (SOX) and the Public Company Accounting Oversight Board (PCAOB) will have on audits of publicly traded companies, and the additional requirements that are placed on auditors from SOX and PCAOB. Nature and Functions of Audit Auditing is a systematic process of obtaining and evaluating evidence regarding assertions about economic actions, events and processes wherein evaluations are made and verified as true and correct. The auditing process consists of gathering...
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...Suretta Smith ACC/491 Generally Accepted Auditing Standards Paper September 25, 2012 Instructor: Santos Alarcon, Jr. Abstract The purpose of this paper will be to describe the nature and functions of auditing. The following will be addressed in this paper: description of the elements of the Generally Accepted Auditing Standards (GAAS), description how these standards apply to financial, operational, and compliance audits, explanation of the effect that the Sarbanes-Oxley Act of 2002, and the Public Company Accounting Oversight Board (PCAOB), will have on audits of publicly traded companies and the discussion on the additional requirements that are placed on auditors from this Act, and the actions of the PCAOB. The generally accepted auditing standards (GAAS) were implemented by the Public Company Accounting Oversight Board (PCAOB), in April of 2003. The standards were also adopted by the Auditing Standards Board of the American Institute of Certified Public Accountants, which consists of ten standards that establishes the framework for conducting audits. However, the auditing standards are not detailed but guidance on what should be included in the financial statements (Boynton & Johnson, 2006). The GAAS consist of three categories that incorporate the ten standards which are general standards, standards of field work, and standards of reporting. General standards. under the general standards category, it informs about the characteristics of adequate...
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...Tyco, and various other recognized entities, President George W. Bush signed into legislation during 2002 the Sarbanes-Oxley Act of 2002. This historic piece of legislation has had a profound effect on the accounting profession. As a result of the act, the PCAOB was created. Since its inception, the PCAOB has created some of the most importing accounting standards that are used every day by auditors of public companies. This paper takes a look at the Sarbanes-Oxley Act of 2002 and its effect on internal controls and small businesses. Also, I will discuss the purpose and specific pronouncements related to accounting information systems and internal controls; as well as the impact of possible future pronouncements. Keywords: Sarbanes-Oxley, PCAOB, Accounting information systems The Sarbanes-Oxley Act and the PCAOB Massive accounting scandals in the United States between 2001 and 2002 involving notorious companies, such as Enron, Worldcom, Tyco, and various other recognized entities, led to the creation of the Sarbanes-Oxley Act of 2002. This historic piece of legislation has had a profound effect on the accounting profession since it was signed into law. As a result of the act, the PCAOB was created. Since its inception, the PCAOB has created some of the most importing accounting standards that are used every day by auditors of public companies. The Sarbanes-Oxley Act of 2002 As a result of massive accounting scandals in the United States between 2001 and 2002 involving notorious...
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...REGISTERED STUDENTS MICPA EXAMINATION ACCOUNTING AND AUDITING STANDARDS The Institute’s Examination Regulations and Syllabus state that: (a) Questions involving knowledge of accounting and auditing should be answered in accordance with the requirements of approved accounting standards, approved auditing standards/guidelines and the relevant legislation; Questions involving knowledge of new approved accounting standards, approved auditing standards/guidelines and exposure drafts will not be set until at least 6 months have elapsed since the last day of the month in which the statement became effective or was published. (b) The list of accounting standards, auditing standards and other technical pronouncements, which are currently examinable in the Institute’s examination, are set out below. I. Approved Accounting Standards The Companies Act 1965 requires that approved accounting standards are to be applied to the financial statements of all companies. Approved accounting standards are issued by the Malaysian Accounting Standards Board (MASB), which is established under the Financial Reporting Act 1997. For the purposes of the MICPA pronouncements are examinable : examination, the following accounting (i) (ii) (iii) MASB approved accounting standards and other pronouncements issued by MASB; Malaysian Accounting Standards (MAS) issued by MICPA, which have not been replaced by MASB approved accounting standards; Technical Bulletins (TB) issued by MICPA, which are to...
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...communication of relevant and reliable financial data that will be useful for decision making. Accounting methods involve identifying the events and transactions that affect the entity. Once identified, these items are measured, recorded, classified, and summarized in the accounting records and reported in accordance with generally accepted accounting principles (GAAP). The accounting process is carried out by an entity's employees, and ultimate responsibility for the financial statements lies with the entity's management. The primary objective of an audit is to add credibility to management's financial statements. The typical audit performed in accordance with generally accepted auditing standards (GAAS) involves obtaining and evaluating evidence concerning management's financial statements. Auditing culminates in the issuance of an audit report that contains the auditor's opinion on whether the financial statements do in fact present fairly the entity's financial position, results of operations, and cash flows in conformity with GAAP. The auditor is responsible for forming and expressing an opinion on the entity’s financial statements. 2.2 Verifiability is primarily concerned with the availability of evidence. In an audit the auditor needs to obtain evidence to support conclusions about the fair presentation of financial position, results of operations, and cash flows. However, financial statements contain elements, such as an allowance for doubtful accounts, which may not...
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...that the independent auditor obtain written representations from management as a part of an audit of financial statements performed in accordance with generally accepted auditing standards and provides guidance concerning the representations to be obtained. Reliance on Management Representations .02 During an audit, management makes many representations to the auditor, both oral and written, in response to specific inquiries or through the financial statements. Such representations from management are part of the audit evidence the independent auditor obtains, but they are not a substitute for the application of those auditing procedures necessary to afford a reasonable basis for an opinion regarding the financial statements under audit. Written representations from management ordinarily confirm representations explicitly or implicitly given to the auditor, indicate and document the continuing appropriateness of such representations, and reduce the possibility of misunderstanding concerning the matters that are the subject of the representations. [Revised, March 2006, to reflect conforming changes necessary due to the issuance of Statement on Auditing Standards No. 105.]1 .03 The auditor obtains written representations from management to complement other auditing procedures. In many cases, the auditor applies auditing procedures specifically designed to obtain audit evidence concerning matters that also are the subject of written representations. For example, after the auditor...
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...Generally Accepted Auditing Standards Paper Gary Varnell University of Phoenix ACC 490 Auditing Aaron Strenkoski July 11, 2011 Introduction This paper is designed to explain the nature and functions of auditing, relate these functions to the audit functions of the Shawnee News-Star, describe the elements that make up the Generally Accepted Auditing Standards and how these standards apply to financial, operational, and compliance audits. This paper will also explain the effect that the Sarbanes-Oxley Act of 2002 as well as the Public Company Auditing Oversight Board (PCAOB) will have on the audits of companies that are publicly traded, and will also discuss the additional requirements that are placed on auditors as a result of the Sarbanes-Oxley Act as well as the actions of the PCAOB. Auditing is defined as “ a systematic process of objectively obtaining and evaluating evidence regarding assertions about economic actions and events to ascertain the degree of correspondence between those assertions and established criteria and communicating the results to interested users” (Boynton & Johnson 2006, p. 6). The auditing process begins with the auditor obtaining information of an entity and evaluating, in an unbiased manner, this information as it relates to the processes, economic transactions and procedures of the entity. When evaluating this information, the auditor must ensure that the information complies with Generally Accepted Accounting Principles (GAAP) and any...
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...the following papers of Intermediate (IPC) and Final Course(s) as annexed herewith (shown in Bold cum Italics): Intermediate (IPC) Course Paper 1: Accounting (Group I) Paper 2: Business Laws, Ethics and Communication (Group I) Paper 5: Advanced Accounting (Group II) Paper 6: Auditing and Assurance (Group II) Final Course Paper 3: Advanced Auditing and Professional Ethics (Group I) Paper 4: Corporate and Allied Laws (Group I) Director, Board of Studies Annexure SYLLABUS PAPER 1: ACCOUNTING (One paper – Three hours – 100 Marks) Level of Knowledge : Working Knowledge Objectives : (a) To lay a foundation for the preparation and presentation of financial statements, (b) To gain working knowledge of the principles and procedures of accounting and their application to different practical situations, (c) To gain the ability to solve simple problems and cases relating to sole proprietorship, partnership and companies and (d) To familiarize students with the fundamentals of computerized system of accounting. Contents : 1. A General Knowledge of the framing of the accounting standards, national and international accounting authorities, adoption of international financial reporting standards Accounting Standards Working knowledge of: AS AS...
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...The talk of having a new body that was tasked with the mandate of overseeing public companies accounting and auditing process had been circulating before the enactment of the Sarbanes-Oxley act. As early as 1990s, the then chairman of the Security and Exchange Commission was already lamenting about the erosion of auditor independence. However, accounting scandals that emerged towards the end of 1990s showed the deplorable state of the corporate world that characterized the United States corporate community. As such, this prompted the legislature to act fast in order to tame this runaway menace. Congress passed the Sarbanes-Oxley Act which was purposely developed in order to address the shortcomings of the auditing process that was evident in the American market....
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...Accepted Accounting Standards Paper Prithvi Shenoy ACC491 October 14, 2013 Michael Milkonian Abstract The importance of Auditing has gained considerable attention ever since its introduction in the mid-1800s. According to FASB, Statement of Financial Accounting Concepts No. 2, relevance and reliability are central to making accounting information useful for decision makers. To achieve this, auditors are required to obtain “reasonable assurance that those financial statement are presented fairly in all material respects” (Boynton & Johnson, 2006). This paper aims to explain the nature and types of auditing which is governed by the Generally Accepted Auditing Standards (GAAS). The paper then discusses the effects of Sarbanes-Oxley (SOX) Act 2002 and the Public Company Accounting Oversight Board (PCAOB) on publicly traded companies (issuers). Finally, the changes in the auditing environment with respect to the additional responsibilities placed on auditors and PCAOB as a result of the enforcement of SOX Act 2002 is discussed in the paper. Generally Accepted Accounting Standards Paper The elements of GAAS In response to the McKesson & Robbins’ accounting scandal in 1938, the AICPA introduced the 10 Generally Accepted Auditing Standards (GAAS) in 1939 to provide “guidance on the conduct of an audit” as well as an “overview of the timing of the different phases of an audit engagement” (Louwers and Ramsay et al., 2007). The 10 basic standards can be categorized...
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...Garcia; Kathleen M. Parry; Joseph M. Schmerling; Jaime Ulloa Auditing Theory and Practice 0902 ACCT422 4021 Due: April 29, 2009 Table of Contents Page Number What is the Sarbanes-Oxley Act of 2002? 3 Why was SOX established? 4 When did SOX take effect? 5 What companies were affected and how? 6 What does SOX compliance require? 9 Conclusion 11 References 13 What is the Sarbanes-Oxley Act of 2002? The Sarbanes-Oxley Act of 2002 – its official name being “Public Company Accounting Reform and Investor Protection Act of 2002” – is recognized to be the most significant U.S. federal disclosure and corporate governance legislation since the Securities Act of 1933 (the Securities Act) and the Securities Exchange Act of 1934 (the Exchange Act), and, the provisions of the Act are significant enough that it is considered by many to be the most significant change to federal securities laws in the U.S. since the New Deal. It is best understood, however, not as a piece of legislation centered on a new concept of regulation, but as a process which mandated that many major reforms be implemented as soon as possible (in some cases, within 30 days) on the precise schedule specified by Congress. In that sense, the Enron and WorldCom debacles provided the impetus of public outrage that forced into effect some of the most readily available reform proposals for publicly traded companies...
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...financial statements of a subsequent period. In addition this report also incorporates management representation and consideration of an entity’s ability to continue as a going concern. There may be times when new information may come to an auditor's attention subsequent to the date of their report of an audited financial statements, this might affect the previously issued report. With information form the PCAOB this report describes how a subsequent audits should be followed by any auditor who becomes aware that facts may have existed at that time of the original audit of the financial statement. When performing an integrated audit of financial statements and internal control over financial reporting, refer to paragraph 98 of PCAOB Auditing Standard No. 5, which relays that an audit of internal control over financial reporting should be integrated with an audit of financial statements, this will provide directions, with respect to the subsequent discovery of information existing on the date of the auditor's final report. Most of the guidelines are set out only in general terms. Which in this case if a specific action is need to be taken into account, then a in this particular case the findings may vary depending on the situation presented. The auditor would be well advised to consult with an attorney when he or she encounters any situation that may hinder the...
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...as to whether your basic financial statements are fairly presented, in all material respects, in conformity with U.S. generally accepted accounting principles, the objective also includes reporting on: • Internal control related to the financial statements and compliance with laws, regulations, and the provisions of contracts and grant agreements, noncompliance with which could have a material effect on the financial statements, in accordance with Government Auditing Standards. • Internal control related to major programs and an opinion (or disclaimer of opinion) on compliance with laws, regulations, and the provisions of contracts and grant agreements that could have a direct and material effect on each major program in accordance with the Single Audit Act Amendments of 1996 and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Our audit will be conducted in accordance with generally accepted auditing standards established by the Auditing Standards Board (United States); the standards for financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United State; the Single Audit Act Amendments of 1996, the provisions of OMB Circular A-133, and will include tests of accounting records, a determination of major program(s) in accordance with OMB Circular A-133, and other procedures we consider...
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...an audit in accordance with generally accepted auditing standards (GAAS). Auditing standards provide a measure of audit quality and the objectives to be achieved in an audit. Auditing procedures differ from auditing standards. Auditing procedures are acts that the auditor performs during the course of an audit to comply with auditing standards. Auditing Standards 2. The general, field work, and reporting standards (the 10 standards) approved and adopted by the membership of the AICPA, as amended by the AICPA Auditing Standards Board (ASB), are as follows: General Standards 1. The audit is to be performed by a person or persons having adequate technical training and proficiency as an auditor. 2. In all matters relating to the assignment, an independence in mental attitude is to be maintained by the auditor or auditors. 3. Due professional care is to be exercised in the performance of the audit and the preparation of the report. Standards of Field Work 1. The work is to be adequately planned and assistants, if any, are to be properly supervised. 2. A sufficient understanding of internal control is to be obtained to plan the audit and to determine the nature, timing, and extent of tests to be performed. 3. Sufficient appropriate evidential matter is to be obtained through inspection, observation, inquiries, and confirmations to afford a reasonable basis for an opinion regarding the financial statements under audit. Standards of Reporting 1. The report shall state whether...
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...In response to accounting scandals and in particular Enron, the Sarbanes-Oxley Act of 2002 was passed to provide more oversight of accounting professionals. The Sarbanes-Oxley Act of 2002 created the Public Company Accounting Oversight Board (PCAOB). The PCAOB is a nonprofit, private-sector corporation that is responsible for the oversight of accounting professionals who are engaged in providing independent audit reports for publicly traded companies (SEC.GOV). One of the effect of the Sarbanes-Oxley Act of 2002 was to make it “illegal to provide certain non-attest services to clients and changed the regulation of the auditing profession” (Boynton and Johnson, 2006). Because of the, independence of auditors has been increased. It has also...
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