To maximize the knowledge acquired by students, this book has been designed to be read in conjunction with the post-Sarbanes-Oxley technical audit guidance. All of the post-Sarbanes-Oxley technical guidance is available for free at http://www.pcaobus.org/Standards/index.aspx. In addition, a summary of the Sarbanes-Oxley Act of 2002 is also available for free at http://thecaq.aicpa.org/Resources/Sarbanes+Oxley/Sarbanes-Oxley+–+The+Basics.htm.
II. Recommended Technical Knowledge
The Sarbanes-Oxley Act of 2002
Section 103
Section 201
Section 203
Section 204
Section 206
Section 301
Section 302
Section 305
Section 401
Title IX
PCAOB Auditing Standard No. 5
Paragraph #2
Paragraph #9
Paragraph #11
Paragraph #21-22
Paragraph #25
Paragraph #28-30
Paragraph #69
Paragraph #A5 (in Appendix A)
Paragraph #A8 (in Appendix A)
III. Case Questions – Answer Key
1. Refer to the second general standard of Generally Accepted Auditing Standards (GAAS). What is auditor independence and what is its significance to the audit profession? What is the difference between independence in appearance and independence in fact?
The second general standard of generally accepted auditing standards (GAAS) is, “In all matters relating to the assignment, an independence in mental attitude is to be maintained by the auditor or auditors.” If the auditor is not independent, the financial statements are considered unaudited for all practical purposes. In case where the SEC has found that a CPA firm was not independent, it has required that the financial statements be re-audited by another firm. A lack of independence can result in disciplinary action by regulators and/or professional organizations and litigation by those who relied on the financial statements (e.g., clients and investors). The profession,
