Term
| Types of services provided by CPAs |
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Definition
ASSURANCE: Attestation- ex, audits of financial statements, examinations of internal controls
NONASSURANCE: ex Tax Services, Management consulting |
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Term
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Definition
| used to descrive the broad range of information enhancement services preformed by CPAs that are designed to enhance the degree of confidence in the information |
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Term
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Definition
| a practitioner is engaged to issue or does issue an examination, a review, or an agreed upon procedures report about subject mater that is the responsibility of another party (ex management) |
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Term
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Definition
| contain management's thoughts on the effectiveness of internal control over financial reporting and attest to the effectiveness of that control with the auditors |
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Term
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Definition
| CPAs perform financial statement audits to gather sufficient information and evidence to issue an audit report with an opinion on if the company complied with the applicable reporting framework (GAAP usually) |
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Term
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Definition
| Referred to as an audit when it involves historical financial statements, provides the highest form of assurance that CPAs can offer. |
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Term
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Definition
| a substantially lesser in scope of procedures than an examination and is designed to lend only a moderate (limited) degree of assurance. |
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Definition
| results in a report by the CPAs that describes those procedures and their findings (not an examination or review) |
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Term
| What creates the demand for audits |
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Definition
| third parties use audited financial statements to make economic decisions |
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Term
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Definition
| cover the BS, IS's, RE, and cash flows, goal is to determine if they conform with GAAP/ Performed exclusively by CPAs. |
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Term
| Users of financial audits |
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Definition
| management, investors, banks, creditors, financial analysts, govt agencies |
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Term
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Definition
| ex- IRS audit of an income tax return. Determines compliance with specific laws and regulations. |
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Term
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Definition
| ex- effectiveness of operations of a receiving department of a manufacturing company. Study of a specific unit of a entity. |
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Definition
| ex- assurance on both the financial statements and effectiveness of internal control over financial reporting. SOX requires that auditors of publicly traded companies perform these. |
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Term
| American Institute of Certified Public Accountants 4 roles |
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Definition
1) Establishing standards (in the conduct of CPA professional services)
2) Carrying on a program of research and publication
3)Continuing professional education
4)Contributing the the profession's self-regulation |
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Term
| Statements on Auditing Standards (SASs) |
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Definition
| issued by the Auditing Standards Board, pronouncements on auditing for non-publicly traded companies |
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Term
| Public Company Accounting Oversight Board (PCAOB)and their role |
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Definition
| created in 2002 to oversee and discipline CPAs and public accounting firms that audit public firms. They adopt the standards relating to the preparation of audit reports for SEC filers, and oversee and discipline CPA firms that audit public companies. |
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Term
| Securities and Exchange Commission (SEC) |
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Definition
| Agency of the US government that oversees the responsibility of the PCAOB. They protect public investors by requiring full disclosure of financial information by companies offering securities for sale to the public. |
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Term
| Types of professional services done by CPAs |
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Definition
Attestation and Assurance
Tax
Consulting
Accounting
Personal Financial Planning
Litigation Support
Fraud investigation |
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Term
| International Auditing Standards |
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Definition
| international standards with different levels of authority in the various countries in which they are used |
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Term
| State Bards of Accountancy |
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Definition
| License CPAs and CPA firms to practice public accounting. |
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Term
| Principles underlying a GAAS audit (5) |
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Definition
Purpose
Premise
Personal Responsibility
Auditor actions in performing an audit
Reporting results of an audit |
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Term
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Definition
Management have responsibility to:
- prepare financial statements in accordance to GAAP
- provide auditor with needed info and unrestricted access to those in the entity |
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Term
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Definition
| a questioning mind and a critical assessment of audit evidence |
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Term
| responsibilities of an auditor |
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Definition
| having appropriate competence and capabilities to perform an audit |
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Term
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Definition
| low level of risk remaining that the auditors express an opinion that the financial statements are properly stated when they are not |
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Term
| reporting the results of an audit |
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Definition
| express in a written report an opinion on findings(or statement that an opinion cannot be expressed) |
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Term
| GAAS(slides)/PCAOB(book) General Standards |
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Definition
Adequate training and proficiency
Independence of mental attitude
Due professional care |
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Term
| GAAS(slides)/PCAOB(book) Standards of Fieldwork |
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Definition
Adequately plan
obtain a sufficient understanding of the entity
obtain sufficient audit evidence fo opinion |
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Term
| GAAS(slides)/PCAOB(book) Standards of reporting |
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Definition
State whether financial statements are GAAP
ID circumstances where principles have not been consistently applied
Informative disclosures
clearly state the degree of responsibility being assumed by the auditors |
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Term
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Definition
| Risk that the auditors may unknowingly fail to modify the financial statements in accordance with GAAP |
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Term
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Definition
| intentional acts that cause the financial statements to be misstated |
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Term
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Definition
| unintentional misstatements or omissions of amounts or disclosures in the financial statements |
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Term
1) Title
2) Addressee
3) Content Sections (Paragraphs)
- Intro
- Management's responsibility
- Auditor's responsibility
- Opinion paragraph
4) Signature with Firm Name
5) City and State
6) Date |
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Definition
| Standard auditor's report for nonpublic companies |
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Term
| "Report of Registered Independent Accounting Firm" |
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Definition
| public company audit report. Refers to PCAOB. Refers internal controls. Somewhat more brief than the nonpublic company report. |
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Term
| CPA Firm Quality Control Procedures |
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Definition
| Depend on the size of the firm, every firm should have its own procedures that apply to it. They provide assurance that the CPA firm meets its responsibilities |
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Term
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Definition
conducted by members of AICPA or other firms. Two types: Engagement review and System review.
Pass, pass with deficiencies, or fail |
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Term
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Definition
| conducted by PCAOB staff. Risk based approach to selection and inspection is used. A report is written and reported to the SEC, part of which is made public. |
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Term
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Definition
| Auditior issue this when there is some limitation on the scope of their audit, or when one or more items in the financial statements are not presented in accordance with GAAP. Must be significant, but not overshadow and overall opinion on the statements |
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Term
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Definition
| states that financial statements are not fairly presented. It is rare, because it is of little use to the client. Management usually changes their practice to avoid this statement |
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Term
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Definition
| auditors issue this if they are unable to determine the overall fairness of the financial statements. results from very significant limitations in the scope of the auditor's examination |
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Term
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Definition
| accountant will not act with objectivity because of interest opposed to the client's interest. (Litigation between accountant and client) |
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Term
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Definition
| accountant will promote a client's interests or position and compromise objectivity or independence (promoting a client's product) |
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Term
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Definition
| accountant will become too sympathetic to the client's interests or too accepting of client's work or product due to a long or close relationship. |
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Term
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Definition
| Accountant will take on the role of client management or otherwise assume management responsibilities. (Accountant assumes client's role while performing nonaudit services) |
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Term
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Definition
| accountant could benefit, financially of otherwise, from an interest in, or relationship with the client. |
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Term
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Definition
| accountant will not appropriately evaluate results of a previous judgement made or service performed or supervised by the accountant or the accountant's firm (Accountant also provides bookkeeping for the firm) |
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Term
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Definition
| accountant will subordinate judgement to that of an individul associated with a client due to clients rep, expertise, dominance, or attempt to coerce the accountant. (CPA firm is threatened with dismissal) |
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Term
Independence of mind
Independence of appearance |
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Definition
| Two types of independence required by an auditor. One of actual independence and one that a reasonable third party could attest to |
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Term
| Individual vs Firm Independence |
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Definition
| not all individuals need to be independent, but the firm itself must be to perform attest services. |
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Term
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Definition
| providing other services such as bookkeeping while also being in charge of their audit is prohibited by _________ |
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Term
| integrity and objectivity rule |
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Definition
applies to all AICPA members and CPA services.
Violations:
- make, permits, or directs material misstatements in client's financial records
- fails to correct materially false financial statements
- signs docs containing materially false info |
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Term
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Definition
retaining client records may be considered an act discreditable to the profession. Works with:
1) client prepared records
2) client records prepared by CPAs
3) Supporting records (adjusting entries)
4) CPA working papers (audit programs) |
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Term
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Definition
| a member in public practice should not perform a contingent fee fr any professional services, or receive such a fee from a client for whom the member performs this list of other services on page 93 (as is the case for commissions and referral fees) |
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Term
| confidential client information rule |
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Definition
| shall not disclose any confidential client information without the specific consent of the client. Auditors cannot directly disclose illegal acts unless they have the legal duty to do so. Confidential, but not privileged communications with the client |
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Term
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Definition
| liability that develops through case decisions generally arising due to a breach of contract, negligence, and fraud. |
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Term
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Definition
| liability develops when a governmental unit passes regulations that potentially impose a liability on CPAs |
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Term
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Definition
| act with which civil action can be brought |
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Term
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Definition
| does not involve a misrepresentation with intent to deceive |
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Term
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Definition
| violation of legal duty to exercise a degree of care that an ordinary prudent person would exercise under similar conditions. |
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Term
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Definition
| lack of even slight care, indicative of a reckless disregard for one's professional responsibilities |
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Term
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Definition
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Term
| elements of proof by client under common law |
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Definition
duty accepted
breach of duty
losses suffered
causation by CPAs performance |
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Term
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Definition
| auditor's negligence was not the sole cause of the damages |
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Term
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Definition
| examine the issue of causation and assess a percentage to each entity that had a part |
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Term
| joint and several liability |
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Definition
| if the other defendant cannot pay for their damages, it is up to you to cover them |
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Term
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Definition
| auditors knew that the FS were for a particular use by a known user |
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Term
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Definition
| auditors knew the FS were for a particular purpose |
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Term
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Definition
| the auditors should have known because it was reasonably foreseeable that the FS would be used by the user |
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Term
| private securities litigation reform act 1995 |
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Definition
| placed limits on amount of auditor's liability by establishing proportionate liability. |
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Term
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Definition
| the court has decided that accountants cannot be held liable under RICO act unless they actually participate in the operation of management of the organization |
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Term
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Definition
has the power to prohibit CPAs from reporting on SEC filings.
Can take punitive action against public accounting firms
Auditors are forces to report illegal acts by clients to them if the client fails to report. |
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Term
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Definition
| may conduct investigations and disciplinary proceedings on registered CPA firms and professional employees. Can fine, sanction, and refer cases to the justice dept |
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Term
| compilation of financial statements |
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Definition
| refers to the prep of FS based upon the information provided to the CPAs by the client. Not intended to lend any assurance |
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Term
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Definition
| consists of limited verification procedures, substatially less than an audit. They exercise due professional care |
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