OVERVIEW OF AUDITING, GENERALLY ACCEPTED AUDITING STANDARDS GAAS

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OVERVIEW OF AUDITING,GENERALLY ACCEPTED AUDITING
STANDARDS (GAAS)
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AUDITING DEFINED

• AUDITING IS A SYSTEMATIC PROCESS OF OBJECTIVELY
  OBTAINING AND EVALUATING EVIDENCE REGARDING
  ASSERTIONS ABOUT ECONOMIC ACTIONS AND EVENTS TO
  ASCERTAIN THE DEGREE OF CORRESPONDENCE BETWEEN
  THE ASSERTIONS AND ESTABLISHED CRITERIA AND
  COMMUNICATING THE RESULTS TO INTERESTED USERS

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TYPES OF AUDITS AND AUDITORS

• AUDITS
• FINANCIAL
• COMPLIANCE
• OPERATIONAL
• AUDITORS
• EXTERNAL (CPA)
• INTERNAL
• GOVERNMENT

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INTERNAL AUDITING DEFINED

• INTERNAL AUDITING IS AN INDEPENDENT APPRAISAL
  FUNCTION ESTABLISHED WITHIN AN ORGANIZATION TO
  EXAMINE AND EVALUATE ITS ACTIVITIES AS A SERVICE
  TO THE ORGANIZATION. THE OBJECTIVE OF INTERNAL
  AUDITING IS TO ASSIST MEMBERS OF THE ORGANIZATION
  IN THE EFFECTIVE DISCHARGE OF THEIR OBLIGATIONS.
  TO THIS END, INTERNAL AUDIITNG FURNISHES THEM
  WITH ANALYSES, APPRAISALS, RECOMMENDATIONS,
  COUNSEL, AND INFORMATION CONCERNING THE
  ACTIVITIES REVIEWED

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GOVERNMENT AUDITING

• THE TERM AUDIT INCLUDES BOTH FINANCIAL AND
  PERFORMANCE AUDITS. FINANCIAL RELATED AUDITS
  INCLUDE DETERMINING WHETHER (1) FINANCIAL
  INFORMATION IS PRESENTED IN ACCORDANCE WITH
  ESTABLISHED... CRITERIA E.G. GAAP, (2) THE
  ENTITY HAS ADHERED TO SPECIFIC FINANCIAL
  COMPLIANCE REQUIREMENTS WITH LAWS AND
  REGULATIONS, AND (3) THE ENTITYS INTERNAL
  CONTROL STRUCTURE OVER FINANCIAL REPORTING AND/OR
  SAFEGUARDING ASSETS IS SUITABLY DESIGNED AND
  IMPLEMENTED TO ACHIEVE THE CONTROL OBJECTIVES .
  PERFORMANCE AUDITS INCLUDE ECONOMY AND EFFICIENCY
  AUDITS AND PROGRAM AUDITS

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CPA PROFESSION

• LICENSING
• STATE BOARD OF PUBLIC ACCOUNTANCY
• EXAM, EDUCATION, EXPERIENCE
• CONTINUING EDUCATION
• PROFESSIONAL ORGANIZATIONS
• AICPA
• AUDITING STANDARDS BOARD (ASB)
• MSCPA

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PROFESSIONAL SERVICES

• AUDIT
• ASSURANCE
• ATTESTATION
• TAXES
• CONSULTING
• COMPILATION
• REVIEW

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PROFESSIONAL DEVELOPMENTS

• 1985 - REP. DINGELL (D-MI)
• SUBCOMMITTEE OF THE HOUSE ENERGY AND COMMERCE
  COMMITTEE
• 1986 - REP. WYDEN (D-OR)
• FINANCIAL FRAUD DETECTION AND DISCLOSURE ACT
• 1986 - HARRIS OPINION POLL (SPONSORED BY AICPA)
• 1987 - TREADWAY COMMISSION
• NATIONAL COMMISSION ON FRAUDULENT FINANCIAL
  REPORTING
• 1988- ANDERSON COMMITTEE (AICPA COMMITTEE)

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• 1989 - SAS 53-61 EXPECTATION GAP STANDARDS
• SAS 53 - AU316
• THE AUDITORS RESPONSIBILITY TO DETECT AND REPORT
  ERRORS AND IRREGULARITIES
• SAS 54 - AU 317
• ILLEGAL ACTS BY CLIENTS
• SAS 55 - AU 319
• CONSIDERATION OF THE INTERNAL CONTROL STRUCTURE
  IN A FINANCIAL STATEMENT AUDIT
• SAS 56 - AU 329
• ANALYTICAL PROCEDURES
• SAS 57 - AU 342
• AUDIITNG ACCOUNTING ESTIMATES

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• SAS 58 - AU 508
• REPORTS ON AUDITED FINANCIAL STATEMENTS
• SAS 59 - AU 341
• THE AUDITORS CONSIDERATION OF AN ENTITYS
  ABILITY TO CONTINUE AS A GOING CONCERN
• SAS 60 - AU 325
• COMMUNICATION OF INTERNAL CONTROL STRUCTURE
  RELATED MATTERS NOTED IN AN AUDIT
• SAS 61 - AU 380
• COMMUNICATION WITH AUDIT COMMITTEES

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• 1990 - MANDATORY PEER REVIEW FOR FIRMS WITH SEC
  CLIENTS
• 1990 - FEDERAL TRADE COMMISSION - CODE OF
  PROFESSIONAL CONDUCT
• 1994 - NON-CPA OWNERSHIP OF CPA FIRMS
• 1994/95 - LIMITED LIABILITY PARTNERSHIPS
• 1995 - SECURITIES LITIGATION REFORM ACT
• FINANCIAL FRAUD DETECTION AND DISCLOSURE ACT OF
  1995
• 1996 - SPECIAL COMMITTEE ON ASSURANCE SERVICES
• 1997 - SAS 82 CONSIDERATION OF FRAUD IN A
  FINANCIAL STATEMENT AUDIT
• 1997 - INDEPENDENCE STANDARDS BOARD
• 1998 - MASSACHUSETTS PASSES 150-HOUR LEGISLATION

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POSTULATES OF AUDITING

• FINANCIAL STATEMENTS ARE VERIFIABLE (AUDITABLE)
• NO NECESSARY CONFLICT OF INTEREST BETWEEN
  MANAGEMENT AND AUDITORS EXIST
• EFFECTIVE INTERNAL CONTROLS LOWER THE PROBABILITY
  OF FRAUD OR IRREGULARITIES
• CONSISTENT APPLICATION OF GAAP RESULTS IN A FAIR
  PRESENTATION OF FINANCIAL STATEMENTS
• EXCEPT FOR EVIDENCE TO THE CONTRARY, WHAT WAS
  TRUE IN THE PAST WILL HOLD TRUE FOR THE FUTURE
• THE FINANCIAL STATEMENTS ARE FREE FROM COLLUSIVE
  AND OTHER IRREGULARITIES
• AUDITOR ACTS EXCLUSIVELY AS AN AUDITOR
• PROFESSIONAL STATUS OF THE CPA IMPOSES
  PROESSIONAL OBLIGATION

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GAAS

• GENERAL
• PROFICIENCY AS AUDITOR/ACCOUNTANT
• INDEPENDENCE
• DUE PROFESSIONAL CARE
• FIELD WORK
• PLAN AND SUPERVISE
• INTERNAL CONTROL
• SUFFICIENT COMPETENT EVIDENCE
• REPORTING
• GAAP
• CONSISTENCY
• DISCLOSURE
• OPINION

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