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1、精选优质文档-倾情为你奉上Chapter 2The CPA Profession Review Questions2-1The four major services that CPAs provide are:1. Assurance services Assurance services are independent professional services that improve the quality of information for decision makers. Assurance services include attestation services, which
2、 are any services in which the CPA firm issues a report that expresses a conclusion about the reliability of an assertion that is the responsibility of another party. The four categories of attestation services are audits of historical financial statements, attestation on the effectiveness of intern
3、al control over financial reporting, reviews of historical financial statements, and other attestation services.2. Accounting and bookkeeping services Accounting services involve preparing the clients financial statements from the clients records. Bookkeeping services include the preparation of the
4、clients journals and ledgers as well as financial statements.3. Tax services Tax services include preparation of corporate, individual, and estate returns as well as tax planning assistance.4. Management consulting services These services range from suggestions to improve the clients accounting syst
5、em to computer installations.2-2The major characteristics of CPA firms that permit them to fulfill their social function competently and independently are:1. Organizational form A CPA firm exists as a separate entity to avoid an employer-employee relationship with its clients. The CPA firm employs a
6、 professional staff of sufficient size to prevent one client from constituting a significant portion of total income and thereby endangering the firms independence.2. Conduct A CPA firm employs a professional staff of sufficient size to provide a broad range of expertise, continuing education, and p
7、romotion of a professional independent attitude and competence.3. Peer review This practice evaluates the performance of CPA firms in an attempt to keep competence high.2-3The Public Company Accounting Oversight Board provides oversight for auditors of public companies, including establishing auditi
8、ng and quality control standards for public company audits, and performing inspections of the quality controls at audit firms performing those audits.2-4The purpose of the Securities and Exchange Commission is to assist in providing investors with reliable information upon which to make investment d
9、ecisions. Since most reasonably large CPA firms have clients that must file reports with the SEC each year (all companies filing registration statements under the securities acts of l933 and l934 must file audited financial statements and other reports with the SEC at least once each year), the prof
10、ession is highly involved with the SEC requirements.The SEC has considerable influence in setting generally accepted accounting principles and disclosure requirements for financial statements because of its authority for specifying reporting requirements considered necessary for fair disclosure to i
11、nvestors. In addition, the SEC has power to establish rules for any CPA associated with audited financial statements submitted to the Commission.2-5The AICPA is the organization that sets professional requirements for CPAs. The AICPA also conducts research and publishes materials on many different s
12、ubjects related to accounting, auditing, management advisory services, and taxes. The organization also prepares and grades the CPA examinations, provides continuing education to its members, and develops specialty designations to help market and assure the quality of services in specialized practic
13、e areas.2-6Statement on Standards for Attestation Engagements was first issued in 1986 and its purposes were to provide a framework for attest engagements and to develop standards for those engagements. In 2001, the Auditing Standards Board issued SSAE 10 in response to the need for more detailed st
14、andards for specific types of attestation services. SSAE 10 supercedes the previously issued standards and its main purpose is to improve the usefulness of the attestation standards and provide greater flexibility to practitioners in providing assurance services. 2-7The PCAOB now has responsibility
15、for establishing auditing standards for public companies, while the Auditing Standards Board (ASB) of the AICPA establishes auditing standards for private companies. The ASB previously had responsibility for establishing auditing standards for both public and private companies. Existing auditing sta
16、ndards were adopted by the PCAOB as interim auditing standards for public company audits.2-8Generally accepted auditing standards are ten general guidelines to aid auditors in fulfilling their professional responsibilities. These guidelines include three general standards concerned with competence,
17、independence, and due professional care; three standards of field work including planning and supervision, study and evaluation of internal control, and the gathering of competent evidential matter; and four standards of reporting which require a statement as to presentation in accordance with gener
18、ally accepted accounting principles, inconsistency observed in the current period in relation to the preceding period, adequate disclosure, and the expression of an opinion as to the fairness of the presentation of the financial statements.2-8(continued)Generally accepted accounting principles are s
19、pecific rules for accounting for transactions occurring in a business enterprise. Examples may be any of the opinions of the FASB.2-9Auditors can obtain adequate technical training and proficiency through formal education in auditing and accounting, adequate practical experience, and continuing prof
20、essional education. Auditors can demonstrate their proficiency by becoming licensed to practice as CPAs, which requires successful completion of the Uniform CPA Examination. The specific requirements for licensure vary from state to state.2-10For the most part, generally accepted auditing standards
21、are general rather than specific. Many practitioners along with critics of the profession believe the standards should provide more clearly defined guidelines as an aid in determining the extent of evidence to be accumulated. This would eliminate some of the difficult audit decisions and provide a s
22、ource of defense if the CPA is charged with conducting an inadequate audit. On the other hand, highly specific requirements could turn auditing into mechanical evidence gathering, void of professional judgment. From the point of view of both the profession and the users of auditing services, there i
23、s probably a greater harm from defining authoritative guidelines too specifically than too broadly.2-11International Standards on Auditing (ISAs) are issued by the International Auditing Practices Committee (IAPC) of the International Federation of Accountants (IFAC). ISAs are designed to improve th
24、e uniformity of auditing practices and related services throughout the world by issuing pronouncements on a variety of audit and attest functions and promoting their acceptance worldwide. A CPA who conducts an audit in accordance with GAAS may not comply with ISAs because there may be additional ISA
25、 requirements that extend beyond GAAS requirements. 2-12Quality controls are the procedures used by a CPA firm that help it meet its professional responsibilities to clients. Quality controls are therefore established for the entire CPA firm as opposed to individual engagements.2-13The element of qu
26、ality control is personnel management. The purpose of the requirement is to help assure CPA firms that all new personnel should be qualified to perform their work competently. A CPA firm must have competent employees conducting the audits if quality audits are to occur.2-14A peer review is a review,
27、 by CPAs, of a CPA firms compliance with its quality control system. A mandatory peer review means that such a review is required periodically. AICPA member firms are required to have a peer review every three years. Registered firms with the PCAOB are subject to quality inspections. These are diffe
28、rent than peer reviews because they are performed by independent inspection teams rather than another CPA firm.2-14 (continued)Peer reviews can be beneficial to the profession and to individual firms. By helping firms meet quality control standards, the profession gains if reviews result in practiti
29、oners doing higher quality audits. A firm having a peer review can also gain if it improves the firms practices and thereby enhances its reputation and effectiveness, and reduces the likelihood of lawsuits. Of course peer reviews are costly. There is always a trade off between cost and benefits. A C
30、PA firm also gives up some independence of activities when it is reviewed by another CPA firm.2-15The two divisions of practice that a CPA firm may belong to are the SEC Practice Section (renamed the Center for Public Company Audit Firms) and the Private Companies Practice Section. A firm may belong
31、 to one section, both sections, or neither. Many of the self-regulatory activities of the SECPS have been taken over by the PCAOB.Proponents of this division believe that this will improve the quality of practice by CPA firms and that it will improve self-regulation. Critics state that it establishe
32、s two classes of CPAs and implies a lower performance quality for firms that are not members of the SEC Practice Section. Multiple Choice Questions From CPA Examinations2-16a.(1)b.(2)c.(3)d.(3)2-17a.(2)b.(2)c.(3) Discussion Questions And Problems2-18a.The comments summarize the beliefs of many pract
33、itioners about the SarbanesOxley Act and the PCAOB. The arguments against the Act can be summarized as four arguments:1. Costs of complying with the Act are excessively high, especially the requirement to report on internal control over financial reporting, and will discourage companies from becomin
34、g public companies.2. Relative cost for local audit firms is excessively high.3. Additional oversight is not needed because sufficient quality controls have already been implemented by most audit firms.4. Three other things already provide assurance of adequate quality: a competitive economic enviro
35、nment, legal liability, and auditing standards.To support these comments, it can be argued that the profession has generally functioned well with relatively little controversy and criticism. 2-18(continued)The arguments against these comments are primarily as follows:1. Reporting on the effectivenes
36、s of internal control over financial reporting will provide benefits in improved controls, resulting in higher quality financial reporting and reduced losses from fraud. 2. The increased confidence in financial reporting will increase access to capital and lower the cost of capital by reducing infor
37、mation risk. 3. Changes in the scope of CPA practices and other threats to audit quality required government regulation.4. Regulation of public company audits will not affect most audit firms that do not have public company audit clients. b. There is no correct answer to this question. Different peo
38、ple reach different conclusions, depending on the weights put on the various arguments. Time is needed to effectively assess both the costs and benefits of the Act.2-19a.Engagement performanceb. Personnel managementc. Engagement performanced. Engagement performancee. Independence, integrity, and obj
39、ectivityf. Monitoringg. Acceptance and continuation of clients and engagementsh. Personnel managementi. Personnel management2-20a.Rossi and Montgomerys primary ethical consideration is their professional competence to perform all of the audit work for filing with the SEC. In addition, if Rossi and M
40、ontgomery have performed bookkeeping services or certain consulting services for Mobile Home, they will not be independent under PCAOB and SEC independence requirements. The firm must also be a registered firm with the PCAOB.b. The filing with the SEC, in addition to normal audited financial stateme
41、nts, will require completion and registration with the SEC of Form S-1 which includes an audited summary of operations for the last five fiscal years as well as many additional schedules and descriptions of the business. Each quarter subsequent to the filing, Form 10-Q must be filed; and within 90 d
42、ays of the end of each fiscal year Form 10-K must be filed with the SEC.In addition, Form 8-K must be filed whenever significant events have occurred which are of interest to public investors. These forms must be filed in conformity with Regulation S-X, which requires considerable disclosures in add
43、ition to those normally required in audited financial statements.2-21BRIEF DESCRIPTION OF GAASHOLMES ACTIONS RESULTING IN FAILURE TO COMPLY WITH GAASGENERAL STANDARDS1. The audit is to be performed by a person or persons having adequate technical training and proficiency as an auditor.1. It was inap
44、propriate for Holmes to hire the two students to conduct the audit. The audit must be conducted by persons with proper education and experience in the field of auditing. Although a junior assistant has not completed his formal education, he may help in the conduct of the audit as long as there is pr
45、oper supervision and review.2. In all matters relating to the assignment, an independence in mental attitude is to be maintained by the auditor or auditors.2. To satisfy the second general standard, Holmes must be without bias with respect to the client under audit. Holmes has an obligation for fair
46、ness to the owners, management, and creditors who may rely on the report. Because of the financial interest in whether the bank loan is granted to Ray, Holmes is independent in neither fact nor appearance with respect to the assignment undertaken.3. Due professional care is to be exercised in the pe
47、rformance of the audit and the preparation of the report.3. This standard requires Holmes to perform the audit with due care, which imposes on Holmes and everyone in Holmes organization a responsibility to observe the standards of field work and reporting. Exercise of due care requires critical revi
48、ew at every level of supervision of the work done and the judgments exercised by those assisting in the audit. Holmes did not review the work or the judgments of the assistants and clearly failed to adhere to this standard.2-21(continued)BRIEF DESCRIPTION OF GAASHOLMES ACTIONS RESULTING IN FAILURE TO COMPLY WITH GAASSTANDARDS OF FIELD WORK1. The work is to be adequately planned and assistants, if any, are to be properly supervised.1. This standard recognizes that early appointment of the auditor has advantages for the auditor and the client. H