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The Role of the Public Accountant in the American Economy

Chapter 1. The Role of the Public Accountant in the American Economy. The Attest Function. Management. The CPA. Suitable Criteria. Subject Matter. Gathers Evidence. Issues Report. Subject Matter*. The Attest Report. *May be management’s assertion about the subject matter.

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The Role of the Public Accountant in the American Economy

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  1. Chapter 1 The Role of the Public Accountant in the American Economy

  2. The Attest Function Management The CPA Suitable Criteria Subject Matter Gathers Evidence Issues Report Subject Matter* The Attest Report *May be management’s assertion about the subject matter.

  3. Attestation Engagements Type of Engagement Level of Assurance Nature of Report Procedures Examination Review Agreed-upon procedures Highest Moderate or Limited Varies with procedures Expresses opinion Expresses negative assurance States findings Sufficient to limit attestation risk to low level Generally limited to inquiry & analytical procedures Procedures agreed- upon with the specified users

  4. Audit of Financial Statements Management The Auditors Prepares Financial Statements Criteria (e.g., GAAP) Gathers Evidence Issues Report Financial Statements The Auditors’ Report

  5. Audits lend credibility to information by reducing information risk, the risk that information is materially misstated Financial statement misstatements arise due to-- Accidental errors Lack of knowledge of accounting principles Unintentional bias Deliberate falsification Audits do not directly address business risk, the risk that a company will not be able to meet its financial obligations due to economic conditions or poor management decisions What Creates the Demand for Audits?

  6. History of the Attest Function

  7. 2000—The Panel on Audit Effectiveness made a variety of suggestions to improve audits. 2001—Enron Bankruptcy 2002—WorldCom Fraud 2002—Sarbanes-Oxley Act 2003—Public Company Accounting Oversight Board began operations The Accounting Profession’s Credibility Crisis

  8. Audits of Financial Statements Compliance Audits Operational Audits Types of Audits

  9. External Auditors Internal Auditors GAO Auditors Tax Auditors Types of Auditors

  10. Establishes Standards Research and Publication Continuing Professional Education Self-Regulation CPA Examination AICPA’s Traditional Role Note: The standards setting and regulation roles have been taken over by the SEC and the PCAOB with respect to auditors of public companies.

  11. Attestation and Assurance Tax Consulting Accounting Personal Financial Planning Litigation support Fraud Investigation Types of Professional Services

  12. Typical Structure of a National CPA Firm Partners Managers Seniors Staff

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