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Audit I - Chapter 2, Pt. I, The Auditing Profession
Audit I - Chapter 2, Pt. I, The Auditing Profession
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Triggered by the bankruptcies and alleged audit failures involving such companies as
Enron and WorldCom, the Sarbanes–Oxley Act is considered by many to be the most
important legislation affecting the auditing profession since the 1933 and 1934 Securities
Acts. The provisions of the Act dramatically changed the relationship between publicly
held companies and their audit firms.
•
The Sarbanes–Oxley Act established the Public Company Accounting Oversight Board
(PCAOB), appointed and overseen by the SEC.
•
The PCAOB provides oversight for auditors of public companies; establishes auditing,
attestation, and quality control standards for public company audits; and performs
inspections of audit engagements as well as the quality controls at audit firms performing
those audits
•
auditors of brokers and dealers registered with the Securities and Exchange Commission
are also required to register with the PCAOB, are subject to inspections, and must follow
PCAOB auditing and attestation standards.
•
The PCAOB conducts inspections of registered accounting firms to assess their
compliance with the rules of the PCAOB and SEC, professional standards, and each
firm’s own quality control policies. The PCAOB requires annual inspections of accounting
firms that audit more than 100 issuers (public companies) and inspections of other
registered firms at least once every three years
Auditing part I YA, AAUSC, 2022
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•
Security and Exchange Commission
•
The PCAOB conducts inspections of registered accounting firms to assess their
compliance with the rules of the PCAOB and SEC, professional standards, and each
firm’s own quality control policies. The PCAOB requires annual inspections of accounting
firms that audit more than 100 issuers (public companies) and inspections of other
registered firms at least once every three years
•
The PCAOB conducts inspections of registered accounting firms to assess their
compliance with the rules of the PCAOB and SEC, professional standards, and each
firm’s own quality control policies. The PCAOB requires annual inspections of accounting
firms that audit more than 100 issuers (public companies) and inspections of other
registered firms at least once every three years
Council in UK)-
8
The Auditing Profession
….The Need for Regulation
In order to regain trust in the auditing profession, national and
international standard setters and regulators have tried to
introduce three initiatives:
Harmonization of auditing procedures, - to increase
users confidence in the nature of audits around the
world
Focus on audit quality
Adherence to a strict ethical code of conduct
In order to achieve this, practitioners have to follow
regulatory guidance:
-National Corporate Law (The Companies act 2006 in
UK, The Sarbanes Oxley Act in US)
Auditing part I
-Auditing Standards
YA, AAUSC, 2022
-Code of Ethics
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Company)
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The Auditing Profession
….The Need for Regulation
Who may not act as an auditor?
Excluded by Law: The law in most countries
excludes:
– those who manage or work for a company
– those who have business or personal
connections with them from auditing that
company
Excluded by the code of Ethics: Auditors
must also comply with a code of Ethics. The
code of Ethics require the auditor to consider
any factors that would prevent them from acting
as auditor such as independence, competence,
Auditing part I or issues
YA, AAUSC, 2022 regarding confidentiality.
The Auditing Profession 12
International
International Standards on Standards on
Auditing (ISAs) Quality Control
(ISQC)
membership.
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Because CPA firms play an important social role, several organizations, including the
PCAOB, SEC,
Auditing part I
and AICPA, provide oversight to increase the likelihood of appropriate
YA, AAUSC, 2022
audit quality and professional conduct.
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Average
Staff Level Typical Responsibilities
Experience
Staff assistant 0-2 years Performs most of the detailed audit work.
Senior or in- 2-5 years Coordinates and is responsible for the
charge performance of audit procedures,
auditor including supervising and reviewing
staff work.
Manager and 5-10 years Helps the in-charge plan and manage
senior the audit, reviews the in-charge’s
manager work, and manages relations with the
client. A manager may be responsible
for more than one engagement at the
same time.
Table 2.2 Staff Levels and
Responsibilities
Average
Staff Level Typical Responsibilities
Experience
Partner 10+ years Reviews the overall audit work and is
involved in significant audit decisions. A
partner is an owner of the firm and
therefore has the ultimate responsibility
for conducting the audit and serving
the client.
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Questions