audit arens chapter2
TRANSCRIPT
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The CPA Profession & Professional Ethics
Chapter 2
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Learning Objective 1
Describe the nature of CPA firms,what they do, and their structure.
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Certified Public Accounting Firms
The legal right to perform audits is grantedto CPA firms by regulation of each state.
CPA firms also provide many other services totheir clients, such as tax and consulting services.
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Certified Public Accounting Firms Big Four international firms
National firms
Regional and large local firms
Small local firms
PricewaterhouseCoopers, Deloitte Touche Tohmatsu, Ernst & Young, and KPMG
KAP Purwantono, Sarwoko, Sandjaja affiliate of Ernst & KAP Purwantono, Sarwoko, Sandjaja affiliate of Ernst & Young; KAP Osman Bing Satrio affiliate of Deloitte; KAP Young; KAP Osman Bing Satrio affiliate of Deloitte; KAP Sidharta, Sidharta, Widjaja affiliate of KPMG; KAP Haryanto Sidharta, Sidharta, Widjaja affiliate of KPMG; KAP Haryanto Sahari affiliate of PwCSahari affiliate of PwC
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Certified Public Accounting Firms
The four largest CPA firms in the United Statesare called the Big Four international CPA firms.
These four firms have offices in most majorcities in the United States and in manycities throughout the world.
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Management consulting services
Tax services
Accounting and bookkeeping services
Activities of CPA Firms
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Structure of CPA Firms
Three main factors influence the organizationalstructure of all firms:
1. The need for independence from clients.2. The importance of a structure to encourage
competence.3. The increased litigation risk faced by auditors.
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Organizational Structure
Proprietorship
Professional corporation
General partnership
Limited liability company
General corporation
Limited liability partnership
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Hierarchy of a TypicalCPA Firm
Staff Level Experience Typical Responsibilities
Staffassistant 0-2 years
Performs most of thedetailed audit work
Senior orin-chargeauditor
2-5 yearsResponsible for the auditfield work, includingsupervising staff work
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Hierarchy of a TypicalCPA Firm
Staff Level Experience Typical Responsibilities
Manager 5-10 yearsHelps the plan, managesthe audit, reviews work,and works with the client
Partner 10+ yearsReviews audit work andmakes significant auditdecisions
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E-Commerce andCPA Firm Operations
CPA firms are using the Internet to markettheir services.
Firm Web sites also feature online software toolsand databases to subscribers.
Firms take advantage of online resources anddatabases to help their staffs stay current on emerging business and standards-setting issues.
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Learning Objective 2
Understand the role of thePublic Company AccountingOversight Board and the effectsof the Sarbanes-Oxley Acton the CPA profession.
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This Act is considered by many observers tobe the most important legislation affectingthe auditing profession since the 1930s.
Sarbanes-Oxley Act
The provisions of the Act apply to publiclyheld companies and their audit firms.
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Sarbanes-Oxley Act
SEC
PCAOB(Public Company
AccountingOversight Board)
)
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Sarbanes-Oxley Act
The PCAOB conducts inspections of registeredaccounting firms and assess their compliancewith the rules of the PCAOB and the SEC.
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Learning Objective 3
Summarize the role of theSecurities and ExchangeCommission in accountingand auditing.
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The overall purpose of the Securities andExchange Commission (SEC) is to assist inproviding investors with reliable informationupon which to make investment decisions.
Securities and Exchange Commission
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Securities and Exchange Commission
Form S-1
Form 8-K
Form 10-K
Form 10-Q
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Learning Objective 4
Describe the key functionsperformed by the AICPA.
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The AICPA sets professional requirementsfor CPAs, conducts research, and publishesmaterials on many different subjects relatedto accounting, auditing, attestation andassurance services, managementconsulting services, and taxes.
AICPA
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The AICPA is empowered to set standards(guidelines) and rules that all membersand other practicing CPAs must follow.
Establishing Standardsand Rules
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Establishing Standardsand Rules1. Auditing standards
2. Compilation and review standards
3. Other attestation standards
4. Consulting standards
5. Code of Professional Conduct
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Other AICPA Functions
Supports research by its own staff andprovides grants to others.
Writes and grades the CPA examination.
Provides seminars and education in avariety of subject matters.
Publishes a variety of materials.
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Vision for the Future
The AICPA has established the CPA Vision Projectto provide a core purpose and a vision for the CPAprofession in the year 2011 and beyond.
The core purpose of the CPA Vision Project is:CPAsmaking sense of a changing andcomplex world.
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Vision for the Future
1. Continuing education and life-long learning
2. Competence
3. Integrity
4. Attuned to broad business issues
5. Objectivity
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Learning Objective 5
Use generally accepted auditingstandards as a basis forfurther study.
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1. The audit is to be performed by a person orpersons having adequate technical trainingand proficiency as an auditor.
2. The auditor must maintain independencein mental attitude in all matters relatingto the audit.
General Standards
Audit hrs dilaksanakan oleh seseorang/ lebih yg memiliki Audit hrs dilaksanakan oleh seseorang/ lebih yg memiliki keahlian & pelatihan teknis yg cukup sbg auditorkeahlian & pelatihan teknis yg cukup sbg auditor
Dalam semua hal yang berhubungan dengan perikatan, Dalam semua hal yang berhubungan dengan perikatan, independensi dalam sikap mental harus dipertahankan oleh independensi dalam sikap mental harus dipertahankan oleh auditorauditor
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General Standards
3. The auditor must exercise due professionalcare in the performance of the audit and thepreparation of the report.
Dalam pelaksanaan audit dan penyusunan laporannya, auditor Dalam pelaksanaan audit dan penyusunan laporannya, auditor wajib menggunakan kemahiran professionalnya dengan cepat wajib menggunakan kemahiran professionalnya dengan cepat dan seksamadan seksama
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1. The auditor must adequately plan the workand must properly supervise any assistants.
2. The auditor must obtain a sufficient understanding of the entity and its environment, including its internal control, to assess the risk of material misstatement and to design further Audit procedures.
Standards of Field Work
Pekerjaan hrs direncakanan sebaik-baiknya dan jika digunakan Pekerjaan hrs direncakanan sebaik-baiknya dan jika digunakan asisten harus disupervvisi dengan semestinyaasisten harus disupervvisi dengan semestinya
Pemahaman memadai ats pengendalian intern hrs diperoleh Pemahaman memadai ats pengendalian intern hrs diperoleh untuk merencanakan audit dan menentukan sifat, saat dan untuk merencanakan audit dan menentukan sifat, saat dan lingkup pengujian yang hrs dilakukanlingkup pengujian yang hrs dilakukan
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Standards of Field Work
3. The auditor must obtain sufficient appropriateaudit evidence by performing audit proceduresto afford a reasonable basis for an opinion regarding the financial statements under audit.
Bukti audit kompeten yang cukup harus diperoleh melalui Bukti audit kompeten yang cukup harus diperoleh melalui inspeksi, pengamatan, permintaan keterangan dan konfirmasi inspeksi, pengamatan, permintaan keterangan dan konfirmasi sebagai dasar memadai untuk menyatakan pendapat atas sebagai dasar memadai untuk menyatakan pendapat atas laporan keuangan yang di auditlaporan keuangan yang di audit
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1. The report shall state whether the financial statements are presented in accordance with generally accepted accounting principles.
2. The report shall identify those circumstances in which suchprinciples have not been consistently observed in the currentPeriod in relation to the preceding period.
Standards of Reporting
Laporan Audit harus menyatakan apakah LK telah disusun Laporan Audit harus menyatakan apakah LK telah disusun sesuai dgn standard akuntansi yg berlaku umum di Indonesiasesuai dgn standard akuntansi yg berlaku umum di Indonesia
Lap. Auditor hrs menunjukkan, jika ada, ketidak konsistenan Lap. Auditor hrs menunjukkan, jika ada, ketidak konsistenan penerapan Standar Akuntansi dlm LK periode berjalan dg penerapan Standar Akuntansi dlm LK periode berjalan dg penerapan Standar Akuntansi dlm LK periode sblm-nyapenerapan Standar Akuntansi dlm LK periode sblm-nya
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3. Informative disclosures in the financial statements are to beregarded as reasonably adequate unless otherwise stated in the report.
4. The report shall contain an expression of opinion regardingthe financial statements, taken as a whole.
Standards of Reporting
Pengungkapan informatif dlm LK hrs dipandang memadai, Pengungkapan informatif dlm LK hrs dipandang memadai, kecuali dinyatakan lain dalam Lap. Auditorkecuali dinyatakan lain dalam Lap. Auditor
Lap. Auditor hrs memuat suatu pernyataan pendapat Lap. Auditor hrs memuat suatu pernyataan pendapat mengenai LK secara keseluruhan atau suatu asersi bahwa mengenai LK secara keseluruhan atau suatu asersi bahwa suatu pernyataan tertentu tidak dapat diberikansuatu pernyataan tertentu tidak dapat diberikan
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Generally Accepted AuditingStandards
General Standards1. Adequate training and proficiency
2. Independence in mental attitude
3. Due professional care
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Generally Accepted AuditingStandards
Standards of Field Work1. Proper planning and supervision
2. Understanding of the entity
3. Sufficient appropriate evidence
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Generally Accepted AuditingStandards
Standards of Reporting1. Statements prepared in accordance with GAAP
2. Circumstances when GAAP not followed
3. Adequacy of disclosures
4. Expression of opinion on financial statements
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Relationship Between GAAS and PCAOB Auditing Standards
The term generally accepted auditing standardsis no longer used for public company audits.
The term GAAS continues to be used for auditsof private companies.
Public company audits refer to PCAOB auditingstandards.
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The 10 generally accepted auditing standardsare too general to provide meaningful guidance.
SASs interpret the 10 generally acceptedauditing standards and are the mostauthoritative references available to auditors.
Statements on Auditing Standards
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GAAS and Standards of Performance
Statements on Auditing Standards
Classification of Statements on Auditing Standards
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Learning Objective 6
Discuss the role of internationalauditing standards.
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International Standardson Auditing
International Standards on Auditing (ISAs)
I
are issued by the International AuditingPractice Committee of the InternationalFederation of Accountants (IFAC).
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International Standardson Auditing
IFAC is the worldwide organizationfor the accountancy profession.
The IFAC works to improve theuniformity of auditing practices andrelated services throughout the world.
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Learning Objective 7
Identify quality control standardsand practices within theaccounting profession.
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Elements of Quality Control
Independence, integrity, and objectivity
Personnel management
Acceptance and continuation of clientsand engagements
Engagement performance
Monitoring
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Relationships
Quality controlstandards
Generally acceptedauditing standards
AICPA practicesections
Peerreview
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Need for Ethics
Ethical behavior is necessary for a societyto function in an orderly manner.
The need for ethics in society is sufficientlyimportant that many commonly heldethical values are incorporated into laws.
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CPAs Encouraged to ConductThemselves at a High Level
Legalliability
AICPA practicesections
Continuingeducation
requirements
GAAS andinterpretations
Code ofProfessional
Conduct
CPAexamination
Qualitycontrol
Peerreview
PCAOBand SEC
Conduct ofCPA firmpersonnel
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Learning Objective 4
Describe the purpose andcontent of the AICPACode of Professional Conduct.
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Code of Professional Conduct
PrinciplesIdeal standards of ethical conductstated in philosophical terms.They are not enforceable.
Rules ofconduct
Minimum standards of ethicalconduct stated as specific rules.They are enforceable.
Interpretationsof the rulesof conduct
Interpretation of the rules of conduct bythe AICPA Division of Professional Ethics.They are not enforceable, but apractitioner must justify departure.
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Code of Professional Conduct
Ethicalrulings
Published explanations and answersto questions about the rules ofconduct submitted to the AICPA bypractitioners and others interestedin ethical requirements.They are not enforceable, but apractitioner must justify departure.
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Ethical Principles
1. Responsibilities:Professionals should exercise sensitive andmoral judgments in all their activities.
2. The public interest:Members should accept the obligation to actin a way that will serve and honor the public.
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Ethical Principles
3. Integrity:Members should perform all responsibilitieswith integrity to maintain public confidence.
4. Objectivity and independence:Members should be objective, independent,and free of conflicts of interest.
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Ethical Principles
5. Due care:Members should observe the professionsstandards and strive to improve competence.
6. Scope and nature of services:A member in public practice should observe the Code of Professional Conduct.
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9 Ethical Principles
1. Tanggung Jawab Profesi2. Kepentingan Umum3. Integritas4. Objektivitas5. Kompetensi & Kehati-hatian Profesional6. Kerahasiaan7. Perilaku Professional8. Standar Teknis
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Standards of Conduct
Principles
Rules ofconductSubstandard
conduct
Ideal conductby practitioners
Minimum levelof conduct bypractitioners
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End of Chapter 2