MODERN AUDITING 7th Edition William C. Boynton California Polytechnic State University at San Luis...

MODERN AUDITING MODERN AUDITING 7th Edition7th Edition

MODERN AUDITING MODERN AUDITING 7th Edition7th Edition

William C. BoyntonWilliam C. BoyntonCalifornia Polytechnic State California Polytechnic State University at San Luis ObispoUniversity at San Luis Obispo

Raymond N. JohnsonRaymond N. JohnsonPortland State UniversityPortland State University

Walter G. KellWalter G. KellUniversity of MichiganUniversity of MichiganDeveloped by:

Gregory K. Lowry, MBA, CPASaint Paul’s College

John Wiley & Sons, Inc.

CHAPTER 1CHAPTER 1AUDITING AND THE AUDITING AND THE PUBLIC ACCOUNTING PROFESSIONPUBLIC ACCOUNTING PROFESSION

CHAPTER 1CHAPTER 1AUDITING AND THE AUDITING AND THE PUBLIC ACCOUNTING PROFESSIONPUBLIC ACCOUNTING PROFESSION

Introduction to Contemporary Auditing The Public Accounting Profession: A

Historical Perspective CPA Vision Project Services Performed by CPA Firms Organizations Associated with the Public Accounting Profession Regulatory Framework for Ensuring

Quality Services

Auditing DefinedAuditing DefinedAuditing DefinedAuditing 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 those assertions and established criteria and communicating the results to interested users.

Comparative Summary of Types of Comparative Summary of Types of Audits Audits Figure 1-1Figure 1-1

Comparative Summary of Types of Comparative Summary of Types of Audits Audits Figure 1-1Figure 1-1

Types of AuditorsTypes of AuditorsTypes of AuditorsTypes of Auditors

1. Independent Auditors2. Internal Auditors3. Government Auditors

The Roots of AuditingThe Roots of AuditingThe Roots of AuditingThe Roots of Auditing

The beginning of the company audit can be linked to British legislation during the industrial revolution in

the mid-1800s. The British influence migrated to the

United States in the late 1800s as English and Scottish investors sent their own auditors to check on the condition of American companies in which they had heavily invested.

Rise of the U.S. ProfessionRise of the U.S. ProfessionRise of the U.S. ProfessionRise of the U.S. Profession

1896 New York became the first state to pass legislation providing for the licensing of CPAs.1917 The AICPA was established.1921 All 48 states had passed CPA-

licensing legislation.1932 The NYSE began requiring all listed corporations to obtain an audit certificate from an independent CPA.

Rise of the U.S. ProfessionRise of the U.S. ProfessionRise of the U.S. ProfessionRise of the U.S. Profession

1934 The passage of the Securities Act of 1933 and the Securities

Exchange Act of 1934 added to the demand for audit

services for publicly owned companies.1940s 3 important important changes in audit practice had evolved.1980s The required knowledge in all

professional fields was growing rapidly.

1980s The accounting profession developed new

attestation standards.1990s A time of transition began for

both the accounting and auditing professions.

Rise of the U.S. ProfessionRise of the U.S. ProfessionRise of the U.S. ProfessionRise of the U.S. Profession

CPA Vision ProjectCPA Vision ProjectFigure 1-2Figure 1-2

CPA Vision ProjectCPA Vision ProjectFigure 1-2Figure 1-2

Vision Statement CPAs are trusted professionals who enable people and organizations to shape their future. Combining insight with integrity, CPAs deliver value by:1. Communicating the total picture with clarity

and objectivity,2. Translating complex information into critical

knowledge,3. Anticipating and creating opportunities, and4. Designing pathways that transform vision into realities.Core Purpose CPAs... Making sense out of a changing and complex world.

CPA Vision ProjectCPA Vision ProjectFigure 1-2Figure 1-2

CPA Vision ProjectCPA Vision ProjectFigure 1-2Figure 1-2

Vision Vision ElementsElements

The Accountant’s Value ChainThe Accountant’s Value ChainFigure 1-3Figure 1-3

The Accountant’s Value ChainThe Accountant’s Value ChainFigure 1-3Figure 1-3

Business Events

Data

Information

Knowledge

Decisions

Communicating the Total Picture

Transforming Complex Information into

Knowledge

Anticipating and Creating Opportunities

Transforming Vision into Reality

Universe of CPA ServicesUniverse of CPA ServicesFigure 1-4Figure 1-4

Universe of CPA ServicesUniverse of CPA ServicesFigure 1-4Figure 1-4

International Technology

Audit/Attestation

Compilation

Financial Planning

Consulting

Assurance

Assurance Services are independent professional services that improve the quality of information, or its context, for decision makers.1. Auditing2. Risk assessment services3. Performance measurement services4. Elder care assurance5. Accounting and compilation services

Services Performed Services Performed by CPA Firmsby CPA Firms

Services Performed Services Performed by CPA Firmsby CPA Firms

Attest Services are ones in which the CPA firm issues a written communication that expresses a conclusion about the reliability of a written assertion that is the responsibility of another party.1. Audit service2. Examination3. Review4. Agreed-upon procedures

Services Performed Services Performed by CPA Firmsby CPA Firms

Services Performed Services Performed by CPA Firmsby CPA Firms

Organizations Associated with the Organizations Associated with the Public Accounting ProfessionPublic Accounting Profession

Figure 1-5Figure 1-5

Organizations Associated with the Organizations Associated with the Public Accounting ProfessionPublic Accounting Profession

Figure 1-5Figure 1-5

1. Standard Setting — Quality Control Standards

2. Firm Regulation3. Self-Regulation

a. Division for CPA Firmsb. Quality Review Division

4. Government Regulation

Regulatory Framework for Regulatory Framework for Ensuring Quality ServicesEnsuring Quality ServicesRegulatory Framework for Regulatory Framework for Ensuring Quality ServicesEnsuring Quality Services

Quality Control ElementsQuality Control ElementsQuality Control ElementsQuality Control Elements

1. Independence, Integrity, and Objectivity

2. Personnel Management3. Acceptance and Continuance of

Clients and Engagements4. Engagement Performance5. Monitoring

CHAPTER 1CHAPTER 1AUDITING AND AUDITING AND

THE PUBLIC ACCOUNTING PROFESSIONTHE PUBLIC ACCOUNTING PROFESSION

CHAPTER 1CHAPTER 1AUDITING AND AUDITING AND

THE PUBLIC ACCOUNTING PROFESSIONTHE PUBLIC ACCOUNTING PROFESSION

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