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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
CopyrightCopyrightCopyrightCopyright
Copyright 2001 John Wiley & Sons, Inc. All rights reserved. Reproduction or translation of this work beyond that permitted in Section 117 of the 1976 United States Copyright Act without the express written permission of the copyright owner is unlawful. Request for further information should be addressed to the Permissions Department, John Wiley & Sons, Inc. The purchaser may make backup copies for his/her own use only and not for distribution or resale. The Publisher assumes no responsibility for errors, omissions, or damages, caused by the use of these programs or from the use of the information contained herein.