Presentation on theme: "MODERN AUDITING 7th Edition"— Presentation transcript:
1 MODERN AUDITING 7th Edition William C. BoyntonCalifornia Polytechnic State University at San Luis ObispoRaymond N. JohnsonPortland State UniversityWalter G. KellUniversity of MichiganDeveloped by:Gregory K. Lowry, MBA, CPASaint Paul’s CollegeJohn Wiley & Sons, Inc.
2 CHAPTER 1 AUDITING AND THE PUBLIC ACCOUNTING PROFESSION Introduction to Contemporary AuditingThe Public Accounting Profession: A Historical PerspectiveCPA Vision ProjectServices Performed by CPA FirmsOrganizations Associated with the Public Accounting ProfessionRegulatory Framework for Ensuring Quality Services
3 Auditing DefinedAuditing 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.
4 Comparative Summary of Types of Audits Figure 1-1
5 Types of Auditors 1. Independent Auditors 2. Internal Auditors 3. Government Auditors
6 The Roots of AuditingThe 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.
7 Rise 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.
8 Rise 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.
9 Rise of the U.S. Profession 1980s The accounting profession developed new attestation standards.1990s A time of transition began for both the accounting and auditing professions.
10 CPA Vision Project Figure 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.
12 The Accountant’s Value Chain Figure 1-3 Business EventsDataInformationKnowledgeDecisionsCommunicating the Total PictureTransforming Complex Information into KnowledgeAnticipating and Creating OpportunitiesTransforming Vision into Reality
13 Universe of CPA Services Figure 1-4 InternationalTechnologyAudit/AttestationCompilationFinancial PlanningConsultingAssurance
14 Services Performed by CPA Firms 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
15 Services Performed by 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
16 Organizations Associated with the Public Accounting Profession Figure 1-5
17 Regulatory Framework for Ensuring Quality Services 1. Standard Setting — Quality Control Standards2. Firm Regulation3. Self-Regulationa. Division for CPA Firmsb. Quality Review Division4. Government Regulation
18 Quality Control Elements 1. Independence, Integrity, and Objectivity2. Personnel Management3. Acceptance and Continuance of Clients and Engagements4. Engagement Performance5. Monitoring
19 CHAPTER 1 AUDITING AND THE PUBLIC ACCOUNTING PROFESSION
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