The CPA Profession

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The CPA Profession

• Chapter 2 Highlights

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Certified Public Accounting Firms
The legal right to perform audits is granted to
CPA firms by regulation of each state.
CPA firms also provide many other services
to their 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
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Certified Public Accounting Firms
The four largest CPA firms in the United
States are called the Big Four international
CPA firms.
These four firms have offices in most
major cities in the United States and in
many cities throughout the world.
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Activities of CPA Firms
Accounting and bookkeeping services
Tax services
Management consulting services
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Hierarchy of a TypicalCPA Firm
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Hierarchy of a TypicalCPA Firm
Staff Level
Experience
Typical Responsibilities
Manager
5-10 years
Helps the plan, manages the audit, reviews
work, and works with the client
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AICPA
The AICPA sets professional requirements for
CPAs, conducts research, and publishes materials
on many different subjects related to accounting,
auditing, attestation and Assurance services,
management Consulting services, and taxes.
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Establishing Standardsand Rules
1. Auditing standards (Historically)
2. Compilation and review standards
3. Other attestation standards
4. Consulting standards
5. Code of Professional Conduct
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Other AICPA Functions
Writes and grades the CPA examination
Supports research by its own staff and provides
grants to others
Publishes a variety of materials.
Provides seminars and education in a variety of
subject matters
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General Standards

• The audit is to be performed by a person or
  persons
• having adequate technical training and
  proficiency
• as an auditor.

2. In all matters relating to the assignment, an
independence in mental attitude is to
be maintained by the auditor or auditors.
3. Due professional care is to be exercised in
the planning and performance of the audit and
the preparation of the report.
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Standards of Field Work

• The work is to be adequately planned and
• assistants, if any, are to be properly
  supervised.

2. A sufficient understanding of internal control
is to be obtained to plan the audit and to
determine the nature, timing, and extent of
tests to be performed.
3. Sufficient competent evidential matter is to
be obtained through inspection, observation,
inquiries and confirmations to afford a
reasonable basis for an opinion regarding the
financial statements under audit.
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Standards of Reporting
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 such principles have not
been consistently observed in the current
period in relation to the preceding period.
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Standards of Reporting
3. Informative disclosures in the
financial statements are to be regarded as
reasonably adequate unless otherwise stated in
the report.
4. The report shall contain an expression
of opinion regarding the financial
statements, taken as a whole.
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Relationship Between GAAS and PCAOB Auditing
Standards
The term generally accepted auditing standards is
no longer used for public company audits.
The term GAAS continues to be used for audits of
private companies.
Public company audits refer to PCAOB auditing
standards.
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Statements on Auditing Standards
The 10 generally accepted auditing standards are
too general to provide meaningful guidance.
SASs interpret the 10 generally accepted auditing
standards and are the most Authoritative
references available to auditors.
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Elements of Quality Control Standards
Independence, integrity, and objectivity
Personnel management
Acceptance and continuation of clients and
engagements
Engagement performance
Monitoring
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CPAs Encouraged to ConductThemselves at a High
Level
Conduct of CPA firm personnel
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Next Class

• Background and nature of the Sarbanes-Oxley Act.
• Its effect on the CPA profession
• Role of the Public Company Accounting Oversight
  Board (PCAOB)