Kế toán, kiểm toán - Chapter 02: Professional standards

Auditing & Assurance Services, 6eChapter 02 Professional Standards “In today’s regulatory environment, it’s virtually impossible to violate rules.” – Bernard Madoff, money manager, approximately one year prior to being arrested for embezzling $50 billion from investors in a Ponzi scheme. 2-*Auditing Standards for Public and Nonpublic EntitiesAudits of Public EntitiesAudits of Nonpublic EntitiesAICPA Statements on Auditing StandardsStandards issued by the Auditing Standards Board prior to April 2003 not amended or superseded by PCAOB standards (Interim Standards)All current standards issued by Auditing Standards BoardPCAOB Auditing StandardsAll current standards issued by PCAOBNot applicable2-*Generally Accepted Auditing StandardsIdentify necessary qualifications and characteristics of auditors and guide the conduct of the auditPurpose of GAAS is to achieve the following objectives of an audit examinationObtain reasonable assurance about whether financial statements are free of material misstatementReport on the financial statements and communicate in accordance with auditor’s findings2-*Comparison of 10 Basic Standards with Principles: ResponsibilitiesGeneral StandardsResponsibilities PrincipleTraining and proficiency2. Independence in mental attitude3. Due professional careAuditors are responsible for:competence and capabilitiesethical requirements (independence and due care)professional skepticism and professional judgment2-*Responsibilities PrincipleCompetence and capabilitiesExperience and expertiseIndependenceIndependence in fact vs. independence in appearanceFinancial and managerial relationshipsDue careLevel of performance by reasonable auditor in similar circumstancesProfessional skepticism and judgmentSkepticism: Appropriate questioning and critical assessment of evidenceJudgment: Application of training, knowledge, and experience in making informed decisions during audit2-*Comparison of 10 Basic Standards with Principles: Performance Standards of FieldworkPerformance PrinciplePlanning and supervision2. Understanding of entity and environment to assess risk of material misstatement3. Obtain sufficient appropriate evidenceTo obtain reasonable assurance:Plan work and supervise assistantsDetermine and apply appropriate materiality levelsIdentify and assess risks of material misstatementObtain sufficient appropriate evidence2-*Performance PrincipleGoal is to provide reasonable assurance that financial statements do not contain material misstatements Planning and supervisionPreparation of audit plan MaterialityInfluences decisions of financial statement usersConsidered throughout the audit Risk assessment Understand entity and environment (including internal control)Determine necessary effectiveness of substantive tests Audit evidenceSufficient = quantity (How many transactions or components?)Appropriate = quality (What level of reliability needed? Source?)2-*Overview of EvidenceDetection RiskSufficiency (Quantity of Evidence)Relevance (What Does Evidence Tell the Auditor?)Reliability (Can the Auditor Trust the Evidence?)Appropriateness (Quality of Evidence)2-*Sufficient evidenceRelated to quantity (number of transactions or components examined)Influenced by effectiveness of entity’s internal controlEffective internal controlLower level of control riskEvaluate less evidenceIneffective internal controlHigher level of control riskEvaluate more evidence2-*Appropriate EvidenceRelates to the quality of evidenceRelevance: Does evidence address assertion(s) of interest?Reliability: Source of evidenceAuditors’ direct personal knowledgeExternal documentary evidenceInternal documentary evidenceHighLow2-*Comparison of 10 Basic Standards with Principles: Reporting Standards of ReportingReporting PrincipleFinancial statements in accordance with GAAPGAAP applied consistently (only report if not consistent)Adequacy of disclosures (only report if not adequate)Express or disclaim an opinionExpress an opinion or state that an opinion cannot be expressedOpinion is based on conformity of financial statements with applicable financial reporting framework2-*Reporting PrincipleExpress an opinion (or indicate that an opinion cannot be expressed) on entity’s financial statementsAssess financial statements against financial reporting frameworkSet of criteria used to determine the measurement, recognition, presentation, and disclosure of material items in the financial statementsExamples include GAAP, IFRS, or special purpose framework2-*Types of Audit OpinionsUnmodified (unqualified)F/S are in conformity with GAAPQualifiedExcept for limited items, F/S are in conformity with GAAPAdverseF/S are not in conformity with GAAPDisclaimerAuditors do not express an opinion2-*System of Quality ControlProvides firm with reasonable assurance that the firm and its personnelComply with professional standards and regulatory/legal requirementsIssue reports that are appropriate in the circumstances2-*Public Company Accounting Oversight Board (PCAOB) Monitors public accounting firms through inspectionsFirms auditing > 100 public entities: annualFirms auditing ≤ 100 public entities: every 3 yearsInspection reports list deficiencies in audits conducted by registered firms (