Auditing

Homework 1

2-7.   Who is responsible for establishing auditing standards for audits of public companies?  

Who is responsible for establishing auditing standards for audits of private companies?   Explain.

A. The Public Company Accounting Oversight Board (PCAOB), is responsible for establishing auditing standards for audits of public companies.   The PCAOB was established by the Sarbanes-Oxley Act and appointed and overseen by the Securities and Exchange Commission (SEC).

B. The Auditing Standards Board (ASB) of the AICPA is responsible for establishing auditing standards for the audits of private companies.

2-10.   Generally accepted auditing standards have been criticized by different sources for failing to provide useful guidelines for conducting an audit.   The critics believe the standards should be more specific to enable practitioners to improve the quality of their performance.   As the standards are now stated, some critics believe that they provide little more than an excuse to conduct inadequate audits.   Evaluate this criticism of the 10 generally accepted auditing standards.

The criticism of the 10 GAAS by some critics is based by the belief that by the GAAS being more specific, it will therefore eliminate some of the more complex audit decisions and better able to provide a line of defense for a CPA firm charged with conducting an inadequate audit.  However, sine highly specific requirements could turn auditing into mechanistic evidence gathering which would be devoid of professional judgment there is probably greater harm in defining authoritative guidelines too specifically than too broadly.

2-16

  a. The first general standard, which states in part that the audit must be performed by a person or persons having adequate technical training, requires that an auditor have

  (1) education and experience in the field of auditing.

  b. Which of the following best describes what is meant by generally accepted auditing standards?...