Hw W1 Acct555

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Homework - Week 1

2-7 (Objectives 2-2, 2-4, 2-5) Who is responsible for establishing auditing standards for audits of public companies? Who is responsible for establishing auditing standards for private companies? Explain.

The Pubic Company Accounting Oversight Board, PCAOB, is responsible for establishing the standards for the audit of public companies whereas the American Institute of CPA’s, AICPA, Auditing Standard Board is responsible for establishing the standards for the audit of private companies. The reason that two different boards have responsibilities is that the with the Sarbanes-Oxley Act being passed, it required the creation of the PCAOB for public companies.

2-10 (Objective 2-6) 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 Generally Accepted Auditing Standards, GAAS, provide a minimum standard as a guideline which auditors are expected to surpass. If GAAS is to become more specific, it could become too much like a checklist of evidence gathering rather than relying on the professional judgement of the auditor which ensures that the audit is appropriate to the size, type and state of the audit client. This helps to keep costs down for smaller companies.

2-16 (Objective 2-6) The following questions deal with generally accepted auditing standards. Choose the best response.

* 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.