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Homework #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 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).

Auditing standards for private entities in the United States are established by the Auditing Standards Board (ASB) of the AICPA. However, prior to passage of the Sarbanes–Oxley Act, the ASB established auditing standards for private and public companies. The PCAOB now has responsibility for auditing standards for public companies, while the ASB continues to provide auditing standards for private companies

Arens, Alvin, Randal J Elder, Mark S. Beasley. Auditing and Assurances Services, 13th Edition. Pearson Learning Solutions.

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.

I believe the general accepted auditing standards are right for the profession, because it helps the auditor in the following three areas, in the conduct and qualifications to become an auditor, the proper performance for an audit and how the reports should be done. Even though the critics said that the standards should be more specific, but this might lead to a tunnel vision effect on behalf of the auditors, and it will also lack professional judgment.