- Due in large part to corporate fraud in financial reporting, the government enacted a number of reforms to the accounting profession during early 2000. Congress had strong doubts that the accounting profession had the ability to self regulate itself as it had done in the past. A number of reforms were made to the accounting profession’s system of self-regulation due in large part to the scandals. The Sarbanes-Oxley Act of 2002 created the Public Company Accounting Oversight Board. Explain the major responsibilities of this board.
a. Give an overview of the legislation that altered the self-regulation process for accounting. What are the major responsibilities of this board? Hint: it was 2002!
b. Explain the regulation process (regulatory authority) for accounting firms that audit public companies.
c. Explain the regulation process (regulatory authority) for accounting firms that do not audit public companies.
- Explain why public companies are required to have to have an integrated audit? Give an example of a company’s actions that provoked the need for the creation of the PCAOB and regulation requirement for an integrated audit of a financial audit of a public company.
- Describe the differences between the 3 engagements: 1. an audit (examination) 2. a review 3. a compilation. What is the level of assurance being offered for each engagement? Give an example of when a business would request each engagement.
- Identify and describe the 8 major steps in planning an audit. Be sure to give examples of what each step would normally require the auditor to do in regards to the specific steps.
- What is the purpose of a client representation letter? What are the key elements normally included in the letter?
- Why is identifying a potential loss contingency so important to the auditor? How can an auditor determine if one exists beyond what is reported in the financial statements or note disclosures?
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