ACC Assignment 3

Only available on StudyMode
  • Download(s) : 79
  • Published : February 10, 2015
Open Document
Text Preview
Carlos Tapia
February 10, 2015
Auditing

Assignment 3: 2-42, 48, 49, 50

2-42aThe PCAOB is a nonprofit organization that has the authority to set standards related to audit reports. Because they set audit standards and are independent of the government they help ensure quality in external audits. The PCAOB also has the authority to conducts inspections of registered public accounting firms. The fact that the PCAOB inspects and investigates audit firms provides for a quality audit because it encourages audit firms to perform a quality audit.

2-42bTo address auditor independence concerns, Sections 201-203 require that accounting firms not perform services outside of the scope of practice of auditors for their clients, all audit and nonaudit services be preapproved by the audit committee, and that the lead partners and reviewing partner for the audit rotate at least every five years.

2-42cRegistered accounting firms may not perform audits for an issuer whose CEO, CFO, controller, or chief accounting office was employed by the accounting firm during the one-year period preceding the audit. This is known as the ‘cooling off period’. If this section were not in place, a threat to independence may be created where a member of an audit firm joins an audit client and is able to exert significant influence over the preparation of subsequent financial statements and/or otherwise influences the outcome of the audit.

2-42dAudit committee requirements ensure that the committee is independent of the firm, that audit committees establish ‘whistleblowing’ mechanisms, and that audit committees are properly funded by the company. The audit committees role is to enhance confidence in the integrity of an organization’s processes and procedures relating to internal control and corporate reporting including financial reporting. The committee provides an ‘independent’ reassurance through its oversight and monitoring role of corporate...
tracking img