Auditing Chapter 2
Chapter 2
The CPA Profession
← Review Questions
2-1 The four major services that CPAs provide are:
1. Audit and assurance services Assurance services are independent professional services that improve the quality of information for decision makers. Assurance services include attestation services, which are any services in which the CPA firm issues a report that expresses a conclusion about the reliability of an assertion that is the responsibility of another party. The four categories of attestation services are audits of historical financial statements, attestation on the effectiveness of internal control over financial reporting, reviews of historical financial statements, and other attestation services. 2. Accounting and bookkeeping services Accounting services involve preparing the client 's financial statements from the client 's records. Bookkeeping services include the preparation of the client 's journals and ledgers as well as financial statements. 3. Tax services Tax services include preparation of corporate, individual, and estate returns as well as tax planning assistance. 4. Management consulting services These services range from suggestions to improve the client 's accounting system to computer installations.
2-2 The major characteristics of CPA firms that permit them to fulfill their social function competently and independently are:
1. Organizational form A CPA firm exists as a separate entity to avoid an employer-employee relationship with its clients. The CPA firm employs a professional staff of sufficient size to prevent one client from constituting a significant portion of total income and thereby endangering the firm 's independence. 2. Conduct A CPA firm employs a professional staff of sufficient size to provide a broad range of expertise, continuing education, and promotion of a professional independent attitude and competence. 3. Peer review This practice
The CPA Profession
← Review Questions
2-1 The four major services that CPAs provide are:
1. Audit and assurance services Assurance services are independent professional services that improve the quality of information for decision makers. Assurance services include attestation services, which are any services in which the CPA firm issues a report that expresses a conclusion about the reliability of an assertion that is the responsibility of another party. The four categories of attestation services are audits of historical financial statements, attestation on the effectiveness of internal control over financial reporting, reviews of historical financial statements, and other attestation services. 2. Accounting and bookkeeping services Accounting services involve preparing the client 's financial statements from the client 's records. Bookkeeping services include the preparation of the client 's journals and ledgers as well as financial statements. 3. Tax services Tax services include preparation of corporate, individual, and estate returns as well as tax planning assistance. 4. Management consulting services These services range from suggestions to improve the client 's accounting system to computer installations.
2-2 The major characteristics of CPA firms that permit them to fulfill their social function competently and independently are:
1. Organizational form A CPA firm exists as a separate entity to avoid an employer-employee relationship with its clients. The CPA firm employs a professional staff of sufficient size to prevent one client from constituting a significant portion of total income and thereby endangering the firm 's independence. 2. Conduct A CPA firm employs a professional staff of sufficient size to provide a broad range of expertise, continuing education, and promotion of a professional independent attitude and competence. 3. Peer review This practice