mgt 132 study guide
CHAPTER 1: Role of Public Accountant
Assurance Services: broad range of information enhancement services that are provided by CPA. (attestation services)
Attest Function: includes the preparation of a report of the CPA’s findings
Attestation Engagement: includes a report on subject matter, or on an assertion about subject matter
-Partner in charge of the engagement has primary responsibility for the performance of an audit.
Examination/Audit:
-provides highest “reasonable” form of assurance CPAs can offer
-low risk of material misstatement
-“In our opinion…”
-an audit today is more likely to include tests of compliance with laws and regulations
Review:
-lesser in scope of procedures than an examination and is designed to lend only a moderate “limited” level of assurance
-moderate risk of material misstatement
-generally limited to inquiries and analytical procedures
-“We are not aware of any material modifications that should be made…”
Agreed-upon procedures engagement:
-summary of findings rather than assurance
-mutually decided procedures that the CPAs will perform
Business Risk:
-risk associated with a company’s survival and profitability
-risk that a company will not be able to meet its obligations when they become due
-risk that company will not be able to make the interest payments
-assessed by considering financial position of the company, nature of its operations, characteristics of industry in which it operates, and quality/integrity of management
Information Risk:
-risk that information used to assess business risk is not accurate
-risk that information is misstated
-financial statements might contain material departures from GAAP.
Sarbanes-Oxley Act of 2002:
-an integrated audit performed under the Sarbanes-Oxley Act requires that auditors report of financial statements and internal control
-toughened penalties for corporate fraud and restricted the types of consulting CPAs may perform for public company audit clients
Assurance Services: broad range of information enhancement services that are provided by CPA. (attestation services)
Attest Function: includes the preparation of a report of the CPA’s findings
Attestation Engagement: includes a report on subject matter, or on an assertion about subject matter
-Partner in charge of the engagement has primary responsibility for the performance of an audit.
Examination/Audit:
-provides highest “reasonable” form of assurance CPAs can offer
-low risk of material misstatement
-“In our opinion…”
-an audit today is more likely to include tests of compliance with laws and regulations
Review:
-lesser in scope of procedures than an examination and is designed to lend only a moderate “limited” level of assurance
-moderate risk of material misstatement
-generally limited to inquiries and analytical procedures
-“We are not aware of any material modifications that should be made…”
Agreed-upon procedures engagement:
-summary of findings rather than assurance
-mutually decided procedures that the CPAs will perform
Business Risk:
-risk associated with a company’s survival and profitability
-risk that a company will not be able to meet its obligations when they become due
-risk that company will not be able to make the interest payments
-assessed by considering financial position of the company, nature of its operations, characteristics of industry in which it operates, and quality/integrity of management
Information Risk:
-risk that information used to assess business risk is not accurate
-risk that information is misstated
-financial statements might contain material departures from GAAP.
Sarbanes-Oxley Act of 2002:
-an integrated audit performed under the Sarbanes-Oxley Act requires that auditors report of financial statements and internal control
-toughened penalties for corporate fraud and restricted the types of consulting CPAs may perform for public company audit clients