University:
California State University, Northridge
Course:
ACCT 460 | Auditing Principles and Analytics
Academic year:

2024
Views:

322

Pages:

23
Author:

Charity Bullock

The Demand for Audit and Other Assurance Services Chapter 1 Part 2 Learning Objective 5 Describe assurance services and distinguish audit services from other assurance and nonassurance services provided by CPAs. Assurance Services An assurance service is an independent professional service that improves the quality of information for decision makers. Assurance services can be performed by CPAs or by a variety of other professionals. Attestation Services An attestation service is a type of assurance service in which the CPA firm issues a report about the reliability of an assertion that is the responsibility of another party. Attestation Services 1. Audit of historical financial statements 2. Attestation of internal control over financial reporting 3. Review of historical financial statements 4. Attestation services on information technology 5. Other attestation services Relationships Among Auditors, Client, and External Users Client or audit committee hires auditor Auditor Auditor issues report relied upon by users to reduce information risk Provides capital Client Client provides financial statements to users External Users Other Assurance Services Most of the other assurance services that CPAs provide do not meet the formal definition of attestation services. The CPA is not required to issue a written report. The assurance does not have to be about the reliability of another party’s assertion about compliance with specified criteria. Attestation Services on Information Technology WebTrust and SysTrust also meet the criteria of attestation service Nonassurance Services Provided by CPAs 1. Accounting and bookkeeping services 2. Tax services 3. Management consulting services Other Assurance Services Examples Assess risks of accumulation, distribution, and storage of digital information… assessing security risks and related controls over data and other information stored electronically, including the adequacy of backup and off-site storage. Other Assurance Services Examples  Compliance with trading policies and procedures  Compliance with entertainment royalty agreements  ISO 900 certification  Environmental audit Assurance, Attestation, and Nonassurance Services ASSURANCE SERVICES ATTESTATION SERVICES Audits Reviews Internal Control over Financial Reporting Other Attestation Services (e.g., WebTrust, SysTrust) Other Assurance Services Certain Management Consulting Assurance, Attestation, and Nonassurance Services NONASSURANCE SERVICES Other Management Consulting Certain Management Consulting Accounting and Bookkeeping Tax Services Learning Objective 6 Differentiate the three main types of audits. Types of Audits  Operational  Compliance  Financial Statement Operational Audit Example Evaluate computerized payroll system for efficiency and effectiveness Information Number of records processed, costs of the department, and number of errors Established Company standards for efficiency and Criteria effectiveness in payroll department Available Evidence Error reports, payroll records, and payroll processing costs Compliance Audit Example Determine whether bank requirements for loan continuation have been met Information Company records Established Loan agreement provisions Criteria Available Evidence Financial statements and calculations by the auditor Audit of Historical Financial Statements Example Annual audit of Boeing’s financial statements Information Boeing's financial statements Established Generally accepted accounting Criteria principles Available Evidence Documents, records, and outside sources of evidence Learning Objective 7 Identify the primary types of auditors. Types of Auditors  Independent certified public accounting firms  Governmental general accounting office auditors  Internal Revenue agents  Internal auditors Learning Objective 8 Describe the requirements for becoming a CPA. Three Requirements for Becoming a CPA  Educational requirement  Uniform CPA examination requirement  Experience requirement CPA Examination Sections  Auditing and Attestation  Financial Accounting and Reporting  Regulation  Business Environments and Concepts