<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.0 Transitional//EN"> I. A. Attestation vs. Auditing Standards

ATTESTATION / GAAS
<DIV ALIGN=right>General</DIV>Standards
1. Training in attestation / 1. Training in auditing
2. Subject matter knowledge
3. Reasonable criteria & consistent measurement
4. Independence / 2. Independence
5. Professional care / 3. Professional care
<DIV ALIGN=right>Standards of</DIV>Field Work
1. Planning and supervision / 1. Planning and supervision
2. Consideration of
2. Evidence / 3. Evidence
<DIV ALIGN=right>Standards of</DIV>Reporting
1. Character of engagement
2. Conclusions / 1. Conformity with GAAP
2. Consistency
3. Disclosure
3. Reservations / 4. Expression of opinion
4. Limitation on report use
  1. Auditing Standards versus Auditing Procedures

C.Statement on Auditing Standards (SASs) and Interpretations.

II.PUBLIC CONCERN--ACCOUNTING PROFESSION

A. Stock market crash of 1929. Prior to the crash - little or no oversight.

Response - 1933 and 1934 act was passed. The SEC was established but by a two to one vote the responsibility for setting accounting and auditing standards was delegated to the private sector.

  1. 1970’s – Penn Central Railroad (1970’s equivalent of Enron except the executives) went bankrupt and problems with foreign officials being bribed.

1. Metcalf (senator) Committee (1976)

"The 'Big Eight' are often called 'public accounting firms' or 'independent public accounting firms.' This study finds little evidence that they serve the public or that they are independentin fact from the interests of their corporate clients. For that reason, this study refers to the 'Big Eight' simply as accounting firms."

  1. Moss (congressman) Committee (1978) – Proposed to abolish FASB.

III. Accounting Profession's Response
A.QUALITY CONTROL STANDARDS(SQCS NO.2 & NO.3)

ELEMENTS / DESCRIPTION
1. Independence, integrity and objectivity
2. Personnel management / People hired are competent and appropriately assigned. Participate in CPE and appropriately promoted.
3. Acceptance and continuance of clients and engagements
4. / Planning, performing, supervising, reviewing, documenting, and communicating result of the audit.
5. Monitoring /
Policies and procedures to monitor the first four standards.

Note: Specific quality control procedures depend on the size and needs of the firm.

B. Relationship to GAAS.

C.Peer review

D. Division for firms

Adhere to Quality Control Standards

Peer review of quality control systems (every )

hours of continuing professional education (CPE) every

2. SEC Practice Section (SECPS) (created in 1977)

Same as above plus:

Report any conflicts to audit committee or BOD if the matter would have resulted in a qualified opinion had it not been resolved.

Report to audit committee consulting fees and services.

Every

Partner not associated with audit will review all audit work before issuing an audit report ( ).

Can’t provide psychological testing, publicopinion polls, merger and acquisition for a finder’s fee, executive recruitment and actuarial services.

Must belong to if you are going to perform audits of SEC clients.

E. Public Oversight Board (POB) (created in 1977)

1.

2. Analyzes Independence Issues.

3.

  1. Today
  2. January 17, 2002, SEC Chairman Harvey Pitt calls for a new organization (Public Accountability Board)

“We initially envision a new body dominated by public members, with two primary components – discipline and quality control.”

- Harvey Pitt

  1. Sarbanes - Oxley Act – to be continued

Sarbanes – Senate Banking Chairman

Oxley – Chairman of the House Financial Services Committee

V. Why does the SEC allow us to regulate ourselves?