Auditing: Understanding the Auditor's Report

1536 Words Jan 29th, 2015 7 Pages
Cory Campbell
ACCT 439-Section 1
AS1

1-30: It has been stated that auditors must be independent because audited financial statements must serve the needs of a wide variety of users. If the auditor were to favor one group, such as existing shareholders, there might be a bias against another group, such as prospective investors.
a. What steps has the external auditing profession taken to minimize potential bias toward important users and thereby encourage auditor independence?

---The external auditing profession as a whole has became more concentrated on maintaining auditor independence and it is now one of the cornerstones of quality auditing. One way that independence can be violated is when an auditor shows bias towards an important
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1-37: Briefly describe the various roles of the following organizations that affect the external auditing profession and the nature of those effects:
a. Congress-Took a much larger role after the huge scandal in 2002. This led them to come up with SOX which greatly impacted the accounting by creating more regulations. This has helped bring credibility back to accounting and allow the public to trust financial statements.

b. Public Company Accounting Oversight Board (PCAOB)-Their main role in auditing is to make sure that audit firms are performing correctly so that the public can have full trust in the information they are receiving. They register all of the audit firms that audit pubic companies, write regulations, and conduct periodic reviews to insure their regulations are being followed.

c. Securities and Exchange Commission (SEC)-Has oversight over the PCAOB and all public companies traded on the stock exchange. They can also establish GAAP and has to prosecute public companies when they falsify documents. d. American Institute of Certified Public Accountants (AICPA)-For a long time was the main enforcer over public accounting, but that changed after the PCAOB was established. Now they make regulations for nonpublic companies and are in charge of a periodic review of company’s nonpublic audits.

e. Center for Audit Quality (CAQ)- An organization that works close with the AICPA to fix emerging issues

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