Premium Essay

External Auditing

In: Business and Management

Submitted By los144
Words 437
Pages 2
Problem 2-7
Since the Sarbanes-Oxley Act of 2002 (SOX), the PCAOB is responsible for establishing the auditing standards for public companies, whereas the AICPA (Auditing Standards Board)is responsible for private companies. Prior to the SOX, the AICPA was responsible to establish auditing standards for both private and public companies. .

Problem 2-10
Although the generally accepted auditing standards are quite general, it is probably best to keep them that way rather than having specific audit guidelines. I believe this is the best way to set the standards because it would still allow the CPA to make a professional judgment by applying their understanding of GAAP. In addition, having specific standards would probably make it harder for CPAs to comply to very technical standards. They would have less room to make an interpretation of GAAP.

Problem 2-16
a. 1)
b. 2)
c. 3)
d. 3)

Problem 2-20
a. Since Rossi and Montgomery, CPA never had a client go public before, it would probably be a challenge for them to perform all the audit work for a public company since there are more requirements of the company to file with the SEC. The firm needs to assess whether they have the proper staff and training to audit a public client. Also the CPA firm cannot perform any more consulting or accounting services for the audit client since it is not allowed under the PCAOB audit standards.
b. The auditors would have to complete the registration of the company with the SEC via Form S-1, file quarterly financials on Form 10-Q, and then file the annual fiscal year's financial statements via Form 10K in addition to the annual audited financial statements.

Problem 3-23
a. 2)
b. 3)
c. 3)

Problem 3-25
a. 2)
b. 3)
c. 3)

Problem 3-26
a. If using "correctly stated", it may imply that the financial statements are truly accurate versus...

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