ACCTG 5510 1st Edition Exam 1 Study Guide Lectures 1 4 Lecture 1 August 27 Assurance Attestation relationship know the difference An assurance service is an independent professional service that improves the quality of information for decision makers Such services are valued because the assurance provider is independent and perceived as being unbiased with respect to the information examined Individuals who are responsible for making business decisions seek assurance services to help improve the reliability and relevance of the information they used in decision making One category of assurance services provided by CPAs is attestation services An attestation service is a type of assurance service in which the CPA firm issues a report about a subject matter or assertion that is made by another party Attestation services fall into five categories 1 2 3 4 5 Audit of historical financial statements Audit of internal control over financial reporting Review of historical financial statements Attestation services on information technology Other attestation services that may be applied to a broad range of subject matter Non Assurance Services 1 Accounting book keeping 2 Compilation 3 Tax services 4 Consulting services 5 Litigation support 6 Fraud investigation Lecture 2 September 3 Know the 10 different Generally Accepted Auditing Standards GAAS and the categories they fall under The 10 standards fall under one of the three categories p 36 Fig 2 2 General standards Parallels with AICPA auditing standards Responsibility section Standards of field work Parallels with AICPA auditing standards Performance section Reporting standards Parallels with AICPA auditing standards Reporting section The 10 GAAS no longer provide the organizational structure of the AICPA auditing standards but they continue to be relevant and applicable PCAOB standards are based on the 10 GAAS standards thus these standards are still relevant to the PCAOB and to the AICPA Know how a standard unqualified audit report is organized in detail The report contains 8 distinct parts including a report title audit report address introductory paragraph management responsibility auditor s responsibility opinion paragraph name and address of auditor s and the audit report date A standard unqualified report can only be issued when 4 condition have been met which include all of the financial statements included in the report sufficient and appropriate evidence has been accumulated the financial statements are presented in accordance with GAAP and there are no circumstances that would require an additional explanatory paragraph Lecture 3 September 10 Know the legal terms expressed in the textbook concerning legal liability as it relates to CPA firms Legal terms would include ordinary negligence gross negligence constructive fraud fraud breach of contract third party beneficiary common law statutory law joint and several liability and separate and proportionate liability Know the 4 major sources of legal liability The 4 sources of legal liability would include liability to the client liability to third parties under common law civil liability under federal securities laws and criminal liability Be able to discuss the sources of legal liability in connection with the defenses available to CPA firms The major defenses most commonly used by CPA firms are lack of duty non negligent performance contributory negligence and absence of casual connection Lecture 4 September 17 Be able to discuss the AICPA Code of Professional Conduct and the rules that all CPA s must follow The AICPA developed the code to guide the ethical behavior of CPA s Much of the code is not enforceable Only the rules section is enforceable Most publically traded companies are subject to regulations by the SEC and PCAOB which is much stricter then the AICPA code the AICPA deals mostly with private companies The code is made up of 4 sections consisting of the principles rules interpretations and ethical rulings The only authoritative portion of the code is the rules