©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder 2 - 1 The CPA Profession مهنة التدقيق Chapter 2

©2008 Prentice Hall Business Publishing, ©2008 Prentice Hall Business Publishing, Auditing 12/e,Auditing 12/e, Arens/Beasley/Elder Arens/Beasley/Elder 2 - 1

The CPA Professionالتدقيق مهنة

Chapter 2

©2008 Prentice Hall Business Publishing, ©2008 Prentice Hall Business Publishing, Auditing 12/e,Auditing 12/e, Arens/Beasley/Elder Arens/Beasley/Elder 2 - 2 - 22

Certified Public Accounting Firms

The legal right to perform audits is granted to CPA firms by regulation of each state. CPA firms also provide many other services to their clients, such as tax and consulting services

More than 45,000 CPA firms exist in the USA ranging in size 1 person to 20,000 partners and staff.



Big Four international firms. In 2005 , the big four size by revenueAs follow: (1) Deloitte & Touche :$7,814 millions , 2650 partner, 23841 professionals

(2) Ernst & Young :$6,330 millions, 2130 partner, 15 900 professionals (3) PricewaterhouseCoopers: 6,167 millions, 2019 part , 20056 professional (4) KPMG: $4,715 millions, 1607 partner, 13184 professionals

National firms

Regional and large local firms

Small local firms



The four largest CPA firms in the United Statesare called the “Big Four” international CPA firms.

These four firms have offices in most majorcities in the United States and in manycities throughout the world.


Management consulting services

Tax services

Accounting and bookkeeping services

Activities of CPA Firms


Structure of CPA Firms

Three main factors influence the organizationalstructure of all firms:

1. The need for independence from clients.2. The importance of a structure to encourage

competence.3. The increased litigation risk faced by auditors.


Organizational Structureالتنظيمي الهيكل

Proprietorship: one owner

Professional corporation: owned by one or more shareholders

General partnership: multiple owners

Limited liability company: its owners have limited personal liability

General corporation:

Limited liability partnership: owned by one or more partners


Hierarchy of a Typical CPA Firmالتدقيق لشركة الهرمي التسلسل

Staff level Experience Typical responsibilities

Staff assistant 0-2 years Perform most of the detailed audit work

Senior or in –charge auditor

2-5 years Responsible for the audit work, supervising and reviewing audit work

Manager 5-10 years Helps the in-charge plan and manage the audit, review the in-charge work, and manage relations with the client. May be is responsible for more than one engagement at the same time.

Partner 10+ years Review the overall audit work and involved in the significant audit decisions.


E-Commerce andCPA Firm Operations

CPA firms are using the Internet to markettheir services.

Firm Web sites also feature online software toolsand databases to subscribers.

Firms take advantage of online resources anddatabases to help their staffs stay current on emerging business and standards-setting issues.


The overall purpose of the Securities andExchange Commission (SEC) is to assist inproviding investors with reliable informationupon which to make investment decisions.

Securities and Exchange Commission


The AICPA sets professional requirementsfor CPAs, conducts research, and publishesmaterials on many different subjects relatedto accounting, auditing, attestation andassurance services, managementconsulting services, and taxes.

AICPA


The AICPA is empowered to set standards(guidelines) and rules that all membersand other practicing CPAs must follow.

Establishing Standardsand Rules


Establishing Standards and Rulesوالقواعد المعايير تأسيس

The AICPA is empowered to set standards (guidelines) and rules that all members and other practicing CPAs must follow.

1. Auditing standards: the auditing standard board (ASB) التدقيق معايير is responsible for pronouncements, which are called

Statement on Auditing Standards SASs

2. Compilation and review standardsالمعايير ومراجعة تجميع

3. Other attestation standards

4. Consulting standards

5. Code of Professional Conduct: professional ethics المهنية االجراءات نظام


Other AICPA Functions

Supports research by its own staff andprovides grants to others.

Writes and grades the CPA examination.

Provides seminars and education in avariety of subject matters.

Publishes a variety of materials.


Generally accepted auditing standards (GAAS)عليها المتعارف التدقيق معايير

1. General standards

2. Standards of field works

3. Reporting standards


1. The audit is to be performed by a person or persons having adequate

technical training and proficiency as an auditor.كمدقق مناسبة ومهارة تدريب لدية شخص قبل من ينجز ان يجب التدقيق

2. The auditor must maintain independence in mental attitude in all matters relating to the audit.

بالتدقيق المتعلقة االمور كل في ذهنيا مستقال يكون ان المدقق على يجب

General Standards معايير عامة

3. The auditor must exercise due professional care in the performance

of the audit and the preparation of the report.التدقيق تقرير واعداد التدقيق اداء في المهني الحذر يمارس ان يجب المدقق


1. The auditor must adequately plan the work and must properly supervise any assistants. التدقيق عملية مناسب بشكل يخطط ان يجبالمساعدين على مناسب بشكل ويشرف

2. The auditor must obtain a sufficient understanding of the entity and its environment, including its internal control, to assess the risk of material misstatement and to design further audit procedures.

الداخلي , الرقابة ونظام وبيئتها عليها يدقق التي للشركة كافي فهم لدية يكون ان يجب , المدققالالحقة التدقيق اجراءات ولتصميم المادي التحريف محاطر لتقدير

Standards of Field Work العمل بحقل معاييرمتعلقة

3. The auditor must obtain sufficient appropriate audit evidence by performing audit procedures to afford a reasonable basis for an opinion regarding the

financial statements under audit.رأي العطاء معقولة قاعدة لتكون التدقيق باجراءات القيام اثناء كافية تدقيق اثباتات على يحصل ان المدقق على يجب

التدقيق تحت الواقعة للشركة المالية بالقوائم يتعلق فيما


1. The report shall state whether the financial statements are presented in accordance with generally accepted accounting principles.

عليها المتعارف المعاييرالمحاسبية حسب المالية القوائم اعداد تم اذا فيما ينص ان يجب التقرير

2. The report shall identify those circumstances in which such principles have not been consistently observed in the current period in relation to the preceding period.

Standards of Reporting


3. Informative disclosures مفيدة معلومات فية in the financial افصاحstatements are to be regarded as reasonablyadequate unless otherwise stated in the report.

4. The report shall contain an expression ofopinion regarding the financial statements,

taken as a whole.



Generally Accepted Auditing Standards

General Standards

1. Adequate training and proficiency2. Independence in mental attitude3. Due professional care

Standards of Field Work

1. Proper planning and supervision2. Understanding of the entity3. Sufficient appropriate evidence


1. Statements prepared in accordance with GAAP2. Circumstances when GAAP not followed3. Adequacy of disclosures4. Expression of opinion on financial statements


The 10 generally accepted auditing standardsare too general to provide meaningful guidance.

SASs interpret the 10 generally acceptedauditing standards and are the mostauthoritative references available to auditors.

Statements on Auditing Standards


GAAS and Standards of Performance

Statements on Auditing Standards

Classification of Statements on Auditing Standards


International Standardson Auditing

International Standards on Auditing (ISAs)are issued by the International AuditingPractice Committee of the InternationalFederation of Accountants (IFAC).


International Standardson Auditing

IFAC is the worldwide organizationfor the accountancy profession.

The IFAC works to improve theuniformity of auditing practices andrelated services throughout the world.


Elements of Quality Control

Independence, integrity, and objectivity

Personnel management

Acceptance and continuation of clientsand engagements

Engagement performance

Monitoring


Relationships

Quality controlstandards

Generally acceptedauditing standards

AICPA practicesections

Peerreview

Documents

©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder 2 - 1 The CPA Profession مهنة التدقيق Chapter 2