Learning Objectives

Understand the events that led up to the recent change and turmoil in the auditing profession.

Recognize that auditing takes place in a context that is shaped largely by the audit client's business.

Understand a high-level model of a business entity, including the elements of corporate governance, objectives, strategies, processes, controls, transactions, and financial statements.

Be familiar with a five-component model of business processes (or cycles) that auditors often use in organizing the audit into manageable components.

Recognize the sets of management assertions that are implicit in a business entity's financial statements.

Understand that auditing standards are established by the AICPA's Auditing Standards Board (ASB) for private entities, and by the Public Company Accounting Oversight Board (PCAOB) for public companies.

Be familiar with the 10 "generally accepted auditing standards" (GAAS).

Understand the nature of the Statements on Auditing Standards (SAS) as interpretations of the ten GAAS.

Be aware that the PCAOB adopted the ASB's SAS on an interim basis and is now issuing its own Auditing Standards (AS) that apply to the audits of public companies.

Understand that auditing is a profession that places a premium on ethical behavior and that is governed by a Code of Professional Conduct.

Know that management is primarily responsible for the entity's financial statements and understand the auditor's responsibility for detecting errors, material fraud, and illegal acts.

Know the basic elements of audit reporting.

Understand the organization and composition of public accounting firms.

Be familiar with the various services offered by assurance providers.

Be familiar with the different types of auditors.

Identify and be familiar with the major organizations that affect the public accounting profession's environment.