mgt 132 study guide

Topics: Auditing, Audit, Financial audit Pages: 6 (2072 words) Published: November 4, 2014

CHAPTER 1: Role of Public Accountant
Assurance Services: broad range of information enhancement services that are provided by CPA. (attestation services) Attest Function: includes the preparation of a report of the CPA’s findings Attestation Engagement: includes a report on subject matter, or on an assertion about subject matter -Partner in charge of the engagement has primary responsibility for the performance of an audit. Examination/Audit:

-provides highest “reasonable” form of assurance CPAs can offer -low risk of material misstatement
-“In our opinion…”
-an audit today is more likely to include tests of compliance with laws and regulations Review:
-lesser in scope of procedures than an examination and is designed to lend only a moderate “limited” level of assurance -moderate risk of material misstatement
-generally limited to inquiries and analytical procedures
-“We are not aware of any material modifications that should be made…” Agreed-upon procedures engagement:
-summary of findings rather than assurance
-mutually decided procedures that the CPAs will perform
Business Risk:
-risk associated with a company’s survival and profitability -risk that a company will not be able to meet its obligations when they become due -risk that company will not be able to make the interest payments -assessed by considering financial position of the company, nature of its operations, characteristics of industry in which it operates, and quality/integrity of management Information Risk:

-risk that information used to assess business risk is not accurate -risk that information is misstated
-financial statements might contain material departures from GAAP. Sarbanes-Oxley Act of 2002:
-an integrated audit performed under the Sarbanes-Oxley Act requires that auditors report of financial statements and internal control -toughened penalties for corporate fraud and restricted the types of consulting CPAs may perform for public company audit clients -the act created the Public Company Accounting Oversight Board (PCAOB) to regulate audits and auditors of public companies Financial Audit:

-an audit of the financial accounting information of an entity -audit of financial statements covers balance sheet and the related statements of income, retained earnings, and cash flows (provided and performed by CPA firms) -independent auditors report on financial statements because different interests may exist between the company preparing the statements and the persons using the statements. Compliance Audit:

-audit of a taxpayer’s income tax return by an IRS auditor -periodic bank examination by bank examiners
Operational Audit:
-measures performance (effectiveness, efficiency)
-auditor make recommendations for improving performance
-oriented towards future improvements to accomplish the goals of management -the boundaries of an operational audit are often drawn from an organization chart and are not limited to a single accounting period Integrated Audit:

-an integrated audit performed under the Sarbanes-Oxley Act requires that auditors report on financial statements and internal control -report on management’s assessment and internal control effectiveness Types of Auditors: internal auditors, auditors of the Government Accountability Office, and internal revenue agents. Internal Auditors:

-operational audits
-also conducts numerous compliance audits
-internal auditors are employees of the organization in which they work -concerned with effectiveness of assigned functions
-most large corporations usually have a large group of internal auditors Government Accountability Office (GAO) Auditors:
-work of GAO auditors include compliance, operational, and financial audits -GAO conducts operational audits and reports the results to Congress to evaluate the effectiveness and efficiency of government programs -governmental auditing often extends beyond examinations leading to expression of opinion on the fairness of financial...
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