“In law a man is guilty when he violates the rights of another. In ethics he is guilty if he only thinks of doing so.” -Immanuel Kant, 1775

Professional Responsibility Defining Assurance Quality

The Expectation Gap  Disparity between the expectations of financial statement users and the actual level of assurance provided by the auditor –Fraud detection vs “due care” –“Going Concern” expectations

The Expectation Gap  S & L Collapse (1980s) –$550 Billion taxpayer bailout –Congressional Investigations –Treadway Commission  AICPA Code of Conduct revised  Nine new SASs  Mandatory CPE  150 hour education requirement

Quality Defined  GAAS (Generally Accepted Auditing Standards) & SAS (Statements on Auditing Standards)

GAAS  General –Adequate Technical Training & Proficiency –Independence –Due Care performing the exam & preparing the report  Field Work –Work adequately planned & supervised –Understanding of Internal Control –Sufficient, Competent Evidence

GAAS  Reporting –IAW GAAP –Consistency –Adequate Disclosure –Expression of Opinion

Quality Defined  GAAS (Generally Accepted Auditing Standards) & SAS (Statements on Auditing Standards)  SSAE (Statements on Standards for Attestation Engagements) –Nonaudit compliance and attest services

Attestation Standards  Complement audit standards  Conditions for the performance of non- audit attest services, e.g.: –Special compliance engagements –Internal control reports

Quality Defined  GAAS (Generally Accepted Auditing Standards)  SAS (Statements on Auditing Standards)  SSAE (Statements on Stds for Attestation Engagements)  SSAR (Statements on Stds for Acctg & Review Svcs)

 Compilations or Reviews of the Financial Statements  Significantly less scope than audits –Inquiry & analytic procedures  Excludes: –Internal control evaluation –Confirmation, etc. SSAR (Statements on Stds for Acctg & Rev. Svcs)

Quality Defined  GAAS (Generally Accepted Auditing Standards)  SAS (Statements on Auditing Standards)  SSAE (Statements on Stds for Attestation Engagements)  SSAR (Statements on Stds for Acctg & Review Svcs)  TX (Statements on Responsibilities in Tax Practice)  CS (Statements on Standards for Consulting Services)

Quality Defined  GAAS (Generally Accepted Auditing Standards)  SAS (Statements on Auditing Standards)  SSAE (Statements on Stds for Attestation Engagements)  SSAR (Statements on Stds for Acctg & Review Svcs)  TX (Statements on Responsibilities in Tax Practice)  CS (Statements on Standards for Consulting Services)  AICPA Code of Conduct

AICPA Code of Conduct  Principles –Framework for Rules  Rules – Binding on all members  Interpretations & Rulings –Further clarification

Code of Conduct-Principles  Professional Responsibility  Public Interest  Integrity  Objectivity & Independence  Due Care  Scope & Nature of Services

Code of Conduct-Rules  101/102 –Independence/Integrity & Objectivity  201/202/203 –GAAS/Compliance w/GAAS & GAAP  301/302 –Confidentiality & Contingent Fees  501/502/503/505 –Acts Discreditable/Advertising/Commissions & referral fees/ Form & Name of Practice