The CPA Profession
Chapter 2 Highlights
2-1
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.
2-2
Certified Public Accounting Firms
Big Four international firms
National firms
Regional and large local firms
Small local firms
2-3
Certified Public Accounting Firms
The four largest CPA firms in the United States
are called the “Big Four” international CPA firms.
These four firms have offices in most major
cities in the United States and in many
cities throughout the world.
2-4
Activities of CPA Firms
Accounting and bookkeeping services
Tax services
Management consulting services
2-5
Hierarchy of a Typical
CPA Firm
Staff Level Experience Typical Responsibilities
Staff
assistant
Senior or
in-charge
auditor
0-2 years
Performs most of the
detailed audit work
2-5 years
Responsible for the audit
field work, including
supervising staff work
2-6
Hierarchy of a Typical
CPA Firm
Staff Level Experience Typical Responsibilities
Manager
Partner
Helps the plan, manages
5-10 years the audit, reviews work,
and works with the client
10+ years
Reviews audit work and
makes significant audit
decisions
2-7
AICPA
The AICPA sets professional requirements
for CPAs, conducts research, and publishes
materials on many different subjects related
to accounting, auditing, attestation and
Assurance services, management
Consulting services, and taxes.
2-8
Establishing Standards
and Rules
1. Auditing standards (Historically)
2. Compilation and review standards
3. Other attestation standards
4. Consulting standards
5. Code of Professional Conduct
2-9
Other AICPA Functions
Writes and grades the CPA examination
Supports research by its own staff and
provides grants to others
Publishes a variety of materials.
Provides seminars and education in a
variety of subject matters
2 - 10
General Standards
1. The audit is to be performed by a person or persons
having adequate technical training and proficiency
as an auditor.
2. In all matters relating to the assignment, an
independence in mental attitude is to be maintained
by the auditor or auditors.
3. Due professional care is to be exercised in the
planning and performance of the audit and the
preparation of the report.
2 - 11
Standards of Field Work
1. The work is to be adequately planned and
assistants, if any, are to be properly supervised.
2. A sufficient understanding of internal control is to be
obtained to plan the audit and to determine the nature,
timing, and extent of tests to be performed.
3. Sufficient competent evidential matter is to be obtained
through inspection, observation, inquiries and
confirmations to afford a reasonable basis for an
opinion regarding the financial statements under audit.
2 - 12
Standards of Reporting
1. The report shall state whether the financial
statements are presented in accordance with
generally accepted accounting principles.
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.
2 - 13
Standards of Reporting
3. Informative disclosures in the financial
statements are to be regarded as reasonably
adequate unless otherwise stated in the report.
4. The report shall contain an expression of
opinion regarding the financial statements,
taken as a whole.
2 - 14
Relationship Between GAAS and
PCAOB Auditing Standards
The term generally accepted auditing standards
is no longer used for public company audits.
The term GAAS continues to be used for audits
of private companies.
Public company audits refer to PCAOB
auditing standards.
2 - 15
Statements on Auditing Standards
The 10 generally accepted auditing standards
are too general to provide meaningful guidance.
SASs interpret the 10 generally accepted
auditing standards and are the most
Authoritative references available to auditors.
2 - 16
Elements of Quality Control Standards
Independence, integrity, and objectivity
Personnel management
Acceptance and continuation of clients
and engagements
Engagement performance
Monitoring
2 - 17
CPAs Encouraged to Conduct
Themselves at a High Level
CPA
examination
Quality
control
GAAS and
interpretations
Conduct of
CPA firm
personnel
Peer
review
PCAOB
and SEC
Code of
Professional
Conduct
Continuing
education
requirements
Legal
liability
Division of
CPA firms
2 - 18
Next Class:
 Background
and nature of the
Sarbanes-Oxley Act.
 It’s
effect on the CPA profession
 Role of the Public Company Accounting
Oversight Board (PCAOB)
2 - 19