Solution manual for
b b
principles of auditing and other as
b b b b b bb
surance services b b
22nd edition b b
by ray whittington kurt
b b b
,CHAPTER 1 b
The Role of the Publi
b b b b
c Accountant in the
b b b
American Economy b
ReviewbQuestions
1-1 Theb―crisisbofbcredibility‖blargelybarosebfrombthebnumberbofbcompaniesbthatbrestatedbtheirbpreviouslybissu
edbfinancialbstatementsbasbabresultbofbaccountingbirregularitiesbandbfraud.bEspeciallybresponsiblebwerebtheb
verybvisiblebEnronbandbWorldCombfraudbcases.bBothbcompaniesbfiledbforbbankruptcybandbconstitutedbthebl
argestbcompaniesbinbAmericanbhistorybtobdobso.bThebextentbofbthebaccountingbirregularitiesbandbfraudbbein
gbinvestigatedbandbdisclosedbbroughtbintobquestionbthebeffectivenessbofbfinancialbstatementbaudits.bInbaddit
ion,bthebcriminalbconvictionbofbArthurbAndersen,bLLP,bonebofbthebthenbBigb5baccountingbfirms,bonbcharges
bofbdestroyingbdocumentsbrelatedbtobthebEnronbcasebbroughtbintobquestionbthebethicsbstandardsbofbthebprofe
ssion.
1-2 Assurancebservicesbarebprofessionalbservicesbthatbenhancebthebqualitybofbinformation,borbitsbcontext,bforb
decision-
making.bThebtwobtypesbare:b(a)bthosebthatbincreasebthebreliabilitybofbinformationbandb(b)bthosebthatbinvolv
eb puttingbinformationbinbab formborb contextb thatb facilitatesb decision-making.
1-3 Abfinancialbstatementbauditbis,bbybfar,bthebmostbcommonbtypebofbattestbengagement.bTheboverallbassertion,b
madebbybmanagement,bmostbfrequentlybisbthatbthebfinancialbstatementsbfollowbgenerallybacceptedbaccounti
ngbprinciples.
1-4 Ablargebcorporationbwithbsecuritiesblistedbonbabstockbexchangebisbrequiredbbybthebrulesbofbthebstockbexchang
ebandbbybthebrulesbofbthebSecuritiesbandbExchangebCommissionbtobprovidebanbauditbreportbwithbthebannualbfi
nancialbstatementsbfurnishedbtobitsbstockholders.b Itbalsobisbrequiredbtobengagebthebauditorsbtobprovidebanbopi
nionbonbitsbinternalbcontrol.bApartbfromblegalbrequirements,bhowever,bablargeblistedbcorporationbrecognizesb
thatbitbmustbmaintainbinvestorbconfidencebinbthebreliabilitybofbitsbfinancialbstatementsb andbinternalbcontrolb o
verb financialbreportingbifb itb isb tobcontinuebtobbebablebtobsecurebcapitalbfrombthebpublic.bThebreportbbybabfirm
bofbcertifiedbpublicbaccountantsbaddsbcredibilitybtobthebfinancialbstatementsbpreparedbbybthebcorporation.b W
henbabsmallbfamily-
ownedbenterprisebelectsbtobhavebanbaudit,bthebpurposebusuallybisbtobusebthebauditors'breportbtobsupportbanbapp
licationbforbabbankbloan.
,1-5 Abreportbbybanbindependentbpublicbaccountantbconcerningbthebfairnessbofbabcompany'sbfinancialbstatementsbi
sbcommonlybrequiredbinbthebfollowingbsituations:
(1) Applicationbforbabbankbloan.
(2) Establishingbcreditbforbpurchasebofbmerchandise,bequipment,borbotherbassets.
(3) Reportingboperatingbresults,bfinancialbposition,bandbcashbflowsbtobabsenteebownersb(stockholdersb
orbpartners).
(4) Issuancebofbsecuritiesbbybabcorporation.
(5) Annualbfinancialbstatementsbbybabcorporationbwithbsecuritiesblistedbonbabstockbexchangeborbtradedb
overbthebcounter.
(6) Salebofbanbongoingbbusiness.
(7) Terminationbofbabpartnership.
1-6 Tobaddbcredibilitybtobfinancialbstatementsbisbtobincreasebtheblikelihoodbthatbtheybhavebbeenbpreparedbfollo
wingbthebappropriatebcriteria,busuallybgenerallybacceptedbaccountingbprinciples.bAsbsuch,banbincreasebinbcr
edibilitybresultsbinbfinancialbstatementsbthatbcanbbebbelievedbandbreliedbuponbbybthirdbparties.
1-7 Businessbriskbisbthebriskbthatbthebinvestmentbwillbbebimpairedbbecausebabcompanybinvestedbinbisbunablebtob
meetbitsbfinancialbobligationsbduebtobeconomicbconditionsborbpoorbmanagementbdecisions.bInformationbris
kbisbthebriskbthatbthebinformationbusedbtobassessbbusinessbriskbisbnotbaccurate.b Auditorsbcanbdirectlybreduce
binformationbrisk,bbutbhavebonlyblimitedbeffectbonbbusinessbrisk.
1-8 Atbthebbeginningbofbthebcentury,bthebprincipalbobjectivebofbauditingbwasbthebpreventionbandbdetectionbofbfr
aud.bAuditbworkbcenteredbonbthebbalancebsheet,bbecausebthebincomebstatementbwasbregardedbasbhighlybconf
identialbandbnotbforbpublicbdisclosure.b Today,bthebprincipalbobjectivebofbauditingbisbtobformbanbopinionbonbt
hebfairnessbofbfinancialbstatementsbandbtheirbconformitybwithbgenerallybacceptedbaccountingbprinciples.bBu
tbthebprofessionalbstandardsbalsobrequirebthatbanbauditbbebdesignedbtobprovidebreasonablebassurancebofbdete
ctingbmaterialbmisstatements,bduebtoberrorsborbfraud.b Particularbemphasisbisbplacedbonb thebincomebstateme
ntbwhichbisbofbgreatbimportancebtobinvestors.bAuditingbtodaybalsobhasbthebobjectivesbofbmeetingbthebrequire
mentsbofbthebSecuritiesbandbExchangebCommissionb(SEC)bandbthebPublicbCompanybAccountingbOversight
bBoardbforbpublicbcompanies.
1-9 Thebstatementbisbincorrect.bThebincreasingbintegratedbdatabasesbofbtoday,balongbwithbavailablebauditb
proceduresb makebauditedbentirebpopulationsb ab possibilitybinb manybsituations.
1-10 Anboperationalbauditbattemptsbtobmeasurebthebeffectivenessbandbefficiencybofbabspecificbunitbofbanborga
nization.bItbinvolvesbmorebsubjectivebjudgmentsbthanbabcompliancebauditborbanbauditbofbfinancialbstatem
entsbbecausebthebcriteriabofbeffectivenessbandbefficiencybofbdepartmentalbperformancebarebnotbasbclearly
bestablishedbasbarebmanyblawsbandbregulationsborbgenerallybacceptedbaccountingbprinciples.
Thebreportbpreparedbafterbcompletionbofbanboperationalbauditbisbusuallybdirectedbtobmanagementbo
fbtheborganizationbinbwhichbthebauditbworkbwasb done.
1-11 Abcompliancebauditbisbanbauditbtobdeterminebwhetherbfinancialbreportsborbotherbassertionsbarebinbcomplian
cebwithbestablishedbcriteria.bThebnecessarybingredientsbarebverifiablebdatabandbthebexistencebofbstandardsb
establishedbbybanbauthoritativebbody.bAnboperationalbaudit,bonbthebotherbhand,bisbabreviewbofbabdepartmen
tborbotherbunitbofbabbusinessborbgovernmentalborganizationbtobmeasurebthebeffectivenessbandbefficiencybofb
operations.bInternalbauditorsboftenbperformboperationalbauditsbasbdobauditorsbemployedbbybthebGovernme
ntb AccountabilitybOfficeb(GAO)b ofb thebfederalbgovernment.
1-12 Internalbauditorsbmustbbebindependentbofbthebdepartmentbheadsbandbotherblinebexecutivesbwhosebworkbtheyb
review.bHowever,binternalbauditorsbarebnotbindependentbinbthebsamebsensebasbabpublicbaccountingbfirm.
, Thebpublicbaccountingbfirmbservesbmanybclientsbandbthebrevenuebobtainedbfrombanybonebclientbisbonlybabsm
allbpartbofbthebrevenuebofbthebfirm.bInternalbauditors,bonbthebotherbhand,barebemployeesbofbonebcompany,band
barebsubjectbtobthebrestraintsbinherentbinbthebemployer-
employeebrelationship.bInternalbauditorsbcanbachievebabgreatbdealbofbindependencebbybreportingbtobthebaudit
bcommitteebofbthebboardbofbdirectors,bbutbtheybcannotbachievebthebsamebdegreebofbindependencebasbisbposse
ssedbbybthebexternalbpublicbaccountingbfirm.
1-13 Thebinternalbauditorsbarebemployeesb ofbSpacecraft,bInc.,bandbmaybbebinfluencedbbybcorporatebmanagement.
Thebpublicbaccountingbfirmbisbindependentbofbthebcompanybandbisbinbabbetterbpositionbtobtakebpositionsbopp
osedbtobthosebofbcompanybmanagement.bThebworkbofbthebinternalbauditbstaffbemphasizesbmeasurementbofbth
ebefficiencybandbeffectivenessbofbvariousboperatingbunitsbofbthebcompanybandbcompliancebwithballbtypesbofb
controls,bwhereasbthebpublicbaccountingbfirmbisbprimarilybconcernedbwithbdeterminingbthebfairnessbofbSpace
craft'sbfinancialbstatements.
1-14 ThebGovernmentbAccountabilitybOfficeb(GAO)bisbabstaffbofbprofessionalbauditorsbwhichbreportsbtobCongre
ss.bItsbfunctionbisbtobdeterminebthatbprogramsbcarriedboutbbybfederalbagenciesbconformbtobthebfinancialbauth
orizationbofbthebCongress.bItbisbalsobconcernedbwithbthebcost-
effectivenessbofbgovernmentbprograms.bThebauditbactivitiesbincludebinvestigationbofbthebcostsbandbperforma
ncebofbcorporationsbholdingbgovernmentbcontracts.
1-15 AmongbthebmanybimportantbcontributionsbtobauditingbliteraturebbybthebAICPAbarebthebseriesbofbStatementsbo
nbAuditingbStandardsb(SASs),bStatementsbonbStandardsbforbAttestationbEngagementsb(SSAEs),bIndustrybAu
ditbandbAccountingbGuides,bAuditbGuides,bAuditbRiskbAlerts,bStatementsbonbStandardsbforbAccountingbandb
ReviewbServicesb(SSARSs),b,bandbthebCodebofbProfessionalbConductb(onlybtwobrequired).
1-16 Abpeerbreviewbisbabcriticalbreviewbofbabpublicbaccountingbfirm'sbpracticesbbybanotherbpublicbaccountingbf
irmb(orbotherbCPAsbfunctioningbasbabpeerbreviewbteam).bThebpurposebofbabpeerbreviewbisbtobencourageba
dherencebtobqualitybcontrolbstandardsbestablishedbbybthebaccountingbfirmbandbthebprofession.
1-17 ThebSecuritiesbandbExchangebCommissionb(SEC)bisbanbagencybofbthebfederalbgovernmentbandbisbresponsibl
ebforbadministeringbabnumberbofbacts,bincludingbthebSecuritiesbActbofb1933bandbthebSecuritiesbExchangeb Ac
tb ofb 1934.b Inb meetingb thisbresponsibility,b theb SECbreviewsb financialb statementsb ofbcompaniesbofferingbse
curitiesbforbsalebtobthebpublic.bItbisbparticularlybconcernedbwithbrequiringbfullbdisclosurebofbfinancialbinforma
tionbandbwithbpreventingbmisrepresentation.bThroughbthebPublicbCompanybAccountingbOversightbBoard,bth
ebSECbnowboverseesbpublicbaccountingbfirmsbthatbauditbpublicbcompanies.bIncludedbinbthisboversightbproces
sbincludesbdevelopmentbofbauditing,bindependence,bandbqualitybcontrolbstandards;b inspectionb ofb performa
nce;b andbenforcementb ofb thebstandards.
ThebAICPAbisbthebnationalborganizationbofbcertifiedbpublicbaccountants.bItbhasblongbbeenbableaderb
inbaccountingbandbauditingbresearch,binbpublicationbofbauthoritativebaccountingbandb auditingbpronouncem
entsb andbstudies,bandbinbpromotingb highb professionalb standardsb ofb practice.
1-18 Servicesbofferedbbybpublicbaccountingbfirmsbinbadditionbtobauditingbincludebotherbformsbofbattestation,btaxb
work,bconsultingbservices,blitigationbsupportbservices,bfraudbinvestigationbservices,bpersonalbfinancialbplan
ningbandbaccountingbservices.bThisblastbcategorybincludesbpreparationbofbfinancialbstatementsbforbsmallerbc
ompaniesbthatbhaveblimitedbaccountingbpersonnelbandbvariousbtypesbofbwrite-
upbwork.bPublicbaccountingbfirmsbalsobperformbabvarietybofbotherbservices.b Consultingbservicesbincludebai
dingbclientsbinbthebdesignbofbaccountingbsystems,bconversionbtobInformationbTechnologyb(IT)bsystems,bpre
parationbofbbudgets,bplanningbbusinessbcombinationsbwithbotherbcompanies,bexecutivebsearch,bandbnumero
usbotherbprojects.bPublicbaccountingbfirmsbarebrestrictedbasbtobthebconsultingbservicesbthatbtheybmaybprovid
ebtobauditbclientsbthatbarebpublicbcompanies.
b b
principles of auditing and other as
b b b b b bb
surance services b b
22nd edition b b
by ray whittington kurt
b b b
,CHAPTER 1 b
The Role of the Publi
b b b b
c Accountant in the
b b b
American Economy b
ReviewbQuestions
1-1 Theb―crisisbofbcredibility‖blargelybarosebfrombthebnumberbofbcompaniesbthatbrestatedbtheirbpreviouslybissu
edbfinancialbstatementsbasbabresultbofbaccountingbirregularitiesbandbfraud.bEspeciallybresponsiblebwerebtheb
verybvisiblebEnronbandbWorldCombfraudbcases.bBothbcompaniesbfiledbforbbankruptcybandbconstitutedbthebl
argestbcompaniesbinbAmericanbhistorybtobdobso.bThebextentbofbthebaccountingbirregularitiesbandbfraudbbein
gbinvestigatedbandbdisclosedbbroughtbintobquestionbthebeffectivenessbofbfinancialbstatementbaudits.bInbaddit
ion,bthebcriminalbconvictionbofbArthurbAndersen,bLLP,bonebofbthebthenbBigb5baccountingbfirms,bonbcharges
bofbdestroyingbdocumentsbrelatedbtobthebEnronbcasebbroughtbintobquestionbthebethicsbstandardsbofbthebprofe
ssion.
1-2 Assurancebservicesbarebprofessionalbservicesbthatbenhancebthebqualitybofbinformation,borbitsbcontext,bforb
decision-
making.bThebtwobtypesbare:b(a)bthosebthatbincreasebthebreliabilitybofbinformationbandb(b)bthosebthatbinvolv
eb puttingbinformationbinbab formborb contextb thatb facilitatesb decision-making.
1-3 Abfinancialbstatementbauditbis,bbybfar,bthebmostbcommonbtypebofbattestbengagement.bTheboverallbassertion,b
madebbybmanagement,bmostbfrequentlybisbthatbthebfinancialbstatementsbfollowbgenerallybacceptedbaccounti
ngbprinciples.
1-4 Ablargebcorporationbwithbsecuritiesblistedbonbabstockbexchangebisbrequiredbbybthebrulesbofbthebstockbexchang
ebandbbybthebrulesbofbthebSecuritiesbandbExchangebCommissionbtobprovidebanbauditbreportbwithbthebannualbfi
nancialbstatementsbfurnishedbtobitsbstockholders.b Itbalsobisbrequiredbtobengagebthebauditorsbtobprovidebanbopi
nionbonbitsbinternalbcontrol.bApartbfromblegalbrequirements,bhowever,bablargeblistedbcorporationbrecognizesb
thatbitbmustbmaintainbinvestorbconfidencebinbthebreliabilitybofbitsbfinancialbstatementsb andbinternalbcontrolb o
verb financialbreportingbifb itb isb tobcontinuebtobbebablebtobsecurebcapitalbfrombthebpublic.bThebreportbbybabfirm
bofbcertifiedbpublicbaccountantsbaddsbcredibilitybtobthebfinancialbstatementsbpreparedbbybthebcorporation.b W
henbabsmallbfamily-
ownedbenterprisebelectsbtobhavebanbaudit,bthebpurposebusuallybisbtobusebthebauditors'breportbtobsupportbanbapp
licationbforbabbankbloan.
,1-5 Abreportbbybanbindependentbpublicbaccountantbconcerningbthebfairnessbofbabcompany'sbfinancialbstatementsbi
sbcommonlybrequiredbinbthebfollowingbsituations:
(1) Applicationbforbabbankbloan.
(2) Establishingbcreditbforbpurchasebofbmerchandise,bequipment,borbotherbassets.
(3) Reportingboperatingbresults,bfinancialbposition,bandbcashbflowsbtobabsenteebownersb(stockholdersb
orbpartners).
(4) Issuancebofbsecuritiesbbybabcorporation.
(5) Annualbfinancialbstatementsbbybabcorporationbwithbsecuritiesblistedbonbabstockbexchangeborbtradedb
overbthebcounter.
(6) Salebofbanbongoingbbusiness.
(7) Terminationbofbabpartnership.
1-6 Tobaddbcredibilitybtobfinancialbstatementsbisbtobincreasebtheblikelihoodbthatbtheybhavebbeenbpreparedbfollo
wingbthebappropriatebcriteria,busuallybgenerallybacceptedbaccountingbprinciples.bAsbsuch,banbincreasebinbcr
edibilitybresultsbinbfinancialbstatementsbthatbcanbbebbelievedbandbreliedbuponbbybthirdbparties.
1-7 Businessbriskbisbthebriskbthatbthebinvestmentbwillbbebimpairedbbecausebabcompanybinvestedbinbisbunablebtob
meetbitsbfinancialbobligationsbduebtobeconomicbconditionsborbpoorbmanagementbdecisions.bInformationbris
kbisbthebriskbthatbthebinformationbusedbtobassessbbusinessbriskbisbnotbaccurate.b Auditorsbcanbdirectlybreduce
binformationbrisk,bbutbhavebonlyblimitedbeffectbonbbusinessbrisk.
1-8 Atbthebbeginningbofbthebcentury,bthebprincipalbobjectivebofbauditingbwasbthebpreventionbandbdetectionbofbfr
aud.bAuditbworkbcenteredbonbthebbalancebsheet,bbecausebthebincomebstatementbwasbregardedbasbhighlybconf
identialbandbnotbforbpublicbdisclosure.b Today,bthebprincipalbobjectivebofbauditingbisbtobformbanbopinionbonbt
hebfairnessbofbfinancialbstatementsbandbtheirbconformitybwithbgenerallybacceptedbaccountingbprinciples.bBu
tbthebprofessionalbstandardsbalsobrequirebthatbanbauditbbebdesignedbtobprovidebreasonablebassurancebofbdete
ctingbmaterialbmisstatements,bduebtoberrorsborbfraud.b Particularbemphasisbisbplacedbonb thebincomebstateme
ntbwhichbisbofbgreatbimportancebtobinvestors.bAuditingbtodaybalsobhasbthebobjectivesbofbmeetingbthebrequire
mentsbofbthebSecuritiesbandbExchangebCommissionb(SEC)bandbthebPublicbCompanybAccountingbOversight
bBoardbforbpublicbcompanies.
1-9 Thebstatementbisbincorrect.bThebincreasingbintegratedbdatabasesbofbtoday,balongbwithbavailablebauditb
proceduresb makebauditedbentirebpopulationsb ab possibilitybinb manybsituations.
1-10 Anboperationalbauditbattemptsbtobmeasurebthebeffectivenessbandbefficiencybofbabspecificbunitbofbanborga
nization.bItbinvolvesbmorebsubjectivebjudgmentsbthanbabcompliancebauditborbanbauditbofbfinancialbstatem
entsbbecausebthebcriteriabofbeffectivenessbandbefficiencybofbdepartmentalbperformancebarebnotbasbclearly
bestablishedbasbarebmanyblawsbandbregulationsborbgenerallybacceptedbaccountingbprinciples.
Thebreportbpreparedbafterbcompletionbofbanboperationalbauditbisbusuallybdirectedbtobmanagementbo
fbtheborganizationbinbwhichbthebauditbworkbwasb done.
1-11 Abcompliancebauditbisbanbauditbtobdeterminebwhetherbfinancialbreportsborbotherbassertionsbarebinbcomplian
cebwithbestablishedbcriteria.bThebnecessarybingredientsbarebverifiablebdatabandbthebexistencebofbstandardsb
establishedbbybanbauthoritativebbody.bAnboperationalbaudit,bonbthebotherbhand,bisbabreviewbofbabdepartmen
tborbotherbunitbofbabbusinessborbgovernmentalborganizationbtobmeasurebthebeffectivenessbandbefficiencybofb
operations.bInternalbauditorsboftenbperformboperationalbauditsbasbdobauditorsbemployedbbybthebGovernme
ntb AccountabilitybOfficeb(GAO)b ofb thebfederalbgovernment.
1-12 Internalbauditorsbmustbbebindependentbofbthebdepartmentbheadsbandbotherblinebexecutivesbwhosebworkbtheyb
review.bHowever,binternalbauditorsbarebnotbindependentbinbthebsamebsensebasbabpublicbaccountingbfirm.
, Thebpublicbaccountingbfirmbservesbmanybclientsbandbthebrevenuebobtainedbfrombanybonebclientbisbonlybabsm
allbpartbofbthebrevenuebofbthebfirm.bInternalbauditors,bonbthebotherbhand,barebemployeesbofbonebcompany,band
barebsubjectbtobthebrestraintsbinherentbinbthebemployer-
employeebrelationship.bInternalbauditorsbcanbachievebabgreatbdealbofbindependencebbybreportingbtobthebaudit
bcommitteebofbthebboardbofbdirectors,bbutbtheybcannotbachievebthebsamebdegreebofbindependencebasbisbposse
ssedbbybthebexternalbpublicbaccountingbfirm.
1-13 Thebinternalbauditorsbarebemployeesb ofbSpacecraft,bInc.,bandbmaybbebinfluencedbbybcorporatebmanagement.
Thebpublicbaccountingbfirmbisbindependentbofbthebcompanybandbisbinbabbetterbpositionbtobtakebpositionsbopp
osedbtobthosebofbcompanybmanagement.bThebworkbofbthebinternalbauditbstaffbemphasizesbmeasurementbofbth
ebefficiencybandbeffectivenessbofbvariousboperatingbunitsbofbthebcompanybandbcompliancebwithballbtypesbofb
controls,bwhereasbthebpublicbaccountingbfirmbisbprimarilybconcernedbwithbdeterminingbthebfairnessbofbSpace
craft'sbfinancialbstatements.
1-14 ThebGovernmentbAccountabilitybOfficeb(GAO)bisbabstaffbofbprofessionalbauditorsbwhichbreportsbtobCongre
ss.bItsbfunctionbisbtobdeterminebthatbprogramsbcarriedboutbbybfederalbagenciesbconformbtobthebfinancialbauth
orizationbofbthebCongress.bItbisbalsobconcernedbwithbthebcost-
effectivenessbofbgovernmentbprograms.bThebauditbactivitiesbincludebinvestigationbofbthebcostsbandbperforma
ncebofbcorporationsbholdingbgovernmentbcontracts.
1-15 AmongbthebmanybimportantbcontributionsbtobauditingbliteraturebbybthebAICPAbarebthebseriesbofbStatementsbo
nbAuditingbStandardsb(SASs),bStatementsbonbStandardsbforbAttestationbEngagementsb(SSAEs),bIndustrybAu
ditbandbAccountingbGuides,bAuditbGuides,bAuditbRiskbAlerts,bStatementsbonbStandardsbforbAccountingbandb
ReviewbServicesb(SSARSs),b,bandbthebCodebofbProfessionalbConductb(onlybtwobrequired).
1-16 Abpeerbreviewbisbabcriticalbreviewbofbabpublicbaccountingbfirm'sbpracticesbbybanotherbpublicbaccountingbf
irmb(orbotherbCPAsbfunctioningbasbabpeerbreviewbteam).bThebpurposebofbabpeerbreviewbisbtobencourageba
dherencebtobqualitybcontrolbstandardsbestablishedbbybthebaccountingbfirmbandbthebprofession.
1-17 ThebSecuritiesbandbExchangebCommissionb(SEC)bisbanbagencybofbthebfederalbgovernmentbandbisbresponsibl
ebforbadministeringbabnumberbofbacts,bincludingbthebSecuritiesbActbofb1933bandbthebSecuritiesbExchangeb Ac
tb ofb 1934.b Inb meetingb thisbresponsibility,b theb SECbreviewsb financialb statementsb ofbcompaniesbofferingbse
curitiesbforbsalebtobthebpublic.bItbisbparticularlybconcernedbwithbrequiringbfullbdisclosurebofbfinancialbinforma
tionbandbwithbpreventingbmisrepresentation.bThroughbthebPublicbCompanybAccountingbOversightbBoard,bth
ebSECbnowboverseesbpublicbaccountingbfirmsbthatbauditbpublicbcompanies.bIncludedbinbthisboversightbproces
sbincludesbdevelopmentbofbauditing,bindependence,bandbqualitybcontrolbstandards;b inspectionb ofb performa
nce;b andbenforcementb ofb thebstandards.
ThebAICPAbisbthebnationalborganizationbofbcertifiedbpublicbaccountants.bItbhasblongbbeenbableaderb
inbaccountingbandbauditingbresearch,binbpublicationbofbauthoritativebaccountingbandb auditingbpronouncem
entsb andbstudies,bandbinbpromotingb highb professionalb standardsb ofb practice.
1-18 Servicesbofferedbbybpublicbaccountingbfirmsbinbadditionbtobauditingbincludebotherbformsbofbattestation,btaxb
work,bconsultingbservices,blitigationbsupportbservices,bfraudbinvestigationbservices,bpersonalbfinancialbplan
ningbandbaccountingbservices.bThisblastbcategorybincludesbpreparationbofbfinancialbstatementsbforbsmallerbc
ompaniesbthatbhaveblimitedbaccountingbpersonnelbandbvariousbtypesbofbwrite-
upbwork.bPublicbaccountingbfirmsbalsobperformbabvarietybofbotherbservices.b Consultingbservicesbincludebai
dingbclientsbinbthebdesignbofbaccountingbsystems,bconversionbtobInformationbTechnologyb(IT)bsystems,bpre
parationbofbbudgets,bplanningbbusinessbcombinationsbwithbotherbcompanies,bexecutivebsearch,bandbnumero
usbotherbprojects.bPublicbaccountingbfirmsbarebrestrictedbasbtobthebconsultingbservicesbthatbtheybmaybprovid
ebtobauditbclientsbthatbarebpublicbcompanies.
