1、Chapter 2 Auditing Standards 2.1 GAAS (Generally Accepted Auditing Standards)2.2 Quality Control2.3 China Standards on Auditing, Review, Other Assurance, Related Services and Quality ControlLearning Objectives After studying this chapter, you should be able to 1. Understand ten Generally Accepted Au
2、diting Standards.2. Comprehend definition of an assurance engagement.3. Distinguish assertion-based engagements and direct reporting engagements.4. Learn the elements of an assurance engagement.5. Distinguish reasonable assurance and limited assurance.6. Learn elements of quality control. Standards
3、are established to measure the quality of performance of individuals and organizations. Standards relating to the accounting profession concern themselves with CPA professional qualities, with the judgment exercised by CPAs in the performance of their professional engagements, and with a CPA firms q
4、uality control. 2.1 GAAS (Generally Accepted Auditing Standards)2.1.1 Ten Generally Accepted Auditing Standards2.1.2 Statements on auditing Standards2.1.3 International Standards on AuditingGlossary GAAS (Generally Accepted Auditing Standards) 一般公一般公认审计准则认审计准则general standards 一般准则一般准则standards of f
5、ield work 现场工作准则现场工作准则standards of reporting 报告准则报告准则due professional care 合理的职业谨慎合理的职业谨慎statements on auditing standards 审计准则说明书审计准则说明书International Standards on Auditing 国际审计准则国际审计准则International Auditing and Assurance Standards Board (IAASB) 国际审计与鉴证准则理事会国际审计与鉴证准则理事会International Federation of Acc
6、ountants (IFAC) 国际会计国际会计师联合会师联合会 Auditing standards are general guidelines to aid auditors in fulfilling their professional responsibilities in the audit of historical financial statements. These include consideration of professional qualities such as competence and independence，reporting requiremen
7、ts，and evidence. 2.1.1 Ten Generally Accepted Auditing Standards GENERAL STANDARDS STANDARDS OF FIELD WORK STANDARDS OF REPORTING Developed by the AICPA in 1947, 10 generally accepted auditing standards (GAAS) represent the basic framework of authoritative auditing guidelines for professional accoun
8、tants. There are three categories for the 10 generally accepted auditing standards; they are general standards, standards of field work，and reporting standards. GENERAL STANDARDSThe general standards stress the important personal qualities that the auditor should possess. 1. The audit is to be perfo
9、rmed 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
10、the audit and the preparation of the report. Adequate Technical Training and ProficiencyThe first general standard is normally interpreted as requiring the auditor to have formal education in auditing and accounting, adequate practical experience for the work being performed, and continuing professi
11、onal education. Independence in Mental Attitude As we all know independence is very important to auditing profession, so CPA firms are required to follow several practices to increase the likelihood of independence of all personnel. For example, each partner and employee must answer an “independence
12、 questionnaire” annually, dealing with such things as stock ownership and membership on board of directors. Due Professional Care Due care in the performance of all aspects of auditing means that the auditor has a professional responsibility for fulfilling his duties diligently and carefully. As an
13、illustration, due care includes consideration of the completeness of the working papers, the sufficiency of the audit evidence，and the appropriateness of the audit report. As a professional, the auditor must avoid negligence and bad faith, but the auditor is not expected to make perfect judgments in
14、 every instance. STANDARDS OF FIELD WORK The standards of field work concern evidence accumulation and other activities during the actual conduct of the audit. 1. The work is to be adequately planned and assistants, if any, are to be properly supervised.2. A sufficient understanding of internal cont
15、rol 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 financi
16、al statements under audit. Adequate Planning and Supervision The first standard deals with ascertaining that the engagement is sufficiently planned to ensure an adequate audit and proper supervision of assistants. Supervision is essential in auditing because a considerable portion of the field work
17、is done by less experienced staff members. Understand the Clients Internal Control One of the most widely accepted concepts in the theory and practice of auditing is the importance of the clients system of internal control to generate reliable financial information. If the auditor is convinced that
18、the client has an excellent system of internal control, one that includes adequate internal controls for providing reliable data and for safeguarding assets and records，the amount of audit evidence to be accumulated can be significantly less than when controls are not adequate. In some instance，inte
19、rnal control may be so inadequate as to preclude conducting an effective audit. Sufficient Competent Evidence The decisions about how much and what types of evidence to accumulate for a given set of circumstances are ones requiring professional judgment. STANDARDS OF REPORTING 1. The report shall st
20、ate 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.3. Informative disclo
21、sures in the financial statements are to be regarded as reasonably adequate unless otherwise stated in the report.4. The report shall either contain an expression of opinion regarding the financial statements, taken as a whole, or an assertion to the effect that an opinion cannot be expressed, the r
22、easons therefore should be stated. In all cases where an auditors name is associated with financial statements, the report should contain a clear-cut indication of the character of the auditors work, if any, and the degree of responsibility the auditor is taking. The four reporting standards require
23、 the auditor to prepare a report on the financial statements taken as a whole，including informative disclosures. The reporting standards require that the report state whether the statements are presented in accordance with generally accepted accounting principles and also identify any circumstances
24、in which generally accepted accounting principles have not been consistently applied in the current year compared with the previous one. 2.1.2 Statements on auditing Standards The 10 generally accepted auditing standards are too general to provide meaningful guidance to auditors. More specific guida
25、nce can be found in the Statements on Auditing Standards. SASs interpret the 10 generally accepted auditing standards which are the most authoritative references available to auditors. 2.1.3 International Standards on Auditing Due to the globalizing of business and capital markets，there is a strong
26、interest and trend towards developing uniform accounting and auditing standards throughout the world. Therefore, representatives from different countries are working together on standards-setting projects to coordinate new international auditing standards. International Standards on Auditing (ISAs)
27、are issued by the International Auditing and Assurance Standards Board (IAASB) of International Federation of Accountants (IFAC). The IFAC is the worldwide organization for the accountancy profession. Founded in 1977, its mission is to serve the public interest. IFAC will continue to strengthen the
28、worldwide accountancy profession and contribute to the development of strong international economies by establishing and promoting adherence to high-quality professional standards, furthering the international convergence of such standards and speaking out on public interest issues where the profess
29、ions expertise is most relevant. And the IAASB works to improve the uniformity of auditing practices and related services throughout the world by issuing pronouncements on a variety of audit and attest functions and promoting their acceptance worldwide. 2.2 Quality Control2.2.1 Elements of Quality C
30、ontrol2.2.2 Peer ReviewGlossaryquality control 质量控制质量控制peer review 同业互查同业互查 The CPA firms should establish a system of quality control designed to provide it with reasonable assurance that a firm and its personnel comply with professional standards and regulatory and legal requirements，and that repo
31、rts issued by the firm or engagement partners are appropriate in the circumstances. 2.2.1 Elements of Quality ControlLeadership Responsibilities for Quality within the Firms Ethical Requirements Acceptance and Continuance of Client Relationships and Specific Engagements Human Resources Engagement Pe
32、rformance Monitoring Leadership Responsibilities for Quality within the Firms The firms should establish policies and procedures designed to promote an internal culture based on the recognition that quality is essential in performing engagements. Such policies and procedures should require the firms
33、 chief executive officer or managing board of partners to assume ultimate responsibility for the firms system of quality control. Any person or persons assigned operational responsibility for the firms quality control system by the firms chief executive officer or managing board of partners should h
34、ave sufficient and appropriate experience and ability, and the necessary authority, to assume that responsibility. Ethical Requirements The firm should establish policies and procedures designed to provide it with reasonable assurance that the firm and its personnel comply with relevant ethical requ
35、irements. Acceptance and Continuance of Client Relationships and Specific Engagements The firm should establish policies and procedures designed to deciding whether to accept or continue a client relationship. These policies and procedures should minimize the risk of associating with a client whose
36、management lacks integrity. The firm should also only undertake engagements that can be completed with professional competence. For example, a client evaluation form, dealing with such matters as predecessor auditor comments and evaluation of management，must be prepared for every new client before a
37、cceptance. Human Resources The firm should establish policies and procedures designed to provide it with reasonable assurance that it has sufficient personnel with the capabilities, competence, and commitment to ethical principles necessary to perform its engagements in accordance with professional
38、standards and regulatory and legal requirements, and to enable the firm or engagement partners to issue reports that are appropriate in the circumstances. Such policies and procedures address the following personnel issues, such as recruitment, performance evaluation, capabilities, competence, caree
39、r development，promotion, compensation, and the estimation of personnel needs. Engagement Performance The firm should establish policies and procedures designed to provide it with reasonable assurance that engagements are performed in accordance with professional standards and regulatory and legal re
40、quirements, and that the firm or the engagement partner issue reports that are appropriate in the circumstances. For example, an engagement quality control review that provides an objective evaluation of the significant judgments made by the engagement team and the conclusions reached in formulating
41、 the report should be performed for all audits of financial statements of listed entities. Monitoring The firm should establish policies and procedures designed to provide it with reasonable assurance that the policies and procedures relating to the system of quality control are relevant, adequate,
42、operating effectively and complied with in practice. Such policies and procedures should include an ongoing consideration and evaluation of the firms system of quality control, including a periodic inspection of a selection of completed engagements. 2.2.2 Peer Review Peer review is the review by oth
43、er CPA firms of a CPA firms compliance with its quality control system. The purpose of a peer review is to determine and report whether the CPA firm being reviewed has developed adequate policies and procedures for the six elements of quality control and follows them in practice. Peer reviews can be
44、 beneficial to the profession and individual firms. By helping firms meets quality control standards, the profession gains from improved practitioner performance and high-quality audits. A firm having a peer review can also gain if it improves the firms practice and thereby enhances its reputation a
45、nd reduces the likelihood of lawsuits. 2.3 China Standards on Auditing, Review, Other Assurance, Related Services and Quality Control2.3.1 China General Standard on Assurance Engagements2.3.2 Review Engagements2.3.3 Quality ControlGlossarycode of ethics for professional accountants 职业会职业会计师道德规范计师道德规
46、范standards on quality control 质量控制准则质量控制准则standards on assurance engagements 鉴证业务准鉴证业务准则则standards on auditing 审计准则审计准则standards on review 审阅准则审阅准则related services 相关服务相关服务agreed-upon procedures 商定程序商定程序compilation 代编代编subject matter information 鉴证对象信息鉴证对象信息 Glossaryassertion-based engagements 基于责任方
47、认定的业务基于责任方认定的业务direct reporting engagements 直接报告业务直接报告业务a responsible party 责任方责任方intended users 预期使用者预期使用者reasonable assurance 合理保证合理保证limited assurance 有限保证有限保证 In China, CICPA sets professional requirements for CPAs, and publishes the standards for auditing. In 2006, CICPA cancelled the independe
48、nt auditing standards and issued the assurance standards. All the CPAs in China must obey assurance standards when they implement audit or other assurance services. The assurance standards include general assurance standards and assurance standards of professional work, and assurance standards of pr
49、ofessional work have three components, and they are auditing standards, review standards, other assurance standards. 2.3.1 China General Standard on Assurance Engagements 2.3.1.1 Definition of an Assurance Engagement 2.3.1.2 Assertion-based Engagements and Direct Reporting Engagements 2.3.1.3 Elemen
50、ts of an Assurance Engagement 2.3.1.1 Definition of an Assurance Engagement“Assurance engagement” means an engagement in which a practitioner expresses a conclusion on a subject matter information designed to enhance the degree of confidence of the intended users other than the responsible party abo
