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Professional Standards
Presentation Outline
I. Types of Practice Standards
II. Generally Accepted Auditing Standards
(GAAS)
III. Attestation Standards
IV. Quality Control Standards for CPA Firms
V. The Public Company Accounting Oversight
Board (PCAOB)
I. Types of Practice Standards
Public Private Governmental Foreign
Client
Companies Companies Entities Companies
General Standards
Standards of Fieldwork
Reporting
Standards
B. General Standards
The General Standards affect all phases of the audit,
including client acceptance or retention.
1. The audit must 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
performance of the audit and the preparation of the
report.
C. Standards of Fieldwork
• Relevance
• Testing what you want to test (e.g., direction
of testing)
• Evidence Source
• Generally an externally generated piece of
evidence more reliable than an internal (client-
generated) piece of evidence
• Evidence Hierarchy
• Direct personal knowledge
• External evidence
• External-internal evidence
• Internal Evidence
• Verbal and written
• Objective v. Subjective Evidence
F. Reporting Standards
The Reporting Standards guide the reporting phase of the audit engagement.
1. The report shall state whether the financial statements are presented in
accordance with GAAP.
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 disclosures 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. When an overall opinion cannot be expressed, the reasons
therefore should be stated. In all cases where an auditor's name is associated with
financial statements, the report should contain a clear-cut indication of the
character of the auditor's work, if any, and the degree of responsibility the auditor
is taking.
G. Independent Auditor’s Report (AS 1, AS 2)
Introductory Paragraph: We have audited the accompanying balance sheets of Apollo Shoes, Inc. as of December 31,2006 and 2005, and
•Notice of audit, the related statements of operations, stockholders’ equity and comprehensive income, and cash flows for the years
then ended. These financial statements are the responsibility of the company's management. Our responsibility is
•F/S Examined to express an opinion on these financial statements based on our audits.
•Auditor, Management responsibilities
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board
Scope Paragraph: (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit includes examining, on a test basis,
Description of an audit evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial
Paragraph position of Apollo Shoes, Inc. as of December 31, 2006 and 2005, and the results of its operations and its cash
flows for the years then ended in conformity with accounting principles generally accepted in the United States.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
Extra Internal Control (United States), the effectiveness of Apollo Shoes Inc.’s' internal control over financial reporting as of
December 31, 2006, based on criteria established in Internal Control-Integrated Framework issued by the
Paragraph (AS 2) Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February 22,
2007 expressed an unqualified opinion on management's assessment of, and the effective operation of, internal
control over financial reporting.