I commend the Corporate Governance Center for its focus on issues that impact public policy. This focus provides important input and new perspectives for regulators and others considering the public policy objectives of protecting investors and promoting the public interest in financial reporting and auditing. I know there are many accounting students in the audience today, and I'm pleased that you have the opportunity here at the Corporate Governance Center to focus on issues of public policy and investor protection, in addition to all the technical knowledge that you will need to pass the CPA examination.
I commend the Corporate Governance Center for its focus on issues that impact public policy. This focus provides important input and new perspectives for regulators and others considering the public policy objectives of protecting investors and promoting the public interest in financial reporting and auditing.
Also today, I want to charge you with the duty of knowing that as members of the next generation of CPAs you will play a significant role in the effective functioning of our capital markets. In fact, in your future career as a CPA, you will become a member of a community, an ecosystem if you will, responsible for producing reliable financial reporting with independent and credible audits.
Contemporary issues in auditing is the essential duty of the profession. And academic experts, such as those here at the Corporate Governance Center, provide invaluable insights into the dynamics and pressures that impact practitioners and their regulators. Throughout my speech today I will discuss some current trends and significant challenges in the accounting and auditing profession.
In facing such challenges, I believe that it is important for members of the profession to understand 1 the context around the auditing standards that you will use, 2 the ethical standards to which you should adhere, and 3 the public policy issues of investor protection that will be the foundation for the professional judgments you will make on a daily basis.
And, above all else, remembering that if you are working within or auditing a publicly traded company, your true client is the investor. Students of accounting and auditing — or any other profession, for that matter — should understand the evolution of the major applicable theories and principles of their profession, and where those theories and principles are Contemporary issues in auditing subject to tensions, reconsideration, and debate.
The history of the profession, the various public policy choices made along the way, and the tensions that arose during the many business cycles and crises have framed the current governance and accountability model that supports our capital markets.
Although today I will focus mainly on recent and current issues, I want to emphasize the importance of studying the history of the accounting and auditing profession, the major issues that have been debated over the years, and the related responses and evolution within the profession.
Accounting and auditing as they exist in the U. After the loss of public confidence in the U. Senate in and to examine the causes of the stock market crash and explore potential reforms. The central questions dealt with whether and how companies should provide investors with detailed financial statements, and what type of assurance could be provided to the public that those financial statements were reliable.
Over the intervening decades, there have been numerous studies, investigations, Congressional hearings and debates about reforms to the accounting profession. But to illustrate the substance and magnitude of these activities, I will refer you to a General Accounting Office GAO  review of the accounting profession.
The report identified 27 major studies performed during those 23 years.
The report summarized major recommendations in the areas of auditor independence, audit quality, accounting and auditing standards, and other reporting and auditor services. The GAO also pointed out areas where additional progress was needed, including auditor independence, responsibility for detecting fraud, reporting on internal controls, and standard setting.
Many subsequent studies were also conducted during the s. Then in the late s and into the s, a massive number of financial reporting and auditing failures caused a collapse in confidence in financial reporting and in the integrity of the financial markets. After engaging in months of study in light of the significant failures,  Congress passed the Sarbanes-Oxley Act in July  to restore confidence in financial reporting and to improve the independence and quality of audits.
The Sarbanes-Oxley Act and 10 Years Later As we mark the 10th anniversary of the Sarbanes-Oxley Act, it is important for you to understand the context and history surrounding your own "entry-point" into the profession.
One of the major tenets of financial reporting that underwent reconsideration during the debates leading up to the Sarbanes-Oxley Act was the need for effective oversight and monitoring of the financial audits that serve investors and the capital markets.
The financial reporting and auditing failures, corporate bankruptcies, and other major corporate scandals in the early s — involving companies such as Enron, WorldCom, Sunbeam, Xerox, Waste Management, and Global Crossing, among others — highlighted significant problems in the model of auditor self-regulation and prompted Congress to re-examine the issue.
Government Accountability Office, "Accounting Profession: Notice the key players in this model and their relationship to each other: The system of auditor self-regulation shown in the bottom half of the graphic was replaced when Congress passed the Sarbanes-Oxley Act, ending more than years of self-regulation by the public accounting profession in the United States.
One of the primary purposes of the Act was to create the Public Company Accounting Oversight Board PCAOB to regulate public company auditors; enhance the independence of those auditors; improve public company financial reporting and responsibility; and provide more direct SEC oversight of public company accounting standard setting.
After 10 years of experience implementing these changes to the regulatory framework, we are, once again, in a period of re-examination of the role, relevance, and reliability of financial audits in protecting investors and the public interest.
This seems to be, in large part, a result of the most recent financial crisis. However, more work needs to be done. Later, I will discuss in more detail the results of our current inspections and enforcement efforts. The Role of the PCAOB The statutory mission of the PCAOB is to oversee the audits of public companies issuers to protect the interests of investors, and further the public interest in the preparation of informative, accurate, and independent audit reports.
Accordingly, the PCAOB works collaboratively with the relevant audit regulatory bodies in other countries. Clearly, reliable financial statements play a key role in the financial markets, which are integral to the success and well-being of American households and businesses, the U.
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It is a pleasure to be here today in Knoxville at the University of Tennessee Corporate Governance Center to discuss current issues and trends in public company auditing. I commend the Corporate Governance Center for its focus on issues that impact public policy.
73 Finiz - Internal audit THE CHALLENGEs OF INTERNAL AUDIT IN CONTEMPORARY FINANCIAL MANAGEMENT Ema Marinković*, Marina M. Šestović Singidunum University, Faculty of Economics, Finance and Administration - FEFA, 44 Zoran Djindjic Blvd., Belgrade, Serbia.
CONTEMPORARY AUDITING REAL ISSUES AND CASES Seventh Edition Michael C. Knapp University of Oklahoma;\ SOUTH-WESTERN 1% CENGAGE Learning-Australia • Brazil • Japan • Korea • Mexico • Singapore • Spain • United Kingdom • United States. CONTENTS SECTION 1 Comprehensive Cases 1.