ORGANIZATIONS THAT AFFECT AUDITING AND ACCOUNTING (The Alphabet Soup)

• Securities and Exchange Commission (SEC)• Oversight and regulation of securities market.• De jure authority to set accounting and auditing

standards.• Ultimate authority in all matters that affect publicly-

traded companies.• Financial Accounting Standards Board (FASB)

• De facto authority to set accounting standards• Establish GAAP.

• Public Companies Accounting Oversight Board (PCAOB) was created by Sarbanes-Oxley. Sets auditing standards for publicly-traded companies and regulates the financial reporting process.

ORGANIZATIONS THAT REGULATE THE ACCOUNTING PROFESSION (More Alphabet Soup)

• Auditing Standards Board (ASB) – AICPA committee• De facto authority to set auditing standards for entities that

are not publicly traded. • Establish GAAS through issuance of SASs and other

pronouncements.• State Boards of Accountancy (KSBA)

• License CPAs.• Monitor profession (including disciplinary action).

• American Institute of Certified Public Accountants (AICPA)

• Voluntary membership for CPAs.• Maintains Code of Conduct.

• State Societies of CPAs (KSCPA)

Assurance to Public that CPA Firms Perform High-Quality Audits (Figure 2-3)

• Training.– Education.– CPA Exam.– Continuing professional education (CPE).

• Regulatory Oversight– Primarily, the SEC, AICPA, and State Boards of Accountancy.– Increasingly, the PCAOB.– Code of Professional Conducts.

• Professionalism.– Generally Accepted Auditing Standards (GAAS).– Quality control.– Peer review.

• Legal Sanctions (Auditors can and ARE sued.)