CPA firms Big Four (International) PricewaterhouseCoopers

1
CPA firms

• Big Four (International)
• PricewaterhouseCoopers (PwC)
• Deloitte Touche (DT)
• KPMG
• Ernst Young (EY)

2
CPA Firms

• National firms
• Regional Firms (50 employees)
• Large local firms (gt25 employees)

3
CPA Firm Services

• Audit
• Review
• Compilation
• Tax
• Accounting
• Bookkeeping
• Consulting services

• The big four have reduced their consulting
  services because of independence concerns

4
Forms of CPA Firms

• Proprietorship
• General Partnership
• Corporation (not allowed in some states)
• Professional Corporation
• Limited Liability Corporation (LLC)
• Limited Liability Partnership (LLP)
• The LLP is the most popular form

5
CPA staff

• Partners
• Managers
• Supervisors
• Seniors
• Assistants/Juniors/Staff
• The value of a CPA firm is not the individual
  staff person, but the many levels of review of
  the work.

6
Sarbanes-Oxley

• Establishes the Public Company Accounting
  Oversight Board (PCAOB) July 2002
• The PCAOB is overseen by the SEC

7
PCAOB

• Establishes Auditing Standards
• Inspects Auditing Firms

8
Which Auditing Standards?

• PCAOB for Public Companies
• Companies that sell stock on large exchanges
• Accounting StandardsBoard (AICPA) for Private
  companies
• Companies closely held, partnerships, sole owners

9
Securities and Exchange Commission

• SEC created 1933 required registration statement
• SEC 1934 required annual reports to be filed
• Financial Statements are required as part of
  registration statement and annually thereafter
• Form 10-K most important, required 60 days after
  year end or 90 days after year end

10
AICPA

• American Institute of Certified Public
  Accountants
• Research
• Publishes books
• advocates for CPAs
• Continuing Education
• Sets standards (private companies)

11
AICPA

• Statements on Auditing Standards (SASs) for
  private companies
• Compilation and review standards (SSARs)
• Other attestation standards
• Consulting standards
• Code of Professional Conduct

12
AICPA

• Publishes Journal of Accountancy
• Writes CPA Exam and grades it
• Continuing Education (CPE)

13
GAAP vs GAAS

• GAAP are standards to compile financial
  statements
• GAAS are standards on how to conduct an Audit
• 10 GAAS Standards (Generalyaccepted auditing
  standards)
• General Standards, Fieldwork Standards and
  Reporting Standards

14
GAAS

• Adequate technical training and proficiency
• Independence in mental attitude
• Due professional care
• Adequate planning and supervision
• Understanding the clients internal controls

15
GAAS

• Sufficient competent Evidence
• Report must state if Financial Statements are in
  accordance with GAAP
• Report if GAAP not consistently applied between
  years
• Notes must be informative
• Report must expess an opinion

16
PCAOB vs GAAS

• PCAOB accepts GAAS for interim period
• PCAOB begins to establish standards

17
SASs

• Statements on Auditing Standards are
  interpretations of the 10 GAAS standards
• GAAS and SASs are minimum standards

18
Quality Control for CPA Firms

• Independence Integrity
• Personnel management (qualified, training, CPE)
• Policies on acceptance of engagements
• Policies on engagement performance
• Monitoring-Quality control partner

19
Peer Review

• Another CPA firm audits if the subject firm is
  following Quality Control and GAAS
• For public firms PCAOB inspections take the place
  of Peer Review
• For private firms must be reviewed every three
  years