AAA services paper

Auditing, Attestation, and Assurance Services
Jeffrey Crump, Millay Dimond, Debbie Evans, Sandy Leong, and Shauna Yuresko
Contemporary Auditing I ACC-491
March 8, 2015
Professor Venetia Clark













Auditing, Attestation, and Assurance Services
Auditing, attestation, and assurance services help to ensure businesses are operating ethically and staying compliant with all rules, standards, and regulations. Boynton and Johson (2006) defined auditing as, "A systematic process of objectively obtaining and evaluating evidence regarding assertions about economic actions and events to ascertain the degree of correspondence between those assertions and established criteria and communicating the results to interested users"(Chapter 1 The Auditing Environment). In other words, auditing gives stakeholders and others who are invested in the business a means to see the reliability and success or failure of the business. An audit can be as simple as a second person reviewing the work. This is a basic example of an internal audit. Larger companies often hire an independent auditing firm to review their financial documents, check them for accuracy, and ensure compliance with GAAP standards. Attestation is a consulting service in which a CPA signs official documents as a third party stating that all actions are true and were conducted properly. An example of this service is when a company has an accountant review procedures for compliance. Once they review them, they can sign off on the procedure. Boynton and Johnson (2006) stated, "Assurance services are independent professional services that improve the quality of information, or its context, for decision makers" (Chapter 1 The Auditing Environment). Assurance services can be issued on a variety of items. A bank may want to offer a new balance transfer program. To increase awareness they will allow people to put in their current balance and interest and then show the savings by transferring the funds. The bank would use assurance services to ensure that calculations are correct. Assurance services allow the company to feel confident that the information they are providing is accurate. This paper will compare and contrast these three services in detail while explaining who would request such services, what standards apply to each service, and who establishes those standards.
Any company looking to remain in compliance with governmental standards would want to have an audit. An audit allows a company to assure all stake holders of the reliability of the business they are doing and the finances they are reporting. An audit can further help a company to know if they are completely compliant with all federal taxes and banking conditions. Furthermore, if a company wants to make sure they are recording everything efficiently and reporting accurately, an audit can really help. An audit allows a company to see the inner workings of their company from a different perspective and then make their next move from there. An audit also helps to examine the internal controls of a company and whether or not they need to be improved or added to.
Sometimes an audit is not enough to assure all stakeholders and that is when an attestation and/or an assurance may be needed. An assurance assures all stakeholders that the financial documents have been reviewed by a CPA and that they are accurate and valid according to federal standards. An attestation is when an auditor adds their signature to official documents as an independent third party signifying that the documents are accurate and that everything was handled correctly. Any business looking to assure the public and their stake holders would request these services, and board members or investors may even demand it.
Banks are another entity that may want to look into audit services, including attestation and assurances. Everyday people use banks and those people need to know that their money is secure and that they will be protected if anything goes wrong. By engaging in assurance services, a bank can have their operation looked at in detail and have the assurance that a third party would put their reputation on the line to say they are doing things right. Anyone signing documents at a bank would benefit from attestation services, as anyone would want to know that their legal documents were filled out correctly and all signatures are valid. Essentially, anyone who wants to feel more secure about their financial decisions could benefit from these services.
The ten generally accepted auditing standards provide the basis for high quality performance of auditing, attestation, and assurance services. The first three standards of GAAS require the auditor to have adequate training, mental independence, and a high standard of professional care. The next three standards require the auditor to adequately plan the auditing field work, have sufficient understanding of the audited organization, and obtain sufficient audit evidence. The remaining four GAAS pertain to reporting of the audit findings. The report states whether generally accepted accounting principles were applied, any inadequacy of disclosure, and an opinion on the company's financial statements. GAAS develop the integrity and reliability of financial information evaluated by CPAs. GAAS establish general uniform rules for auditing which is a verification service extended to attestation. Stakeholders' trust of independent CPA audits lead to the demand for attestation and other assurance services of CPAs.
CPAs evaluate financial information and management assertions against predetermined criteria or standards. GAAS are standards that are used for auditing the accuracy and reliability of financial statements. Internal financial reporting control procedures are standards for determining how the company adheres to compliance requirements. Operational audits may involve budgets and business objectives as standards for evaluating performance. The attestation service of verifying and expressing a written opinion on management's written claims of a sales forecast may involve the reporting standards of GAAP. The attestation of management's assertion on loan payments is examined against the terms of the loan agreement. The CPA performance view is an assurance service providing the assessment on a company's performance evaluation of a specific activity. CPAs apply the industry standards used for specific activity performance measurements. Another assurance service is CPA risk advisory, which provides an unbiased analysis of a possible adverse effect on the company. Profitability can be a standard used for measuring the degree of risk.
Auditing, attestation, and assurance standards are established by different organizations. Some organizations cross over into all areas and some concentrate their efforts on just one area. Auditing standards used by registered public accounting firms are established by the Public Company Accounting Oversight Board (PCAOB). The PCAOB's authorization to establish these standards comes from the Sarbanes-Oxley Act of 2002. According to the Public Company Accounting Oversight Board (2015), "PCAOB Rule 3100, Compliance with Auditing and Related Professional Practice Standards, requires the auditor to comply with all applicable auditing and related professional practice standards of the PCAOB." So, not only does the PCAOB establish these standards, but they also require that they must be followed by all auditors. Audit standards are also established by the American Institute of CPAs (AICPA). The AICPA works with state CPA organizations in order to give auditors the information and resources they need to complete jobs for their clients. They do this by, among other things, developing standards for audit and other services and monitoring and enforcing compliance with the standards.
Attestation standards are also established by the AICPA Auditing Standards Board. They set the standards that must be followed by the members of the AICPA when conducting attest engagements. In addition, the PCAOB sets attestation standards for practitioners to follow. In addition to the PCAOB standards, "When a practitioner undertakes an attest engagement for the benefit of a government body or agency and agrees to follow specified government standards, guides, procedures, statutes, rules, and regulations, the practitioner is obliged to follow those governmental requirements as well as the applicable attestation standards" (Public Company Accounting Oversight Board, 2015).
Assurance standards are set both on a national and international basis. Internationally, "The International Auditing and Assurance Standards Board (IAASB) is an independent standard-setting body that serves the public interest by setting high-quality international standards for auditing, assurance, and other related standards, and by facilitating the convergence of international and national auditing and assurance standards" according to the International Federation of Accountants (2015). The American Institute of CPAs establishes assurance standards and helps members to understand and utilize the standards.
As time has gone on, fraudulent financial reporting and restatements of earnings have become more prevalent. Therefore making auditing services become more important. Attestation and assurance services provide even more assurance for stakeholders in a business. Boynton and Johnson (2006) stated, "Financial statement audits provide an important level of assurance about the integrity of financial statement information used by decision makers" (Chapter 1 The Auditing Environment).








References
Bovnton, W. C., & Johnson, R. N. (2006). Modern auditing: Assurance services and the integrity of financial reporting. (8th ed). Hoboken, NJ: Wiley.
International Federation of Accountants. (2015). Retrieved from http://www.ifac.org/auditing-assurance
PCAOB Public Company Accounting Oversight Board. (2015). Retrieved from http://pcaobus.org/Standards/Auditing/Pages/Auditing_Standard_1.aspx


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