Auditing And Attestation - Essay Answers

2-7. Who is responsible for establishing audit ing standards for audits of public companies? Who is responsible for establishing auditing standards for audits of private companies? Explain.
The Public Company Accounting Oversight Board (PCAOB), is reposible for establishing auditing standards for audits of public companies. The PCAOB was established by the Sarbanes-Oxley Act and appointed and overseen by the Securities and Exchange Commission (SEC).
The Auditing Standards Board (ASB) of the AICPA are responsible for establishing auditing standards for the audits of private companies. However, prior to the SOX Act, the ASB established standards for private and public companies. Thus, the PCAOB adopted existing standards established by the ASB as interim audit standards. The PCAOB is now issuing its own auditing standards, including establishing standards for audits of the effectiveness of internal control over financial repprting.
2-10. Generally accepted auditing standards have been criticized by different sources for failing to provide useful guidelines for conducting an audit. The critics believe the standards should be more specific to enable practitioners to improve the quality of their performance. As the standards are now stated, some critics believe that they provide little more than an excuse to conduct inadequate audits. Evaluate this criticism of the 10 generally accepted auditing standards.
The criticism of the 10 GAAS by some critics, is founded in the belief that by the GAAS being more specific, then they would thereby eliminate some difficult audit decisiona dn provide a line of defense for a CPA firm charged with conducting an inadequate audit. However, highly specific requirements could turn auditing into mechanistic eveidence gathering, devoid of professional judgement. Therefore, from differing points of views, there is probably