Various groups (the PCAOB, the SEC, the AICPA, the IAASB, COSO, FASB, and IASB,
ID: 2578266 • Letter: V
Question
Various groups (the PCAOB, the SEC, the AICPA, the IAASB, COSO, FASB, and IASB, not to mention state boards of accountancy and the courts) have vested interests in oversight and governance of the accounting profession.
Please respond to all of the following prompts in one combined main response:
Describe the unique role each group plays with respect to the audit standard-setting process. Are all the groups really necessary?
Are there redundancies in oversight or governance? From an auditor’s perspective, which group is the most important? Why?
How do these groups contribute to the maintenance of professional quality?
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Explanation / Answer
PCAOB: PCAOB stands for Public Company Accounting Oversight Board. The major responsibility of this board is monitoring companies registered with Security and Exchange Commission, since these companies are publicly traded, which makes it important that the companies prepare their financials fairly and truly. This board has been given authority to perform audits on these companies and also to set auditing standards.
SEC: SEC stands for Securities and Exchange Commission. The major responsibility of this entity is to regulate publicly traded companies in order to safeguard common investors’ interest & rights. SEC ensures that all publicly traded companies follow the accounting standards strictly. In case, a company is found breaching the guidelines, SEC has given an authority to bring charges & penalties against them.
AICPA: AICPA stands for American Institute of Certified Public Accountants. This organization is an association of CPAs that represents the accounting profession. This organization mainly helps the regulatory authorities in developing and setting up accounting standards for all type of businesses.
IAASB: The International Auditing and Assurance Standards Board (IAASB) is the independent standard-setting body which serves as the public interest by setting the high-quality international standards for the auditing, quality control, review, other assurance, and the related services, and by facilitating convergence of the international and national standards.
COSO: It is the Committee of Sponsoring Organizations of the Tread way Commission (COSO) it is a joint initiative to combat the corporate fraud. Dedicated to guide executive management and governance entities on relevant aspects of organizational governance, business ethics, internal control, enterprise risk management, fraud, and financial reporting.
FASB: The Financial Accounting Standards Board (FASB) is the private, non-profit organization standard setting body that has a primary purpose of establishing and improving the generally accepted accounting principles (GAAP) within United States in the public's interest. The Securities and Exchange Commission (SEC) designated FASB as organization responsible for setting of accounting standards for public companies in the U.S
IASB: the International Accounting Standards Board (IASB) is the independent, private-sector body which develops and it approves the International Financial Reporting Standards (IFRS).
All the groups are necessary and in case of redundancies in some areas there are challenges that they are working on to improve.
PCAOB is the most important group from auditor’s perspective since it is the one responsible for setting the auditing standards.
These groups contribute to maintaining professional quality by providing regulations and monitoring the performance of different professionals in the sector to ensure efficiency.
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