The PCAOB has the authority to set audit standards for all a
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The PCAOB has the authority to set audit standards for all audits of public companies. The AICPA continues to set audit standards for nonpublic companies through its auditing standards board.
a. What are the pros and cons of having the same audit standards for both public and nonpublic entities?
b. In what ways might you expect auditing standards for audits of nonpublic companies to differ from the standards for public companies?
Identify three (there are not necessarily three right or wrong answers - this is an opinion and discussion question only). Identify the rationale for your answers.
c. A CPA is performing an audit of a local municipality. Where should the auditor look to determine audit standards that must be followed?
d. What role should an audit committee play in determining which standards an audit firm will use in auditing their company? Explain.
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Solution Summary
The PCAOB has the authority to set audit standards for all audits of public companies. The AICPA continues to set audit standards for nonpublic companies through its auditing standards board.
a. What are the pros and cons of having the same audit standards for both public and nonpublic entities?
b. In what ways might you expect auditing standards for audits of nonpublic companies to differ from the standards for public companies?
Identify three (there are not necessarily three right or wrong answers - this is an opinion and discussion question only). Identify the rationale for your answers.
c. A CPA is performing an audit of a local municipality. Where should the auditor look to determine audit standards that must be followed?
d. What role should an audit committee play in determining which standards an audit firm will use in auditing their company? Explain.
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a) Pros: It makes for a unified set of standards, if the same audit standards are used for both public and nonpublic entities. This would allow users of the auditing data, and other involved individuals to automatically know that the same standards were in place and utilized during the audit. It would provide for uniformity in auditing procedure, because both entities are held to the same auditing standards.
Con: The auditing standards for a public entity are much more extensive, and much more comprehensive. This also means that it costs a great deal more in money and resources to perform a public audit vs. an audit for a private company. Many private companies would have a difficult time bearing the expense of the audit, since typically the private companies are smaller in size that public companies. The burden of complying with public auditing standards as set by the PCAOB would be very costly ...
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