The Firm of Choice. 1

NewAuditing Standards

Maintaining the Integrity of the Independent Audit

The Firm of Choice. 2

Reason for New Standards

• Auditing profession continually reviews practices and makes necessary improvements

• Post Enron and Sarbanes-Oxley

• Higher expectations of auditors

• Need to maintain audit quality in changing business environment

The Firm of Choice. 3

Overview • Standards re-write many of the fundamental building

blocks of auditing

• Require more extensive and different types of procedures than performed in the past

• Effective for audits of financial statements

beginning after December 15, 2006

The Firm of Choice. 4

The Basic Audit Process

• New process is designed to be more adaptable to individual client circumstances.

• Obtain thorough understanding of client, including internal control

• Use understanding to assess risk

• Use risk assessment to design and perform procedures

The Firm of Choice. 5

Effect on Audits

• More work to form an understanding of the client

• More extensive procedures to evaluate internal control design

• Involve more experienced personnel to obtain required level of understanding

• Shift portions of the work to a period in advance of year-end

The Firm of Choice. 6

Questions?