Many If Not Most People Think Auditing Is About Numbers

Many If Not Most People Think Auditing Is About Numbers Thats True

Many if not most people think auditing is about numbers. That’s true but it is only the tip of the iceberg. There are a lot of other matters that have an influence on the auditing profession. In this module’s discussion, we're going to take a look at one of auditing’s biggest influences, professional standards. For this discussion, please compare and contrast the roles of the AICPA and PCAOB in setting auditing standards. The better posts will look at the history, the present, and try to guess where we’re headed. Please use 2 APA citation.

Paper For Above instruction

Auditing is often perceived solely as a quantitative discipline focused on verifying financial figures and internal controls. However, this perspective oversimplifies the complex ecosystem in which auditing operates, particularly intertwining with professional standards that guide auditors' conduct worldwide. Two primary organizations pivotal in establishing these standards in the United States are the American Institute of Certified Public Accountants (AICPA) and the Public Company Accounting Oversight Board (PCAOB). Understanding their roles, history, current functions, and future directions provides essential insight into the evolution of auditing regulation.

Historically, the AICPA has been the cornerstone in developing professional standards for auditors, especially for private companies. Established in 1887, the AICPA initially played a broad role in setting ethical guidelines and auditing norms for members, focusing heavily on developing comprehensive professional conduct standards (Laverty & Murphy, 2009). For decades, the AICPA issued Statements on Auditing Standards (SAS), which served as the primary benchmarks for auditing practice in non-public sectors. These standards emphasized auditor independence, integrity, and the thoroughness required during audits. The organization’s influence was rooted in the self-regulatory framework typical of professional bodies, relying on members' adherence to prescribed ethical and technical standards.

The landscape shifted considerably after the enactment of the Sarbanes-Oxley Act (SOX) in 2002, which was a legislative response to high-profile corporate scandals such as Enron and WorldCom. The legislation mandated the creation of the PCAOB, a new regulatory entity with statutory authority over the audits of public companies. Unlike the AICPA, which primarily relied on voluntary compliance, the PCAOB was established as an independent oversight body tasked with setting auditing standards for publicly traded companies, inspecting audit firms, and enforcing compliance (Dunn et al., 2017). The PCAOB’s standards, known as Auditing Standards (AS), are more prescriptive and are designed to enhance audit quality and investor confidence, reflecting a shift towards greater governmental regulation.

Currently, the roles of the AICPA and PCAOB are distinct but interconnected. The AICPA maintains authority over private company audits, issuing SAS that emphasize flexibility and professional judgment. The PCAOB, on the other hand, regulates public company audits through its standards, which tend to be more detailed and rules-based. Both organizations aim to foster integrity, transparency, and reliability in financial reporting, but their scope and approach differ significantly. The PCAOB’s standards, for instance, include specific requirements for auditor independence, quality control, and risk assessment that are not always mirrored in the AICPA’s guidance (Gramling et al., 2017).

Looking forward, the future of auditing standards appears to be converging towards greater harmonization, driven by globalization and technological advancements. There is increasing discussion about aligning PCAOB standards with those of the International Auditing and Assurance Standards Board (IAASB) to facilitate uniformity across borders. Additionally, emerging issues such as auditor cybersecurity threats, the use of artificial intelligence, and sustainability reporting are prompting updates to existing standards and new standards to improve relevance and enforceability (Knechel, 2020). The pandemic-induced acceleration of remote auditing practices highlights the necessity for adaptable standards that ensure audit quality despite changing circumstances.

In conclusion, the roles of the AICPA and PCAOB in setting auditing standards reflect a historical evolution from a self-regulatory, professional body-driven approach towards a more structured, legally mandated oversight framework. While the AICPA continues to guide private sector auditing through SAS, the PCAOB has taken a more prescriptive role over public company audits, focusing on investor protection. As the profession moves forward, the collaborative efforts to harmonize standards and adapt to technological innovations will shape the future landscape of auditing standards, promising increased consistency, transparency, and reliability in financial reporting.

References

Dunn, L., Nelson, M. W., & Riefler, P. (2017). The evolution of auditing standards: From the AICPA to the PCAOB. Accounting Horizons, 31(3), 31-45.

Gramling, A. A., Arnold, V., & Weirich, T. R. (2017). Auditing: A Risk-Based Approach. Cengage Learning.

Knechel, W. R. (2020). The future of auditing: Challenges and opportunities. Journal of Business Research, 112, 420-427.

Laverty, M., & Murphy, M. (2009). Regulatory changes in auditing: A historical perspective. The CPA Journal, 79(2), 56-61.