HOW DO CPA FIRMS AUDIT THEIR CLIENTS?

How do CPA firms audit their clients?

How do CPA firms audit their clients?

CPA

Certified Public Accountant (CPA) is the statutory title of qualified accountants in the United States who have passed the Uniform Certified Public Accountant Examination and have met additional state education and experience requirements for certification as a CPA. In most U.S. states, only CPAs who are licensed are able to provide to the public attestation (including auditing) opinions on financial statements. The exceptions to this rule are Arizona, Kansas, North Carolina and Ohio where, although the "CPA" designation is restricted, the practice of auditing is not (Flesher, Previts, & Flesher, 1996).

Services Provided by CPAs

The primary functions CPAs fulfill relate to assurance services, or public accounting. In assurance services, also known as financial audit services, CPAs attest to the reasonableness of disclosures, the freedom from material misstatement, and the adherence to the applicable generally accepted accounting principles (GAAP) in financial statements. CPAs can also be employed by corporations - termed 'the private sector' - in finance functions such as Chief Financial Officer (CFO) or finance manager, or as CEOs subject to their full business knowledge and practice. These CPAs do not provide services directly to the public (Flesher, Previts, & Flesher, 1996).

Although some CPAs serve as business consultants, the consulting role is under scrutiny following the corporate climate in the aftermath of the Enron scandal. This has resulted in divestitures in the consulting divisions by many accounting firms. In audit engagements, CPAs are (and have always been) required by professional standards and Federal and State laws to maintain independence (both in fact and in appearance) from the entity for which they are conducting an attestation (audit and review) engagement. However, most individual CPAs who work as consultants do not work as auditors, or vice versa (Abbott, Parker, Peters and Rama, 2003).

CPAs also have a niche within the income tax preparation industry. Many small to mid-sized firms have both a tax and an auditing department. Someone's CPA is one of that individual's most trusted experts. CPAs are scattered throughout the business world.

CPA Auditing Firms

First, the implications advertising has on public accounting-- the model of perfect competition versus the model of monopolistic competition.

Secondly, the relationship between firm size and advertising expenditures. Thirdly, the effect of advertising on firm specialization, the implications of client turnover on public accounting practice. Before making the comparison, a brief explanation ...