 Hello and welcome to this session in which we would look at auditing standards and guidelines. This topic is covered on the CPA exam. As a CPA candidate, you will need to understand the various organizations and the roles and how they issue guidelines and authority when it comes to auditing. So we're going to look at various acronyms and what I'm going to try to do is to make it as painless as possible for you, but you need to be familiar with those terms such as SAS, PCAOB, AICPA, so on and so forth. Before we start, I would like to remind you whether you are an accounting student or especially if you're a CPA candidate studying for the auditing exam, I strongly suggest you take a look at my website farhatlectures.com. No, I don't replace your CPA review course whether you are taking Becker, Roger, Gleam, Wiley, Sergent or any other course. I am a useful addition. I can explain the material a little bit differently than your CPA review course, which in turn will help you understand the material better, which in turn will help you pass the exam. Your risk to try this system is one month. You try it, you like it, you keep it. If not, you cancel. Your maximum loss is one month of subscription. Your potential gain is passing the exam. And if not for anything, take a look at my website to find out how well or not well your university doing on the CPA exam. I do have also resources for other accounting and CPA courses. Please connect with me on LinkedIn. If you haven't done so, take a look at my LinkedIn recommendation, like this recording, share it with other, connect with me on Instagram, Facebook, Twitter and Reddit. So what I'm going to do is go over the various organizations that sets the guidelines, the auditing guidelines for practitioners, for us, for CPAs, for accountants. So this is a list. And I'm going to go over this list separately. I'm going to look at professional standards, engagement standards, and certain guidelines and what goes under each one of them. And I'm going to break them separately. First, we're going to look at professional standards. And first, we have to comply with statements on auditing standards or SAS. Who issues those statements? Well, the AI CPA and specifically under the AI CPA, we have auditing standard board. And the first thing you need to know is when you are dealing with the AI CPA, that the issue, the SAS is the statement on audit on auditing standard, they are, you are dealing with non-issure. So they regulate the overseas private companies, companies that their stock is not publicly traded. So PepsiCo, when you're auditing PepsiCo, you don't follow the SAS's. When you are auditing Microsoft, Apple computers, Amazon, why? Because those are not private companies. Those are public companies. If you're auditing Wegmans or Wawa, those are private companies. If you haven't heard of them, that's good because they're private. If you heard of them, they're private companies. This is where the SAS's will apply. So when you think about SAS's, think about private, private, they also call them non-issuers on the exam, private companies. It means they don't issue, they don't issue stocks to the public, okay? What do they apply to? They apply to their annual report. They apply to their interim financial statements, which is quarterly statements. They also apply to letters to underwriters. So this is, this is SAS's. So SAS's private company non-issuers issued by the AI CPA. The second organization, the PCAOB, the public company accounting oversight board. Now, the first thing that's going to give it, give it kind of a hint, public, PCAOB, public companies. The PCAOB, the auditing standard, this is for the auditing standard for public companies. Now, you are dealing with Amazon, PepsiCo, Microsoft. When an audit firm, when an audit firm auditing these companies, they follow the PCAOB auditing guidelines, whether they are doing review of interim financial statements, quarterly financial statements, letter to the underwriters, or annual reports. Notice the same thing, same thing for both. However, PCAOB, public, public companies, they apply to public companies. The SAS's apply to private companies, non-issuer, and here, obviously, issuers. They are dealing with issuers. Now, what happened if you're not public company, you're not private company, you're a government entity. Well, government entity, they follow the generally accepted government auditing standard, or GA gas. Who issues those standards? The governmental accountability office, or GAO, the GAO, obviously. Well, how would you know it's a governmental? It's called governmental accountability office, generally accepted government auditing standard. So, obviously, who do they apply to? Let's think about it. Do I really need to tell you? Of course not. Government organization, state, local, federal, government programs. Entities, they receive government fund, because they will need to be audited. They could be private company, but they receive government fund, then they will need to be audited following, the program will need to be audited following those guidelines. So, they apply to financial audits, performance audit, and program activities. Now, my first audit ever, when I started my practice long, long time ago, it was with the Department of Housing and Urban Development, or the program is called HUD. So, basically, HUD gives money to a private building, and this private building, because they receive money, they will need to be audited following the generally accepted government auditing standard. That program will have to follow this, and this was my first audit ever. So, it's very interesting when I started this. Other engagement, other than auditing engagement? Well, for example, we might have reviews, compilations, examinations. What governs those engagement? Well, we have something called statement on standard for attestation engagement, and who issued them? Guess what? AI CPA. Mostly everything is issued by the AI CPA. That gives us guidance for attestation engagement. Now, later on, we're going to learn about attestation engagement. We're going to learn about reviews, compilations, and all that. This isn't basically an overview. These guidelines apply to examinations, reviews, agreed upon procedures, report on subject matter. Later on, you would learn about examination, reviews, agreed upon procedures, a little bit about report on subject matter. Then we have statement on standards for accounting and review services. Who issued those? AI CPA, specifically the Accounting Review and Service Committee. Here we are dealing with unaudited financial statements or unaudited financial information. Obviously, it's private. We're dealing with private. Everything here is private, including this section here, private companies. So, SARs apply to private companies, and here we apply SARs when we are dealing with compilations, reviews of historical financial statements, pro forma, whether you are doing a preparation or compilation. And by the way, SARs, compilations, and reviews are highly, highly tested on the CPA exam. So, when you're taking your auditing course, compilations and reviews, they are, I would say, disproportionate section, disproportionate amount of questions will appear from compilations and reviews. And the reason is simple, because when you work for small and medium-sized companies, which is not the big four, they do a lot of compilations and reviews. So, that's why they want newly minted CPAs to be familiar with compilations and reviews, because large companies gets audited, but medium and small companies, what they do, they issue compilations and reviews. Therefore, as a future CPAs, you want to be pretty comfortable with compilations and reviews. And by the way, if you go to farhatlectures.com, I do, I think I do a great job explaining compilations and reviews. I have plenty of resources, multiple choice, through false questions, that's going to help you with this. Other guidelines that, that guide the audit industry is the code of professional conduct, again, issued by the AI CPA. It's the professional guidance for the AI CPA members. So, look at the wording, conduct, conduct, conduct is members. They tell you how to behave professionally as a profession. Basically, the professional guidance is to what? Is to assure the public that the members are held to a high standards. For example, I'm subject to this code of professional conduct. Now, when we talk about statement on quality control standards, also they are issued by the AI CPA. Okay? Now, the quality control standards, they don't apply to members. Think about it. They apply to firms, to actual firms, not members. So, notice here the conduct because as an individual, you perform the conduct. But quality control applies to firm rather than members. So, it provides CPA firms with quality control framework, like what? They'll tell them about policies, procedures, what should you do, what are the legal requirements, the regulatory requirements when issuing reports. So, you need to know what goes where and what. The last thing you need to know is the hierarchy of audit guidance. So, how do we follow? Which one are the most authoritative? Well, you need to know. On the top, we have the SASSes and we have the PCAOB. Remember, the SASS is issued by the AI CPA, private or non-issuer, PCAOB issued by the PCAOB, and we're dealing with public companies. So, those have the highest authority when it comes to conducting an audit. And if you need to justify, if you need to deviate from them, you need to justify any departure because this is the highest authority. Then the second one is interpretive publications such as auditing standards of gas, generally accepted auditing standard, audit guidance provided by the AI CPA, auditing and accounting guidance, AI CPA statement of positions. Notice, you want to see the word AI CPA in there, kind of the second category. The third category, other publications, and here we are dealing with lower-level authority articles in the journals of accountancy, articles in the AI CPA letter, notice the word article, article, CPA continuous professional education material, textbook, and who knows, maybe some people think my YouTube or other publication. I don't think so because I do follow textbook. But the point is, for example, I'll be really at the bottom. You really don't want to follow my procedures and practice. I prepare students for the CPA exam. But the point is, if you really want to follow the highest authority for guidance is what the SAS is and the PCAOB. This is what you will need to follow. At the end of this recording, I'm going to remind you whether you are a CPA candidate or an accounting students. Take a look at my website, foreheadlectures.com. I'm going to tell you one more time. I don't replace your CPA review course. That's not my intent. My intent is to be a useful addition to help you understand the material better, which will help you with your CPA review course, which will help you pass the exam. Think of it as a vitamin pill. Don't shortchange yourself. The CPA exam is a one lifetime investment. Invest in yourself. The CPA is worth it. Study hard. Good luck. And of course, stay safe.