Accounting, also known as accountancy, is the processing of information about economic entities, such as businesses and corporations. Accounting measures the results of an organization's economic activities and conveys this information to a variety of stakeholders, including investors, creditors, management, and regulators. Practitioners of accounting are known as accountants. The terms "accounting" and "financial reporting" are often used interchangeably.
The American Institute of Certified Public Accountants (AICPA) is the national professional organization of Certified Public Accountants (CPAs) in the United States, with more than 428,000 members in 130 countries. Founded in 1887 as the American Association of Public Accountants (AAPA), the organization sets ethical standards and U.S. auditing standards. It also develops and grades the Uniform CPA Examination. The AICPA maintains offices in New York City; Washington, DC; Durham, NC; and Ewing, NJ.
Generally Accepted Accounting Principles (GAAP or U.S. GAAP or GAAP (USA), pronounced like "gap") is the accounting standard adopted by the U.S. Securities and Exchange Commission (SEC) and is the default accounting standard used by companies based in the United States.
Certified Public Accountant (CPA) is the title of qualified accountants in numerous countries in the English-speaking world. It is generally equivalent to the title of chartered accountant in other English-speaking countries. In the United States, the CPA is a license to provide accounting services to the public. It is awarded by each of the 50 states for practice in that state. Additionally, all states except Hawaii have passed mobility laws to allow CPAs from other states to practice in their state. State licensing requirements vary, but the minimum standard requirements include passing the Uniform Certified Public Accountant Examination, 150 semester units of college education, and one year of accounting-related experience.
An audit is an "independent examination of financial information of any entity, whether profit oriented or not, irrespective of its size or legal form when such an examination is conducted with a view to express an opinion thereon." Auditing also attempts to ensure that the books of accounts are properly maintained by the concern as required by law. Auditors consider the propositions before them, obtain evidence, roll forward prior year working papers, and evaluate the propositions in their auditing report.
A financial audit is conducted to provide an opinion whether "financial statements" are stated in accordance with specified criteria. Normally, the criteria are international accounting standards, although auditors may conduct audits of financial statements prepared using the cash basis or some other basis of accounting appropriate for the organization. In providing an opinion whether financial statements are fairly stated in accordance with accounting standards, the auditor gathers evidence to determine whether the statements contain material errors or other misstatements.
An auditor's report is a formal opinion, or disclaimer thereof, issued by either an internal auditor or an independent external auditor as a result of an internal or external audit, as an assurance service in order for the user to make decisions based on the results of the audit.
In the United States, Statements on Auditing Standards provide guidance to external auditors on generally accepted auditing standards in regards to auditing a non-public company and issuing a report. They are promulgated by the Auditing Standards Board of the American Institute of Certified Public Accountants (AICPA), which holds all copyright on the Standards. They are commonly abbreviated as "SAS" followed by their respective number and title.
A going concern is an accounting term for a business that is assumed will meet its financial obligations when they become due. It functions without the threat of liquidation for the foreseeable future, which is usually regarded as at least the next 12 months or the specified accounting period. The presumption of going concern for the business implies the basic declaration of intention to keep operating its activities at least for the next year, which is a basic assumption for preparing financial statements that comprehend the conceptual framework of the IFRS. Hence, a declaration of going concern means that the business has neither the intention nor the need to liquidate or to materially curtail the scale of its operations.
Materiality is a concept or convention within auditing and accounting relating to the importance/significance of an amount, transaction, or discrepancy. The objective of an audit of financial statements is to enable the auditor to express an opinion on whether the financial statements are prepared, in all material respects, in conformity with an identified financial reporting framework, such as the Generally Accepted Accounting Principles (GAAP) which is the accounting standard adopted by the U.S. Securities and Exchange Commission (SEC).
Audit working papers are the documents which record during the course of audit evidence obtained during financial statements auditing, internal management auditing, information systems auditing, and investigations. Audit working papers are used to support the audit work done in order to provide the assurance that the audit was performed in accordance with the relevant auditing standards. They show the audit was:
In the United States, the Auditing Standards Board (ASB) is the senior technical committee designated by the American Institute of Certified Public Accountants (AICPA) to issue auditing, attestation, and quality control statements, standards and guidance to certified public accountants (CPAs) for non-public company audits. Created in October 1978, it is composed of 19 members representing various industries and sectors, including public accountants and private, educational, and governmental entities. It issues pronouncements in the form of statements, interpretations, and guidelines, which all CPAs must adhere to when performing audits and attestations.
Management assertions or financial statement assertions are the implicit or explicit assertions that the preparer of financial statements (management) is making to its users. These assertions are relevant to auditors performing a financial statement audit in two ways. First, the objective of a financial statement audit is to obtain sufficient appropriate audit evidence to conclude on whether the financial statements present fairly, in all material respects, the financial position of a company and the results of its operations and cash flows. In developing that conclusion, the auditor evaluates whether audit evidence corroborates or contradicts financial statement assertions. Second, auditors are required to consider the risk of material misstatement through understanding the entity and its environment, including the entity's internal control. Financial statement assertions provide a framework to assess the risk of material misstatement in each significant account balance or class of transactions.
The following outline is provided as an overview of and topical guide to accounting:
Emphasis of matter is a type of paragraph in an auditors' report on financial statements. Such a paragraph is added to indicate a matter which is disclosed appropriately in the notes forming part of the financial statements that the auditor considers is fundamental to the users' understanding of the financial statements.
Regulation S-X is a prescribed regulation in the United States of America that lays out the specific form and content of financial reports, specifically the financial statements of public companies. It is cited as 17 C.F.R. Part 210; the name of the part is "Form and Content of and Requirements for Financial Statements, Securities Act of 1933, Securities Exchange Act of 1934, Public Utility Holding Company Act of 1935, Investment Company Act of 1940, Investment Advisers Act of 1940, and Energy Policy and Conservation Act of 1975".
Statements on Auditing Procedure were issued by the Committee on Auditing Procedure of AICPA from 1939 to 1972. The Committee issued 54 SAPs before it became the Auditing Standards Executive Committee (AcSEC) and began issuing Statements on Auditing Standards.Statement on Auditing Standards No. 1 summarized and superseded the 54 SAPs.
The convergence of accounting standards refers to the goal of establishing a single set of accounting standards that will be used internationally. Convergence in some form has been taking place for several decades, and efforts today include projects that aim to reduce the differences between accounting standards.
Statement on Standards for Attestation Engagements no. 16 is an auditing standard for service organizations, produced by the American Institute of Certified Public Accountants (AICPA) Auditing Standards Board, which supersedes Statement on Auditing Standards no. 70 and has been superseded by SSAE No. 18.
Statement on Standards for Attestation Engagements no. 18 is a Generally Accepted Auditing Standard produced and published by the American Institute of Certified Public Accountants (AICPA) Auditing Standards Board. Though it states that it could be applied to almost any subject matter, its focus is reporting on the quality of financial reporting. It pays particular attention to internal control, extending into the controls over information systems involved in financial reporting. It is intended for use by Certified Public Accountants performing attestation engagements, the preparation of a written opinion about a subject, and the client organizations preparing the reports that are the subject of the attestation engagement. It prescribes three levels of service: examination, review, and agreed-upon procedures. It also prescribes two types of reports: Type 1, which includes an assessment of internal control design, and Type 2, which additionally includes an assessment of the operating effectiveness of controls. Published April 2016, SSAE 18 and all previous standards it supersedes are represented in section AT-C of the AICPA Professional Standards, with most sections becoming effective on May 1, 2017.
