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Advanced Auditing Concepts & Standards Essays

Financial Statements
Financial Statements Prepared using Chinese and GAAP Standards Kobyashi Maru prepares two sets of financial statements; one set using Chinese standards and GAAP (as meager as those standards may be) and the other for use in the US attempting to conform to U. S. GAAP. The Chinese financials contain a single footnote describing the accounting principles used in the original books of entry.
In the United States, the public capital markets are regulated primarily by the US Securities and Exchange Commission (SEC), a national government agency. The law gives the SEC the authority to prescribe the form and content of financial statements filed with the Commission. Historically, the Commission has looked to the private sector to develop financial reporting standards, though the Commission does prescribe financial statement presentation formats and disclosures and, sometimes, accounting recognition and measurement principles as well.
The SEC oversees more than 30,000 registrants including 12,000 public companies, 4,600 mutual funds, 11,300 investment advisers, 600 transfer agencies, and 5,500 broker dealers. [2008 Data] Approximately 1,150 of the 12,000 companies registered with the SEC are non-US companies. A foreign registrant may submit financial statements that conform to US GAAP or (starting 4 March 2008) financial statements that conform to International Financial Reporting Standards as adopted by the IASB (that is, not jurisdictional adaptations of IFRSs), without need to provide a reconciliation to US GAAP.
Alternatively, a foreign registrant may submit financial statements prepared using its national GAAP or using a jurisdictional adaptation of IFRSs (such as IFRSs as adopted by the EU), but then a reconciliation of earnings and net assets to US GAAP figures is required. At its public meeting in Washington on 15 November 2007, the SEC voted to allow foreign companies to submit financial statements to the Commission using IFRSs as adopted by the IASB without having to include a reconciliation of the IFRS data to US GAAP.
The SEC issued its final rule on Acceptance from Foreign Private Issuers of Financial Statements Prepared in Accordance with International Financial Reporting Standards without Reconciliation to US GAAP on 21 December 2007. In May 2008, the AICPA’s Governing Council designated the International Accounting Standards Board (IASB) as the body authorized to establish international financial accounting and reporting principles under rule 202 and 203 of the AICPA Code of Professional Conduct.
Below is an illustrative Independent Auditor’s Report on financial statements issued in conformity with IFRS. We have audited the accompanying statements of financial position of X Entity as of December 31, 20X1 and 20X0, and the related statements of comprehensive income, changes in equity and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of X Entity as of [at] December 31, 20X1 and 20X0, and the results of its operations, changes in equity and its cash flows for the years then ended in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board. Signature] [Date] In 2007, China massively updated its accounting system to mirror that of the IASB to conform to International Accounting Standards. Under those standards beginning in 2007, China would only have to file one set of Financial Statements that conform to the IFRS. The SEC issued a final rule on Acceptance from Foreign Private Issuers of Financial Statements Prepares in Accordance with IFRS without Reconciliation to U. S. GAAP on 21, December 2007.
References
Independent Auditor’s Report on Financial Statements Issued in Conformity with International Financial Reporting Standards [Fact sheet]. (n.d.). Retrieved March 10, 2013, from AICPA website: http://www.ifrs.com/overview/Accounting_Firms/Reporting_Standards.html

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