LO 2-1 LO 2-2 LO 2-4 LO 2-4 LO 2-5 2-1 List the various types of auditors and describe their respective roles in a sentence or two each. 2-2 Give one example each of compliance, operational, and forensic audits. 2-3 Briefly discuss the key events that led up to the Sarbanes-Oxley Act of 2002 and the creation of the PCAOB. 2-4 Discuss how the events that have so dramatically affected auditors and the public accounting profession since the Enron scandal may in some sense be "healthy" for the profession. 2-5 Compare and contrast management's responsibility for the entity's financial state- ments with the auditor's responsibilities for detecting errors and fraud in the finan- cial statements. 2.6 Why might understanding the characteristics of an entity's business model be impor- tant for a financial statement auditor? 2-7 What roles do information systems and systems of internal control play in the high- level model of business discussed in the chapter, and why might it be important for an auditor to understand these roles? 2-8 The AICPA performs a number of functions that directly bear on independent audi tors of nonpublic entities, including promulgation of rules and standards. List four types of rules or standards issued by the AICPA. LO 2-6 LO 2.6 LO 2-8 WE Chapter 2 The Financial Statement Anding Environment 59 LO 2-8 LO 2.8 LO 2.8 LO 2-10 2-9 What kind of organization is the PCAOB, why was it formed, and what does it do? 2-10 What role does the SEC play in the establishment of accounting and auditing stan- dards for public companies? 2-11 Identify three of the documents required by the Securities Exchange Act of 1934 that are commonly encountered by auditors. Briefly describe the purpose of each of these documents. 2-12 List and briefly describe the four categories of Principles Underlying an Audit Con ducted in Accordance with GAAS. 2-13 Discuss why auditing standards are important for evaluating whether an auditor has done an adequate audit, especially when the auditor fails to detect a material mis- statement in the financial statements. 2-14 Why is independence such an important standard for auditors? How does auditor independence relate to the agency relationship between owners and managers dis- cussed in Chapter 1? LO 2-10 LO 2.12