Chapter 2 Organization and Structure of the Auditing Profession(9)

The most basic practice area of a CPA firm, assurance services consist primarily of performing independent audits of entities' financial statements. CPAs also perform reviews, engagements based on agreed-upon procedures, attest engagements, and other assurance services.

(i) Audits. An audit requires personnel with a blend of skills and technical expertise. For example, if the engagement is extremely complex technically, the audit team may require members who have industry expertise, a high level of knowledge of computer systems, tax expertise, and the ability to understand difficult actuarial computations. A team with such expertise frequently will find and recommend ways to improve the entity's financial and operating policies, a client service that is derived from the audit process.

In addition to audits, accounting firms generally offer a number of audit-related services, either in conjunction with an audit or as separate engagements. One of these services is a

communication to management containing recommendations for improvements in internal control relating to financial reporting and other matters, such as comments on operating efficiencies and profitability. Additional audit-related services include acquisition audits of

entities that clients are contemplating acquiring, and issuing letters reporting whether an entity is in compliance with the covenants of debt instruments.

(ii) Reviews. CPAs also perform review services. Review services for nonpublic entities are

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