The statement is partially correct. Operational audits can be conducted by both internal and governmental audit agencies, as well as by certified public accountants (CPAs) or external audit firms. However, while operational audits can provide insights into management performance, their primary purpose is not solely to measure management performance in meeting organizational goals.
The organization responsible for providing oversight for auditors of public companies is called the Public Company Accounting Oversight Board (PCAOB). The PCAOB is a nonprofit corporation established by the Sarbanes-Oxley Act of 2002 (SOX) in the United States. Its primary role is to oversee and regulate the audits and auditors of public companies in order to protect the interests of investors and promote the reliability and accuracy of financial statements.
The correct answer is "Accounting." Recording, classifying, and summarizing economic events in a logical manner for the purpose of providing financial information for decision making is one of the fundamental activities of accounting. Accounting involves the process of identifying, measuring, recording, and communicating financial information about an entity's economic activities. The information generated through accounting enables stakeholders, such as managers, investors, creditors, and regulatory bodies, to make informed decisions regarding the entity's financial performance and position.
Any service that requires a CPA firm to issue a report about the reliability of an assertion made by another party is known as an "attestation service." Attestation services involve the examination, review, or agreed-upon procedures performed by a CPA firm to provide an opinion, conclusion, or findings on the reliability of the information or assertion made by a third party.
The three common types of attestation services are audits, reviews, and "other" attestation services. These services are differentiated based on the level of assurance provided by the CPA firm.
Compliance audits primarily focus on assessing an organization's adherence to laws, regulations, policies, and industry standards. They aim to ensure that the organization is operating in compliance with relevant legal and regulatory requirements. Compliance audits primarily assess the organization's compliance with external standards rather than evaluating the efficiency and effectiveness of its operating procedures and methods. Efficiency and effectiveness evaluations are typically conducted through operational or performance audits.
The most common accounting basis used in the audit of historical financial statements is "Generally Accepted Accounting Principles" (GAAP). GAAP refers to a set of standard accounting principles, concepts, and practices that are widely accepted and used by the accounting profession to prepare and present financial statements.
