Auditing and Assurance Services: An Integrated Approach,9780131867123

Auditing and Assurance Services: An Integrated Approach

by ; ;
Edition: 11th
ISBN13: 9780131867123
ISBN10: 0131867121
Format: Hardcover
Pub. Date: 2006-01-01
Publisher(s): Prentice Hall
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Summary

Theundisputed #1 market leading bookcontinues to be an innovative look at the most current changes and happenings in the auditing profession! Topics appear as they would during the audit planning and execution stage rather than as isolated pieces of information.Fraud detection; integration of SECTION 404 of the Sarbanes-Oxley Act of 2002 and related SEC and PCAOB rulemakings; internal controls -- Internal Control and Control Risk.For individuals interested in the auditing, accounting, and consulting fields.

Table of Contents

Preface xii
PART 1 The Auditing Profession
The Demand for Audit and Other Assurance Services
3(22)
Learning Objectives
3(15)
Nature of Auditing
4(2)
Distinction Between Auditing and Accounting
6(1)
Economic Demand for Auditing
6(2)
Assurance Services
8(6)
Types of Audits
14(1)
Types of Auditors
15(2)
Certified Public Accountant
17(1)
Summary
18(1)
Essential Terms
18(1)
Review Questions
19(1)
Multiple Choice Questions from CPA Examinations
19(1)
Discussion Questions and Problems
20(3)
Internet Problem 1-1: Assurance Services
23(2)
The CPA Profession
25(20)
Learning Objectives
25(14)
Certified Public Accounting Firms
26(1)
Activities of CPA Firms
27(1)
Structure of CPA Firms
28(2)
Sarbanes--Oxley Act and Public Company Accounting Oversight Board
30(1)
Securities and Exchange Commission
31(1)
American Institute of Certified Public Accountants (AICPA)
32(1)
Generally Accepted Auditing Standards
33(3)
Statements on Auditing Standards
36(1)
International Standards on Auditing
36(1)
Quality Control
37(2)
Summary
39(1)
Essential Terms
39(1)
Review Questions
40(1)
Multiple Choice Questions from CPA Examinations
41(1)
Discussion Questions and Problems
42(2)
Internet Problem 2-1: CPA Vision Project
44(1)
Audit Reports
45(28)
Learning Objectives
45(19)
Standard Unqualified Audit Report
46(3)
Combined Reports on Financial Statements and Internal Control Over Financial Reporting
49(2)
Unqualified Audit Report with Explanatory Paragraph or Modified Wording
51(3)
Departures from an Unqualified Audit Report
54(2)
Materiality
56(2)
Discussion of Conditions Requiring a Departure
58(4)
Auditor's Decision Process for Audit Reports
62(2)
Impact of E-Commerce on Audit Reporting
64(1)
Summary
64(1)
Essential Terms
64(1)
Review Questions
65(1)
Multiple Choice Questions from CPA Examinations
66(1)
Discussion Questions and Problems
67(5)
Internet Problem 3-1: Research Annual Reports
72(1)
Professional Ethics
73(34)
Learning Objectives
73(26)
What Are Ethics?
74(1)
Ethical Dilemmas
75(3)
Special Need for Ethical Conduct in Professions
78(2)
Code of Professional Conduct
80(3)
Independence
83(3)
Independence Rule of Conduct and Interpretations
86(4)
Other Rules of Conduct
90(7)
Enforcement
97(2)
Summary
99(1)
Essential Terms
99(1)
Review Questions
99(1)
Multiple Choice Questions from CPA Examinations
99(2)
Discussion Questions and Problems
101(3)
Cases
104(2)
Internet Problem 4-1: AICPA Code of Professional Conduct---Ethics Rulings and Case
106(1)
Legal Liability
107(26)
Learning Objectives
107(18)
Changed Legal Environment
108(1)
Distinction Among Business Failure, Audit Failure, and Audit Risk
109(1)
Legal Concepts Affecting Liability
110(2)
Liability to Clients
112(2)
Liability to Third Parties Under Common Law
114(3)
Civil Liability Under the Federal Securities Laws
117(4)
Criminal Liability
121(1)
The Profession's Response to Legal Liability
122(2)
Protecting Individual CPAs from Legal Liability
124(1)
Summary
125(1)
Essential Terms
125(1)
Review Questions
126(1)
Multiple Choice Questions from CPA Examinations
127(1)
Discussion Questions and Problems
128(3)
Case
131(1)
Internet Problem 5-1: SEC Enforcement
131(2)
PART 2 The Audit Process
Audit Responsibilities and Objectives
133(28)
Learning Objectives
133(20)
Objective of Conducting an Audit of Financial Statements
134(1)
Management's Responsibilities
135(1)
Auditor's Responsibilities
136(3)
Financial Statement Cycles
139(5)
Setting Audit Objectives
144(2)
Transaction-Related Audit Objectives
146(2)
Balance-Related Audit Objectives
148(2)
How Audit Objectives Are Met
150(2)
Summary
152(1)
Essential Terms
153(1)
Review Questions
153(1)
Multiple Choice Questions from CPA Examinations
154(1)
Discussion Questions and Problems
155(4)
Case
159(1)
Internet Problem 6-1: Assertions and Evidence Associated with New Assurance Services
160(1)
Audit Evidence
161(32)
Learning Objectives
161(22)
Nature of Evidence
162(1)
Audit Evidence Decisions
163(1)
Persuasiveness of Evidence
164(3)
Types of Audit Evidence
167(7)
Audit Documentation
174(9)
Summary of Audit Documentation
183(1)
Essential Terms
183(1)
Review Questions
184(1)
Multiple Choice Questions from CPA Examinations
185(1)
Discussion Questions and Problems
186(3)
Cases
189(3)
Internet Problem 7-1: Electronic Evidence
192(1)
Audit Planning and Analytical Procedures
193(38)
Learning Objectives
193(24)
Planning
194(1)
Accept Client and Perform Initial Audit Planning
194(5)
Understand the Client's Business and Industry
199(5)
Assess Client Business Risk
204(1)
Perform Preliminary Analytical Procedures
205(2)
Summary of the Purposes of Audit Planning
207(1)
Analytical Procedures
208(1)
Five Types of Analytical Procedures
209(6)
Common Financial Ratios
215(2)
Summary of Analytical Procedures
217(1)
Essential Terms
217(1)
Review Questions
217(1)
Multiple Choice Questions from CPA Examinations
218(2)
Discussion Questions and Problems
220(4)
Cases
224(3)
Integrated Case Application---Pinnacle Manufacturing: Part I
227(2)
Internet Problem 8-1: Industry Research and Client Acceptance
229(1)
Internet Problem 8-2: Obtain Client Background Information
229(2)
Materiality and Risk
231(38)
Learning Objectives
231(24)
Materiality
232(1)
Set Preliminary Judgment about Materiality
233(3)
Allocate Preliminary Judgment about Materiality to Segments (Tolerable Misstatement)
236(2)
Estimate Misstatement and Compare with Preliminary Judgment
238(1)
Risk
239(2)
Types of Risks
241(2)
Assessing Acceptable Audit Risk
243(2)
Assessing Inherent Risk
245(3)
Relationship of Risks to Evidence and Factors Influencing Risks
248(4)
Evaluating Results
252(3)
Essential Terms
255(1)
Review Questions
255(1)
Multiple Choice Questions from CPA Examinations
256(2)
Discussion Questions and Problems
258(5)
Cases
263(3)
Integrated Case Application---Pinnacle Manufacturing: Part II
266(1)
Internet Problem 9-1: Materiality and Tolerable Misstatement
267(2)
Section 404 Audits of Internal Control and Control Risk
269(44)
Learning Objectives
269(31)
Internal Control Objectives
270(1)
Management and Auditor Responsibilities Related to Internal Control
271(3)
COSO Components of Internal Control
274(9)
Obtain and Document Understanding of Internal Control
283(4)
Assess Control Risk
287(5)
Tests of Controls
292(3)
Decide Planned Detection Risk and Design Substantive Tests
295(1)
Section 404 Reporting on Internal Control
295(2)
Evaluating, Reporting, and Testing Internal Control for Nonpublic Company
297(2)
Summary
299(1)
Essential Terms
300(1)
Review Questions
301(2)
Multiple Choice Questions from CPA Examinations
303(1)
Discussion Questions and Problems
304(5)
Case
309(1)
Integrated Case Application---Pinnacle Manufacturing: Part III
310(2)
Internet Problem 10-1: Corporate Governance
312(1)
Fraud Auditing
313(32)
Learning Objectives
313(24)
Types of Fraud
314(1)
Conditions for Fraud
315(4)
Assessing the Risk of Fraud
319(3)
Corporate Governance Oversight to Reduce Fraud Risks
322(5)
Responding to the Risk of Fraud
327(2)
Specific Fraud Risk Areas
329(5)
Responsibilities when Fraud is Suspected
334(3)
Summary
337(1)
Essential Terms
337(1)
Review Questions
338(1)
Multiple Choice Questions from CPA Examinations
338(2)
Discussion Questions and Problems
340(2)
Case
342(1)
Internet Problem 11-1: Fraud Best Practices
343(2)
The Impact of Information Technology on the Audit Process
345(30)
Learning Objectives
345(19)
How Information Technologies Enhance Internal Control
346(1)
Assessing Risks of Information Technology
347(1)
Internal Controls Specific to Information Technology
348(6)
Impact of Information Technology on the Audit Process
354(5)
Issues for Different IT Environments
359(4)
Summary
363(1)
Essential Terms
364(1)
Review Questions
364(1)
Multiple Choice Questions from CPA Examinations
365(1)
Discussion Questions and Problems
366(5)
Case
371(2)
Internet Problem 12-1: COBIT
373(2)
Overall Audit Plan and Audit Program
375(34)
Learning Objectives
375(23)
Types of Tests
376(4)
Selecting Which Types of Tests to Perform
380(3)
Impact of Information Technology on Audit Testing
383(1)
Evidence Mix
384(1)
Design of the Audit Program
385(9)
Summary of Key Evidence-Related Terms
394(1)
Summary of the Audit Process
395(3)
Essential Terms
398(1)
Review Questions
398(1)
Multiple Choice Questions from CPA Examinations
399(2)
Discussion Questions and Problems
401(4)
Cases
405(2)
Internet Problem 13-1: Assessing Effects of Evidence Mix
407(2)
PART 3 Application of the Audit Process to the Sales and Collection Cycle
Audit of the Sales and Collection Cycle: Tests of Controls and Substantive Tests of Transactions
409(34)
Learning Objectives
409(23)
Accounts and Classes of Transactions in the Sales and Collection Cycle
410(1)
Business Functions in the Cycle and Related Documents and Records
411(5)
Methodology for Designing Tests of Controls and Substantive Tests of Transactions for Sales
416(9)
Sales Returns and Allowances
425(1)
Methodology for Designing Tests of Controls and Substantive Tests of Transactions for Cash Receipts
426(4)
Audit Tests for Uncollectible Accounts
430(1)
Additional Internal Controls over Account Balances
431(1)
Effect of Results of Tests of Controls and Substantive Tests of Transactions
431(1)
Summary
432(1)
Essential Terms
432(1)
Review Questions
433(1)
Multiple Choice Questions from CPA Examinations
434(1)
Discussion Questions and Problems
435(5)
Case
440(1)
Integrated Case Application---Pinnacle Manufacturing: Part IV
441(1)
Internet Problem 14-1: Electronic Signatures
441(2)
Audit Sampling for Tests of Controls and Substantive Tests of Transactions
443(40)
Learning Objectives
443(29)
Representative Samples
444(1)
Statistical Versus Nonstatistical Sampling and Probabilistic Versus Nonprobabilistic Sample Selection
445(1)
Nonprobabilistic Sample Selection Methods
446(1)
Probabilistic Sample Selection Methods
447(2)
Sampling for Exception Rates
449(2)
Application of Nonstatistical Audit Sampling
451(15)
Statistical Audit Sampling
466(1)
Sampling Distribution
466(1)
Application of Attributes Sampling
467(5)
Essential Terms
472(1)
Review Questions
473(1)
Multiple Choice Questions from CPA Examinations
474(1)
Discussion Questions and Problems
475(4)
Case
479(1)
Integrated Case Application---Pinnacle Manufacturing: Part V
479(2)
Internet Problem 15-1: Sampling for U.S. Census
481(2)
Completing the Tests in the Sales and Collection Cycle: Accounts Receivable
483(36)
Learning Objectives
483(22)
Methodology for Designing Tests of Details of Balances
484(7)
Designing Tests of Details of Balances
491(6)
Confirmation of Accounts Receivable
497(5)
Developing Tests of Details Audit Program
502(3)
Essential Terms
505(1)
Review Questions
505(1)
Multiple Choice Questions from CPA Examinations
506(1)
Discussion Questions and Problems
507(6)
Case
513(1)
Integrated Case Application---Pinnacle Manufacturing: Part VI
513(1)
Internet Problem 16-1: Revenue Recognition
514(5)
Audit Sampling for Tests of Details of Balances
519(40)
Learning Objectives
519(31)
Comparisons of Audit Sampling for Tests of Details of Balances and for Tests of Controls and Substantive Tests of Transactions
520(1)
Nonstatistical Sampling
520(9)
Monetary Unit Sampling
529(10)
Variables Sampling
539(5)
Illustration Using Difference Estimation
544(6)
Essential Terms
550(1)
Review Questions
550(2)
Multiple Choice Questions from CPA Examinations
552(1)
Discussion Questions and Problems
553(3)
Cases
556(1)
Internet Problem 17-1: Audit Sampling Strategies
557(2)
PART 4 Application of the Audit Process to Other Cycles
Audit of the Payroll and Personnel Cycle
559(22)
Learning Objectives
559(14)
Accounts and Transactions in the Payroll and Personnel Cycle
560(1)
Business Functions in the Cycle and Related Documents and Records
560(4)
Methodology for Designing Tests of Controls and Substantive Tests of Transactions
564(5)
Methodology for Designing Tests of Details of Balances
569(4)
Summary
573(1)
Essential Terms
573(1)
Review Questions
573(1)
Multiple Choice Questions from CPA Examinations
574(1)
Discussion Questions and Problems
575(3)
Case
578(1)
Internet Problem 18-1: Outsourcing the Payroll Function
579(2)
Audit of the Acquisition and Payment Cycle: Tests of Controls, Substantive Tests of Transactions, and Accounts Payable
581(30)
Learning Objectives
581(19)
Accounts and Classes of Transactions in the Acquisition and Payment Cycle
582(1)
Business Functions in the Cycle and Related Documents and Records
582(4)
How E-Commerce Affects the Acquisition and Payment Cycle
586(1)
Methodology for Designing Tests of Controls and Substantive Tests of Transactions
586(6)
Methodology for Designing Tests of Details of Balances for Accounts Payable
592(7)
Summary
599(1)
Essential Terms
600(1)
Review Questions
601(1)
Multiple Choice Questions from CPA Examinations
602(1)
Discussion Questions and Problems
603(5)
Case
608(2)
Internet Problem 19-1: Managing the Accounts Payable Function
610(1)
Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts
611(26)
Learning Objectives
611(17)
Types of Other Accounts in the Acquisition and Payment Cycle
612(1)
Audit of Property, Plant, and Equipment
612(8)
Audit of Prepaid Expenses
620(2)
Audit of Accrued Liabilities
622(2)
Audit of Income and Expense Accounts
624(4)
Summary
628(1)
Essential Terms
628(1)
Review Questions
628(1)
Multiple Choice Questions from CPA Examinations
629(1)
Discussion Questions and Problems
630(2)
Cases
632(2)
Internet Problem 20-1: Managing Fixed Assets
634(3)
Audit of the Inventory and Warehousing Cycle
637(28)
Learning Objectives
637(19)
Business Functions in the Cycle and Related Documents and Records
638(3)
How E-Commerce Affects Inventory Management
641(1)
Parts of the Audit of Inventory
641(2)
Audit of Cost Accounting
643(3)
Analytical Procedures
646(1)
Methodology for Designing Tests of Details of Balances
646(2)
Physical Observation of Inventory
648(3)
Audit of Pricing and Compilation
651(3)
Integration of the Tests
654(1)
Summary
655(1)
Essential Terms
656(1)
Review Questions
656(1)
Multiple Choice Questions from CPA Examinations
657(1)
Discussion Questions and Problems
658(5)
Case
663(1)
Internet Problem 21-1: Using Inventory Count Specialists
664(1)
Audit of the Capital Acquisition and Repayment Cycle
665(20)
Learning Objectives
665(14)
Accounts in the Cycle
666(2)
Notes Payable
668(5)
Owners' Equity
673(5)
E-Commerce and Capital Acquisition
678(1)
Summary
679(1)
Essential Terms
679(1)
Review Questions
679(1)
Multiple Choice Questions from CPA Examinations
680(1)
Discussion Questions and Problems
681(3)
Internet Problem 22-1: Stock Exchange Requirements
684(1)
Audit of Cash Balances
685(26)
Learning Objectives
685(17)
Cash in the Bank and Transaction Cycles
686(2)
Types of Cash Accounts
688(1)
Audit of the General Cash Account
689(7)
Fraud-Oriented Procedures
696(5)
Audit of the Imprest Payroll Bank Account
701(1)
Audit of Imprest Petty Cash
701(1)
Summary
702(1)
Essential Terms
702(1)
Review Questions
703(1)
Multiple Choice Questions from CPA Examinations
704(1)
Discussion Questions and Problems
704(4)
Case
708(1)
Internet Problem 23-1: Electronic Money
709(2)
PART 5 Completing the Audit
Completing the Audit
711(30)
Learning Objectives
711(20)
Review for Contingent Liabilities and Commitments
712(5)
Review for Subsequent Events
717(3)
Final Evidence Accumulation
720(3)
Evaluate Results
723(5)
Issue the Audit Report
728(1)
Communicate with the Audit Committee and Management
728(2)
Subsequent Discovery of Facts
730(1)
Essential Terms
731(1)
Review Questions
732(1)
Multiple Choice Questions from CPA Examinations
733(2)
Discussion Questions and Problems
735(3)
Case
738(1)
Internet Problem 24-1: Subsequent Events
739(2)
PART 6 Other Assurance and Nonassurance Services
Other Assurance Services
741(28)
Learning Objectives
741(20)
Attestation Engagements
742(5)
SysTrust Services
747(1)
Prospective Financial Statements
747(3)
Agreed-Upon Procedures Engagements
750(1)
Review and Compilation Services
750(5)
Review of Interim Financial Information for Public Companies
755(1)
Other Audits or Limited Assurance Engagements
756(5)
Summary
761(1)
Essential Terms
761(1)
Review Questions
761(1)
Multiple Choice Questions from CPA Examinations
762(2)
Discussion Questions and Problems
764(4)
Internet Problem 25-1: Reporting on Quarterly Financial Information
768(1)
Internal and Governmental Financial Auditing and Operational Auditing
769(24)
Learning Objectives
769(15)
Internal Financial Auditing
771(2)
Governmental Financial Auditing
773(3)
Operational Auditing
776(8)
Summary
784(1)
Essential Terms
784(1)
Review Questions
785(1)
Multiple Choice Questions from CPA, IIA, and CMA Examinations
786(2)
Cases
788(3)
Internet Problem 26-1: Institute of Internal Auditors
791(2)
Index 793

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