The Audit Committee Handbook

by Braiotta, Louis; Gazzaway, R. Trent; Colson, Robert; Ramamoorti, Sridhar

• ISBN13: 9780470560488
• ISBN10: 0470560487
• Edition: 5th
• Format: Hardcover
• Copyright: 2010-03-22
• Publisher: Wiley

Summary

With the current financial meltdown, new guidance from COSO and PCAOB has made audit committees even more accountable in their role of overseeing the audit function. The Audit Committee Handbook, Fifth Edition provides completely updated and expanded guidance on all functions and responsibilities of the audit committee. The Fifth Edition contains the latest regulatory changes that impact audit committees. Audit committee members, auditors, controllers, and board members will benefit from the new guidance on fraud risk and guidance found in this, the most authoritative work on audit committees.

Author Biography

Louis Braiotta, JR., CPA, is a professor of accounting in the School of Management at SUNY Binghamton. During his career, he has worked at Ernst & Ernst (now Ernst & Young). He was the 2002–2003 recipient of the New York State Society of CPAs' Dr. Emanuel Saxe Outstanding CPA in Education Award.

R. Trent Gazzaway is the national managing partner of audit services for Grant Thornton LLP.

Robert H. Colson, PHD, CPA, is a partner in the public policy and external affairs group of Grant Thornton LLP. He is responsible for the firm's engagement with academic researchers and a wide range of policy leaders associated with capital markets, accounting, auditing, financial regulation, and corporate governance.

Sridhar Ramamoorti, PHD, CPA/CITP/CFF, is a Principal with Infogix Advisory Services, Infogix, Inc., a software controls company. Previously, he was a corporate governance partner with Grant Thornton LLP.

Table of Contents

Preface	p. xi
Getting Acquainted with Your Responsibilities	p. 1
Corporate Accountability: Focus on the Audit Committee	p. 3
Appropriate Accounting Skills	p. 4
Internal Control Oversight	p. 5
Auditor Oversight	p. 6
Audit Committee Resources	p. 7
Transactional Economics	p. 8
The Nature and Importance of Corporate Accountability	p. 8
Developments in Corporate Accountability	p. 12
Corporate Accountability and the Audit Committee	p. 32
Conclusion	p. 43
Sources and Suggested Readings	p. 43
Audit Committees: Basic Roles and Responsibilities	p. 46
Organization of the Audit Committee	p. 47
The Audit Committee Functions	p. 63
The External and Internal Auditing Process	p. 82
Sources and Suggested Readings	p. 94
The External Users of Financial Reporting Information	p. 97
Introduction	p. 97
he Investors	p. 101
Credit Grantors	p. 110
Regulatory Agencies	p. 114
Other Outside Constituencies	p. 121
Important Developments in Business Reporting and Assurance Services	p. 122
Benchmarking	p. 130
Sources and Suggested Readings	p. 131
The Legal Environment of the Audit Committee	p. 134
General Legal Responsibilities	p. 139
Other Federal Provisions Related to Fraud	p. 149
Lessons for the Audit Committee from Litigation	p. 151
Guidelines for Minimizing Legal Liability	p. 166
Sources and Suggested Readings	p. 170
Rules of the Road: Financial Reports and Their Audits	p. 172
An Overview of U.S. Generally Accepted Auditing Standards	p. 174
An Analysis of the Auditing Standards	p. 176
Integration of Auditing and Related Accounting Standards	p. 179
Attestation Engagements	p. 188
International Auditing Standards	p. 195
Sources and Suggested Readings	p. 198
The Planning Function of the Audit Committee	p. 201
Planning the External Audit	p. 203
Financial Statement Assertions	p. 205
The Relationship between Risk and the External Audit	p. 206
The Engagement Team	p. 211
Types of Audit Tests	p. 211
Evaluating the External Audit Plan	p. 215
Sources and Suggested Readings	p. 217
Qualitative Factors That May Influence the Determination of Materiality	p. 219
Example Audit Planning Schedule	p. 221
Planning the Internal Audit	p. 224
Components of the Internal Audit Plan	p. 224
Enterprise Risk Management	p. 227
Oversight and Reporting	p. 228
Sources and Suggested Readings	p. 229
The Monitoring and Reviewing Functions of the Audit Committee	p. 231
Monitoring the System of Internal Control	p. 233
Definition and Basic Concepts	p. 235
Responsibility for the System of Internal Control	p. 238
Reporting Requirements	p. 241
Audit Committee Expectations	p. 245
Sources and Suggested Readings	p. 246
Evaluating the Internal and External Audit Function	p. 247
Selecting and Staffing an Internal Audit Function	p. 247
Monitoring the Internal Audit Function	p. 257
Selecting and Evaluating an External Auditor	p. 261
Reporting by the External Auditor	p. 266
Sources and Suggested Readings	p. 267
Communications between Auditors and Audit Committees	p. 269
Audit Committee's Review Objective	p. 269
Accounting Policy Disclosures	p. 272
Guidelines for Reviewing Accounting Policy Disclosures	p. 275
Sourcesand Suggested Readings	p. 278
A Perspective on Fraud and the Auditor	p. 279
Meaning of Fraud in a Financial Statement Auditor	p. 279
The External Auditor's Responsibility	p. 289
The Internal Auditor's Responsibility	p. 296
Investigating Known Fraud	p. 297
The Audit Committee's Oversight Approach to Fraud Risk Assessment	p. 299
Sources and Suggested Readings	p. 304
The Audit Committee, Corporate Culture, and Tone at the Top	p. 307
Questionable Foreign Payments	p. 307
Corporate Perquisites and Executive Compensation	p. 311
Executive Compensation	p. 316
Corporate Contributions	p. 317
Conclusion	p. 321
Sources and Suggested Readings	p. 324
The Reporting Function and the Audit Committee	p. 327
Independent Auditors' Reports	p. 329
The Auditors' Reports on Audited Financial Statements	p. 329
Other Auditing Opinions	p. 334
Other Reports of the Auditors	p. 338
Sources and Suggested Readings	p. 345
The Audit Committee's Report and Concluding Observations	p. 346
Purpose of the Audit Committee's Report	p. 347
Guidelines for Preparing the Report	p. 349
Concluding Observations	p. 355
Sources and Suggested Readings	p. 362
Appendix	p. 363
Professional Accounting Associations, Business Organizations, Boards, Commissions, and Directors Publications	p. 363
About the Authors	p. 367
Index	p. 371
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