Auditing and Assurance Services

by Arens, Alvin A.; Elder, Randal J.; Beasley, Mark S.; Hogan, Chris E.

• ISBN13: 9780134067124
• ISBN10: 0134067126
• Edition: 16th
• Copyright: 2016-02-22
• Publisher: Pearson

Summary

For the core auditing course for accounting majors.

 

An Integrated, Up-to-Date Approach to Auditing and Assurance Services

Comprehensive and up-to-date, including discussion of new standards, codes, and concepts, Auditing and Assurance Services: An Integrated Approach presents an integrated concepts approach to auditing that details the process from start to finish. Based on the author’s belief that the fundamental concepts of auditing center on the nature and amount of evidence that auditors should gather in specific engagements, this edition’s primary objective is to illustrate auditing concepts using practical examples and real-world settings.

 

The Sixteenth Edition remains up-to-date with examples of key real-world audit decisions and an emphasis on audit planning, risk assessment processes, and collecting and evaluating evidence in response to risks.

 

Also available with MyAccountingLab^®

MyAccountingLab is an online homework, tutorial, and assessment program designed to work with this text to engage students and improve results. Within its structured environment, students practice what they learn and test their understanding.

 

NOTE: You are purchasing a standalone product; MyAccountingLab does not come packaged with this content.

 

If you would like to purchase both the physical text and MyAccountingLab search for:

 

0134435095 / 9780134435091 Auditing and Assurance Services Plus MyAccountingLab with Pearson eText -- Access Card Package

 

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Author Biography

Al Arens, founding author of this textbook, was the PricewaterhouseCoopers Professor of Accounting Emeritus at Michigan State University. In addition to writing books on auditing, he was a coauthor of computerized accounting supplements and he was actively involved in the continuing education of practitioners with local and regional CPA firms. Al was a past president of the American Accounting Association and a former member of the AICPA Auditing Standards Board. He practiced public accounting with both a local CPA firm and the predecessor firm to Ernst & Young. He received many awards including the AAA Auditing Section Outstanding Educator award, the AICPA Outstanding Educator award, the national Beta Alpha Psi Professor of the Year award, and many teaching and other awards at Michigan State.

 

Randy Elder, who has served as a coauthor of this textbook since the 8th edition, is Professor of Accounting at Syracuse University. He teaches undergraduate and graduate auditing courses, and has received several teaching awards. His research focuses on audit quality and current audit firm practices and he served as the team leader for American Accounting Association Auditing Section PCAOB research synthesis teams on audit confirmations and audit sampling. He has extensive public accounting experience with a large regional CPA firm, frequently teaches continuing education for a large international CPA firm, and is a member of the AICPA and Michigan Association of CPAs.

 

Mark S. Beasley, who has also served as a coauthor of this textbook since the 8th edition, is the Deloitte Professor of Enterprise Risk Management and Professor of Accounting at North Carolina State University. He has taught undergraduate and graduate auditing courses, and has received several teaching awards including membership in NC State’s Academy of Outstanding Teachers. He has extensive professional audit experience with the predecessor firm to Ernst & Young and has extensive standards-setting experience working with the Auditing Standards Board as a Technical Manager in the Audit and Assurance Division of the AICPA. He served on the ASB Fraud Standard Task Force responsible for developing SAS 99, the ASB Antifraud Programs and Controls Task Force, and the Advisory Council overseeing the COSO Enterprise Risk Management Framework project. He recently completed over seven years of service as a member of the COSO Board, representing the AAA.

 

Chris Hogan is a Professor of Accounting in the Eli Broad College of Business at Michigan State University. We are thrilled to continue the Michigan State connection started by Al Arens. Chris teaches a graduate auditing course and her research focuses on internal controls and integrated audits, audit firm client portfolios, and the impact of regulation on audit markets. Chris has auditing experience with Price Waterhouse, one of the predecessor firms to PricewaterhouseCoopers, LLP. She has served in multiple leadership roles within the American Accounting Association, including serving as President of the Auditing Section and on the Audit Committee of the AAA.

Table of Contents

Part 1: The Auditing Profession

 

Chapter 1: The Demand for Audit and Other Assurance Services

·         Nature of Auditing

·         Distinction Between Auditing and Accounting

·         Economic Demand for Auditing

·         Assurance Services

·         Types of Audits

·         Types of Auditors

·         Certified Public Accountant

Chapter 2: The CPA Profession

·         Certified Public Accounting Firms

·         Structure of CPA Firms

·         Sarbanes—Oxley Act and Public Company Accounting Oversight Board

·         Securities and Exchange Commission

·         American Institute of Certified Public Accountants (AICPA)

·         International and U.S. Auditing Standards

·         Organization of U.S. Auditing Standards

·         Quality Control

Chapter 3: Audit Reports

·         Standard Unmodified Opinion Audit Report for Nonpublic Entities

·         Conditions for Standard Unmodified Opinion Audit Report

·         Standard Audit Report and Report on Internal Control Over Financial Reporting Under PCAOB Auditing Standards

·         Unmodified Opinion Audit Report with Emphasis-of-Matter Explanatory Paragraph or Nonstandard Report Wording

·         Modifications to the Opinion in the Audit Report

·         Materiality

·         Discussion of Conditions Requiring a Modification of Opinion

·         Auditor’s Decision Process for Audit Reports

·         International Accounting and Auditing Standards

Chapter 4: Professional Ethics

·         What Are Ethics?

·         Ethical Dilemmas

·         Special Need for Ethical Conduct in Professions

·         Code of Professional Conduct

·         Independence Rule

·         Sarbanes—Oxley and Related Independence Requirements

·         Other Rules of Conduct

·         Enforcement

Chapter 5: Legal Liability

·         Changed Legal Environment

·         Distinguishing Business Failure, Audit Failure, and Audit Risk

·         Legal Concepts Affecting Liability

·         Liability to Clients

·         Liability to Third Parties Under Common Law

·         Civil Liability Under the Federal Securities Laws

·         Criminal Liability

·         The Profession’s Response to Legal Liability

 

Part 2: The Audit Process

 

Chapter 6: Audit Responsibilities and Objectives

·         Objective of Conducting an Audit of Financial Statements

·         Management’s Responsibilities

·         Auditor’s Responsibilities

·         Professional Skepticism

·         Professional Judgment

·         Financial Statement Cycles

·         Setting Audit Objectives

·         Management Assertions

·         Transaction-Related Audit Objectives

·         Balance-Related and Presentation and Disclosure-Related Audit Objectives

·         How Audit Objectives Are Met

Chapter 7: Audit Evidence

·         Nature of Evidence

·         Audit Evidence Decisions

·         Persuasiveness of Evidence

·         Types of Audit Evidence

·         Analytical Procedures

·         Common Financial Ratios

·         Audit Documentation

Chapter 8: Audit Planning and Materiality

·         Planning

·         Accept Client and Perform Initial Audit Planning

·         Understand the Client’s Business and Industry

·         Perform Preliminary Analytical Procedures

·         Materiality

·         Materiality for Financial Statements as a Whole

·         Determine Performance Materiality

·         Estimate Misstatement and Compare with Preliminary Judgment

Chapter 9: Assessing the Risk of Material Misstatement

·         Audit Risk

·         Risk Assessment Procedures

·         Considering Fraud Risk

·         Identification of Significant Risks

·         Audit Risk Model

·         Assessing Acceptable Audit Risk

·         Assessing Inherent Risk

·         Relationship of Risks to Evidence and Factors Influencing Risks

·         Relationship of Risk and Materiality to Audit Evidence

Chapter 10: Assessing and Responding to Fraud Risks

·         Types of Fraud

·         Conditions for Fraud

·         Assessing the Risk of Fraud

·         Corporate Governance Oversight to Reduce Fraud Risks

·         Responding to the Risk of Fraud

·         Specific Fraud Risk Areas

·         Responsibilities When Fraud Is Suspected

·         Documenting the Fraud Assessment

Chapter 11: Internal Control and Coso Framework

·         Internal Control Objectives

·         Management and Auditor Responsibilities for Internal Control

·         COSO Components of Internal Control

·         Internal Controls Specific to Information Technology

·         Impact of IT Infrastructure on Internal Control

Chapter 12: Assessing Control Risk and Reporting on Internal Controls

·         Obtain and Document Understanding of Internal Control

·         Assess Control Risk

·         Tests of Controls

·         Decide Planned Detection Risk and Design Substantive Tests

·         Auditor Reporting on Internal Control

·         Evaluating, Reporting, and Testing Internal Control for Nonpublic and Smaller Public Companies

·         Impact of IT Environment on Control Risk Assessment and Testing

Chapter 13: Overall Audit Strategy and Audit Program

·         Types of Tests

·         Selecting Which Types of Tests to Perform

·         Evidence Mix

·         Design of the Audit Program

·         Summary of Key Evidence-Related Terms

·         Summary of the Audit Process

 

Part 3: Application of the Audit Process to the Sales and Collection Cycle

 

Chapter 14: Audit of the Sales and Collection Cycle: Tests of Controls and Substantive Tests of Transaction

·         Accounts and Classes of Transactions in the Sales and Collection Cycle

·         Business Functions in the Cycle and Related Documents and Records

·         Methodology for Designing Tests of Controls and Substantive Tests of Transactions for Sales

·         Sales Returns and Allowances

·         Methodology for Designing Tests of Controls and Substantive Tests of Transactions for Cash Receipts

·         Audit Tests for Uncollectible Accounts

·         Effect of Results of Tests of Controls and Substantive Tests of Transactions

Chapter 15: Audit Sampling for Tests of Controls and Substantive Tests of Transactions

·         Representative Samples

·         Statistical Versus Nonstatistical Sampling and Probabilistic Versus Nonprobabilistic Sample Selection

·         Sample Selection Methods

·         Sampling for Exception Rates

·         Application of Nonstatistical Audit Sampling

·         Statistical Audit Sampling

·         Application of Attributes Sampling

Chapter 16: Completing the Tests in the Sales and Collection Cycle: Accounts Receivable

·         Methodology for Designing Tests of Details of Balances

·         Designing Tests of Details of Balances

·         Confirmation of Accounts Receivable

·         Developing Tests of Details Audit Program

Chapter 17: Audit Sampling for Tests of Details of Balances

·         Comparisons of Audit Sampling for Tests of Details of Balances and for Tests of Controls and Substantive Tests of Transactions

·         Nonstatistical Sampling

·         Monetary Unit Sampling

·         Variables Sampling

·         Illustration Using Difference Estimation

 

Part 4: Application of the Audit Process to Other Cycles

 

Chapter 18: Audit of the Acquisition and Payment Cycle: Tests of Controls, Substantive Tests of Transactions, and Accounts Payable

·         Accounts and Classes of Transactions in the Acquisition and Payment Cycle

·         Business Functions in the Cycle and Related Documents and Records

·         Methodology for Designing Tests of Controls and Substantive Tests of Transactions

·         Methodology for Designing Tests of Details of Balances for Accounts Payable

Chapter 19: Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts

·         Types of Other Accounts in the Acquisition and Payment Cycle

·         Audit of Property, Plant, and Equipment

·         Audit of Prepaid Expenses

·         Audit of Accrued Liabilities

·         Audit of Income and Expense Accounts

Chapter 20: Audit of the Payroll and Personnel Cycle

·         Accounts and Transactions in the Payroll and Personnel Cycle

·         Business Functions in the Cycle and Related Documents and Records

·         Methodology for Designing Tests of Controls and Substantive Tests of Transactions

·         Methodology for Designing Substantive Analytical Procedures and Tests of Details of Balances

Chapter 21: Audit of the Inventory and Warehouse Cycle

·         Business Functions in the Cycle and Related Documents and Records

·         Parts of the Audit of Inventory

·         Audit of Cost Accounting

·         Substantive Analytical Procedures

·         Physical Observation of Inventory

·         Audit of Pricing and Compilation

·         Integration of the Tests

Chapter 22: Audit of the Capital Acquisition and Repayment Cycle

·         Accounts in the Cycle

·         Notes Payable

·         Owners’ Equity

Chapter 23: Audit of Cash and Financial Instruments

·         Types of Cash and Financial Instruments Accounts

·         Cash in the Bank and Transaction Cycles

·         Audit of the General Cash Account

·         Fraud-Oriented Procedures

·         Audit of Financial Instruments Accounts

 

Part 5: Completing the Audit

 

Chapter 24: Completing the Audit

·         Perform Additional Tests for Presentation and Disclosure

·         Review for Contingent Liabilities and Commitments

·         Review for Subsequent Events

·         Final Evidence Accumulation

·         Evaluate Results

·         Issue the Audit Report

·         Communicate with the Audit Committee and Management

·         Subsequent Discovery of Facts

 

Part 6: Other Assurance and Nonassurance Services

 

Chapter 25: Other Assurance Services

·         Review, Compilation, and Preparation Services

·         Review of Interim Financial Information for Public Companies

·         Attestation Engagements

·         Reports on Controls at Service Organizations (SOC Reports)

·         Prospective Financial Statements

·         Agreed-Upon Procedures Engagements

·         Other Audits or Limited Assurance Engagements

Chapter 26: Internal and Governmental Financial Auditing and Operational Auditing

·         Internal Financial Auditing

·         Governmental Financial Auditing

Operational Auditing