Auditing And Assurance Services: An Integrated Approach, 17th Edition PDF by Alvin A. Arens, Randal J. Elder, Mark s. Beasley and Chris e. Hogan

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Auditing And Assurance services: An integrated Approach, Sixteenth Edition

By Alvin A. Arens, Randal J. elder, Mark s. Beasley and Chris e. Hogan

Auditing And Assurance services An integrated Approach Sixteenth Edition

Contents:

Preface 17

Contents

Part1 The Auditing Profession

Chapter 1: The demand for Audit And other Assurance services

Learning objectives 27

Nature of Auditing 28

Distinction Between Auditing and Accounting 30

Economic Demand for Auditing 30

Assurance Services 32

Types of Audits 36

Types of Auditors 38

Certified Public Accountant 40

Summary 41

Essential Terms 41

Review Questions 42

Multiple Choice Questions from CPA Examinations 42

Discussion Questions and Problems 44

Chapter 2: The CPA Profession

Learning objectives 48

Certified Public Accounting Firms 49

Structure of CPA Firms 51

Sarbanes–Oxley Act and Public Company Accounting Oversight Board 53

Securities and Exchange Commission 54

American Institute of Certified Public Accountants (AICPA) 55

International and U.S. Auditing Standards 56

Organization of U.S. Auditing Standards 58

Quality Control 62

Summary 64

Essential Terms 65

Review Questions 65

Multiple Choice Questions from CPA Examinations 66

Discussion Questions and Problems 68

Chapter 3: Audit reports

Learning Objectives 70

Standard Unmodified Opinion Audit Report for Nonpublic Entities 71

Conditions for Standard Unmodified Opinion Audit Report 74

Standard Audit Report and Report on Internal Control Over Financial

Reporting Under PCAOB Auditing Standards 74

Unmodified Opinion Audit Report with Emphasis-of-Matter Explanatory

Paragraph or Nonstandard Report Wording 78

Modifications to the Opinion in the Audit Report 82

Materiality 84

Discussion of Conditions Requiring a Modification of Opinion 87

Auditor’s Decision Process for Audit Reports 90

International Accounting and Auditing Standards 92

Summary 93

Essential Terms 93

Review Questions 94

Multiple Choice Questions from CPA Examinations 95

Discussion Questions and Problems 96

Chapter 4 Professional Ethics

Learning Objectives 102

What Are Ethics? 103

Ethical Dilemmas 104

Special Need for Ethical Conduct in Professions 107

Code of Professional Conduct 109

Independence Rule 113

Sarbanes–Oxley and Related Independence Requirements 117

Other Rules of Conduct 120

Enforcement 127

Summary 129

Essential Terms 129

Review Questions 129

Multiple Choice Questions from CPA Examinations 130

Discussion Questions and Problems 132

Cases 135

Chapter 5: Legal Liability

Learning Objectives 138

Changed Legal Environment 139

Distinguishing Business Failure, Audit Failure, and Audit Risk 140

Legal Concepts Affecting Liability 141

Liability to Clients 143

Liability to Third Parties Under Common Law 146

Civil Liability Under the Federal Securities Laws 148

Criminal Liability 154

The Profession’s Response to Legal Liability 155

Summary 156

Essential Terms 156

Review Questions 157

Multiple Choice Questions from CPA Examinations 158

Discussion Questions and Problems 160

Case 164

Part 2 The Audit Process

Chapter 6: Audit Responsibilities And Objectives

Learning Objectives 166

Objective of Conducting an Audit of Financial Statements 167

Management’s Responsibilities 168

Auditor’s Responsibilities 169

Professional Skepticism 172

Professional Judgment 174

Financial Statement Cycles 176

Setting Audit Objectives 181

Management Assertions 182

Transaction-Related Audit Objectives 185

Balance-Related and Presentation and Disclosure-Related Audit

Objectives 186

How Audit Objectives Are Met 190

Summary 192

Essential Terms 192

Review Questions 193

Multiple Choice Questions from CPA Examinations 194

Discussion Questions and Problems 196

Chapter 7: Audit Evidence

Learning Objectives 219

Nature of Evidence 220

Audit Evidence Decisions 221

Persuasiveness of Evidence 222

Types of Audit Evidence 225

Analytical Procedures 232

Common Financial Ratios 236

Audit Documentation 239

Summary 247

Essential Terms 247

Review Questions 248

Multiple Choice Questions from CPA Examinations 249

Discussion Questions and Problems 251

Case 258

ACL Problem 259

Chapter 8: Audit Planning And Materiality

Learning Objectives 260

Planning 261

Accept Client and Perform Initial Audit Planning 262

Understand the Client’s Business and Industry 266

Perform Preliminary Analytical Procedures 271

Materiality 274

Materiality for Financial Statements as a Whole 275

Determine Performance Materiality 278

Estimate Misstatement and Compare with Preliminary Judgment 281

Summary 283

Essential Terms 283

Review Questions 285

Multiple Choice Questions from CPA Examinations 287

Discussion Questions and Problems 289

Case 296

Integrated Case Application—Pinnacle Manufacturing: Part I 297

ACL Problem 300

Chapter 9: Assessing The Risk Of Material Misstatement

Learning Objectives 301

Audit Risk 302

Risk Assessment Procedures 303

Considering Fraud Risk 307

Identification of Significant Risks 308

Audit Risk Model 309

Assessing Acceptable Audit Risk 313

Assessing Inherent Risk 316

Relationship of Risks to Evidence and Factors Influencing Risks 318

Relationship of Risk and Materiality to Audit Evidence 323

Summary 324

Essential Terms 324

Review Questions 324

Multiple Choice Questions from CPA Examinations 326

Discussion Questions and Problems 328

Cases 332

Integrated Case Application—Pinnacle Manufacturing: Part II 334

Chapter 10: Assessing And Responding To Fraud Risks

Learning Objectives 337

Types of Fraud 338

Conditions for Fraud 339

Assessing the Risk of Fraud 343

Corporate Governance Oversight to Reduce Fraud Risks 347

Responding to the Risk of Fraud 351

Specific Fraud Risk Areas 353

Responsibilities When Fraud Is Suspected 359

Documenting the Fraud Assessment 363

Summary 363

Essential Terms 364

Review Questions 364

Multiple Choice Questions from CPA Examinations 365

Discussion Questions and Problems 367

Case 372

Integrated Case Application—Pinnacle Manufacturing: Part III 373

ACL Problem 374

Chapter 11: Internal Control And Coso Framework

Learning Objectives 375

Internal Control Objectives 376

Management and Auditor Responsibilities for Internal Control 377

COSO Components of Internal Control 379

Internal Controls Specific to Information Technology 389

Impact of IT Infrastructure on Internal Control 395

Summary 397

Essential Terms 397

Review Questions 399

Multiple Choice Questions from CPA Examinations 400

Discussion Questions and Problems 401

Case 405

Chapter 12: Assessing Control Risk And Reporting On Internal Controls

Learning Objectives 407

Obtain and Document Understanding of Internal Control 408

Assess Control Risk 411

Tests of Controls 417

Decide Planned Detection Risk and Design Substantive Tests 421

Auditor Reporting on Internal Control 422

Evaluating, Reporting, and Testing Internal Control for Nonpublic

and Smaller Public Companies 425

Impact of IT Environment on Control Risk Assessment and Testing 426

Summary 430

Essential Terms 430

Review Questions 432

Multiple Choice Questions from CPA Examinations 433

Discussion Questions and Problems 435

Case 443

ACL Problem 445

Integrated Case Application—Pinnacle Manufacturing: Part IV 445

Chapter 13: Overall Audit Strategy And Audit Program

Learning Objectives 448

Types of Tests 449

Selecting Which Types of Tests to Perform 454

Evidence Mix 458

Design of the Audit Program 459

Summary of Key Evidence-Related Terms 467

Summary of the Audit Process 469

Summary 473

Essential Terms 473

Review Questions 474

Multiple Choice Questions from CPA Examinations 475

Discussion Questions and Problems 476

Cases 482

Part3 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 Transactions

Learning Objectives 486

Accounts and Classes of Transactions in the Sales and Collection Cycle 487

Business Functions in the Cycle and Related Documents and Records 488

Methodology for Designing Tests of Controls and Substantive

Tests of Transactions for Sales 492

Sales Returns and Allowances 503

Methodology for Designing Tests of Controls and Substantive

Tests of Transactions for Cash Receipts 504

Audit Tests for Uncollectible Accounts 508

Effect of Results of Tests of Controls and Substantive

Tests of Transactions 508

Summary 509

Essential Terms 510

Review Questions 510

Multiple Choice Questions from CPA Examinations 512

Discussion Questions and Problems 514

Case 519

Integrated Case Application—Pinnacle Manufacturing: Part V 520

ACL Problem 521

Chapter 15: Audit Sampling For Tests Of Controls And Substantive Tests Of Transactions

Learning Objectives 522

Representative Samples 523

Statistical Versus Nonstatistical Sampling and Probabilistic Versus

Nonprobabilistic Sample Selection 524

Sample Selection Methods 525

Sampling for Exception Rates 528

Application of Nonstatistical Audit Sampling 529

Statistical Audit Sampling 543

Application of Attributes Sampling 546

Summary 552

Essential Terms 552

Review Questions 553

Multiple Choice Questions from CPA Examinations 554

Discussion Questions and Problems 556

Case 561

Integrated Case Application—Pinnacle Manufacturing: Part VI 561

ACL Problem 563

Chapter 16: Completing The Tests In The Sales And Collection Cycle: Accounts Receivable

Learning Objectives 564

Methodology for Designing Tests of Details of Balances 565

Designing Tests of Details of Balances 571

Confirmation of Accounts Receivable 577

Developing Tests of Details Audit Program 583

Summary 587

Essential Terms 587

Review Questions 587

Multiple Choice Questions from CPA Examinations 589

Discussion Questions and Problems 590

Case 597

Integrated Case Application—Pinnacle Manufacturing: Part VII 598

ACL Problem 603

Chapter 17:  Audit Sampling For Tests Of Details Of Balances

Learning Objectives 604

Comparisons of Audit Sampling for Tests of Details of Balances

and for Tests of Controls and Substantive Tests of Transactions 605

Nonstatistical Sampling 606

Monetary Unit Sampling 615

Variables Sampling 623

Illustration Using Difference Estimation 628

Summary 631

Essential Terms 632

Review Questions 632

Multiple Choice Questions from CPA and CIA Examinations 633

Discussion Questions and Problems 635

Cases 640

ACL Problem 642

Part4 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

Learning Objectives 644

Accounts and Classes of Transactions in the Acquisition

and Payment Cycle 645

Business Functions in the Cycle and Related Documents and Records 646

Methodology for Designing Tests of Controls and Substantive Tests of

Transactions 649

Methodology for Designing Tests of Details of Balances for Accounts

Payable 656

Summary 664

Essential Terms 664

Review Questions 665

Multiple Choice Questions from CPA Examinations 666

Discussion Questions and Problems 668

Case 674

Chapter 19: Completing The Tests In The Acquisition And Payment Cycle: Verification Of Selected Accounts

Learning Objectives 676

Types of Other Accounts in the Acquisition and Payment Cycle 677

Audit of Property, Plant, and Equipment 677

Audit of Prepaid Expenses 685

Audit of Accrued Liabilities 688

Audit of Income and Expense Accounts 689

Summary 693

Essential Terms 693

Review Questions 693

Multiple Choice Questions from CPA Examinations 694

Discussion Questions and Problems 696

Cases 699

Chapter 20: Audit Of The Payroll And Personnel Cycle

Learning Objectives 702

Accounts and Transactions in the Payroll and Personnel Cycle 703

Business Functions in the Cycle and Related Documents and Records 703

Methodology for Designing Tests of Controls and Substantive

Tests of Transactions 706

Methodology for Designing Substantive Analytical Procedures and

Tests of Details of Balances 712

Summary 716

Essential Terms 716

Review Questions 716

Multiple Choice Questions from CPA Examinations 717

Discussion Questions and Problems 719

Case 723

Chapter 21: Audit Of The Inventory And Warehousing Cycle

Learning Objectives 725

Business Functions in the Cycle and Related Documents and Records 726

Parts of the Audit of Inventory 729

Audit of Cost Accounting 731

Substantive Analytical Procedures 734

Physical Observation of Inventory 735

Audit of Pricing and Compilation 737

Integration of the Tests 741

Summary 743

Essential Terms 743

Review Questions 744

Multiple Choice Questions from CPA Examinations 745

Discussion Questions and Problems 746

Case 753

Chapter 22: Audit Of The Capital Acquisition And Repayment Cycle

Learning Objectives 755

Accounts in the Cycle 756

Notes Payable 757

Owners’ Equity 761

Summary 767

Essential Terms 767

Review Questions 768

Multiple Choice Questions from CPA Examinations 768

Discussion Questions and Problems 770

Chapter 23: Audit Of Cash And Financial Instruments

Learning Objectives 776

Types of Cash and Financial Instruments Accounts 777

Cash in the Bank and Transaction Cycles 779

Audit of the General Cash Account 780

Fraud-Oriented Procedures 788

Audit of Financial Instruments Accounts 793

Summary 796

Essential Terms 796

Review Questions 797

Multiple Choice Questions from CPA Examinations 798

Discussion Questions and Problems 799

Part5 Completing The Audit

Chapter 24: Completing The Audit

Learning Objectives 806

Perform Additional Tests for Presentation and Disclosure 807

Review for Contingent Liabilities and Commitments 808

Review for Subsequent Events 813

Final Evidence Accumulation 817

Evaluate Results 821

Issue the Audit Report 825

Communicate with the Audit Committee and Management 825

Subsequent Discovery of Facts 827

Summary 829

Essential Terms 829

Review Questions 830

Multiple Choice Questions from CPA Examinations 831

Discussion Questions and Problems 833

Case 837

Part6 Other Assurance And Nonassurance Services

Chapter 25: Other Assurance Services

Learning Objectives 839

Review, Compilation, and Preparation Services 840

Review of Interim Financial Information for Public Companies 846

Attestation Engagements 847

Reports on Controls at Service Organizations (SOC Reports) 851

Prospective Financial Statements 853

Agreed-Upon Procedures Engagements 854

Other Audits or Limited Assurance Engagements 855

Summary 857

Essential Terms 858

Review Questions 859

Multiple Choice Questions from CPA Examinations 860

Discussion Questions and Problems 861

Chapter 26: Internal And Governmental Financial Auditing And Operational Auditing

Learning Objectives 866

Internal Financial Auditing 867

Governmental Financial Auditing 870

Operational Auditing 873

Summary 880

Essential Terms 880

Review Questions 881

Multiple Choice Questions from CPA, CIA, and CMA Examinations 881

Discussion Questions and Problems 884

index 888

Credits 896

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