Auditing & Assurance Services A Systematic Approach

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Acknowledgments
Brief Contents
Table of Contents
Chapter 1 An Introduction to Assurance and Financial Statement Auditing
	Tips for Learning Auditing (and How Learning It Will Benefit You!)
	The Demand for Auditing and Assurance
		Principals and Agents
		The Role of Auditing
		Seller Assertions, Information Asymmetry, and Inspector Characteristics
		Desired Characteristics of the House Inspection Service
	An Assurance Analogy: The Case of the House Inspector
		Relating the House Inspection Analogy to Financial Statement Auditing
		Management Assertions and Financial Statements
	Auditing, Attest, and Assurance Services Defined
	Fundamental Concepts in Conducting a Financial Statement Audit
		Materiality
		Audit Risk
		Audit Evidence Regarding Management Assertions
	Sampling: Inferences Based on Limited Observations
	The Audit Process
		Overview of the Financial Statement Auditing Process
		Major Phases of the Audit
		The Unqualified/Unmodified Audit Report
		Other Types of Audit Reports
	Audit Data Analytics
		Audit Data Analytics (ADA)
		Financial Technologies
		Technology and Professional Judgment
	Conclusion
		KEY TERMS
		REVIEW QUESTIONS
		MULTIPLE-CHOICE QUESTIONS
		PROBLEMS
		DISCUSSION CASE
		INTERNET ASSIGNMENT
		HANDS-ON CASES
		TABLEAU
		LEARNING OBJECTIVES
		RELEVANT ACCOUNTING AND AUDITING PRONOUNCEMENTS*
Chapter 2 The Financial Statement Auditing Environment
	External Auditors
		Internal Auditors
		Government Auditors
	Types of Auditors
		Fraud Auditors
		Other Audit Services
	Types of Other Audit, Attest, and Assurance Services
		Attest Services
		Assurance Services
		Other Non-audit/Non-assurance Services
	Public Accounting Firms
		Organization and Composition
		Government Regulation
	Two Decades of Challenge and Change for Financial Statement Auditors
	The Context of Financial Statement Auditing
		The Business Entity as the Primary Context of Auditing
	Society’s Expectations and the Auditor’s Responsibilities
	A Model of Business
		Corporate Governance
		Objectives, Strategies, Processes, Controls, Transactions, and Reports
		A Model of Business Processes: Five Components
	Organizations That Affect the Public Accounting Profession
		Securities and Exchange Commission (SEC)
		Public Company Accounting Oversight Board (PCAOB)
		American Institute of Certified Public Accountants (AICPA)
		International Auditing and Assurance Standards Board (IAASB)
		Financial Accounting Standards Board (FASB)
	Auditing Standards
		Three Sets of Auditing Standards: The Roles of the ASB, PCAOB, and IAASB
		Principles Underlying an Audit Conducted in Accordance with Generally Accepted Auditing Standards
		International Accounting Standards Board (IASB)
		The Nature of Auditing Standards and the Codification of Standards
	Ethics, Independence, and the Code of Professional Conduct
	Conclusion
		KEY TERMS
		REVIEW QUESTIONS
		MULTIPLE-CHOICE QUESTIONS
		PROBLEMS
		DISCUSSION CASES
		INTERNET ASSIGNMENTS
		HANDS-ON CASES
		TABLEAU
		CHAPTER 3
		CHAPTER 4
		CHAPTER 5
		LEARNING OBJECTIVES
		RELEVANT ACCOUNTING AND AUDITING PRONOUNCEMENTS*
Chapter 3 Audit Planning, Types of Audit Tests, and Materiality
	Prospective Client Acceptance
	Client Acceptance and Continuance
		Client Continuance
	Preliminary Engagement Activities
		Determine the Audit Engagement Team Requirements
		Assess Compliance with Ethical and Independence Requirements
		Establish an Understanding with the Entity
		Audit Strategy and Plan
	Planning the Audit
		Assess Business Risks
		Establish Materiality
		Consider Multilocations or Business Units
		Assess the Need for Specialists
		Consider Violations of Laws and Regulations
		Identify Related Parties
		Consider Additional Value-Added Services
		Document the Overall Audit Strategy, Audit Plan, and Prepare Audit Programs
		Risk Assessment Procedures
		Tests of Controls
	Supervision of the Audit
	Types of Audit Procedures
		Substantive Procedures
		Dual-Purpose Tests
		Audit Data Analytics
	Materiality
		Steps in Applying Materiality
		An Example
		KEY TERMS
		REVIEW QUESTIONS
		MULTIPLE-CHOICE QUESTIONS
		PROBLEMS
		DISCUSSION CASE
		INTERNET ASSIGNMENTS
		HANDS-ON CASES
		LEARNING OBJECTIVES
		RELEVANT ACCOUNTING AND AUDITING PRONOUNCEMENTS*
Chapter 4 Risk Assessment
	Audit Risk
		The Audit Risk Model
		Use of the Audit Risk Model
	The Auditor’s Risk Assessment Process
		Management’s Strategies, Objectives, and Business Risks
		Auditor’s Risk Assessment Procedures
		Assessing Business Risks
	Assessing the Risk of Material Misstatement
		Evaluate the Entity’s Risk Assessment Process
		Causes and Types of Misstatements
		The Fraud Risk Assessment Process
	The Auditor’s Response to the Results of the Risk Assessments
	Evaluation of Audit Test Results
	Documentation of the Auditor’s Risk Assessment and Response
	Communications about Fraud to Management, the Audit Committee, and Others
		KEY TERMS
		REVIEW QUESTIONS
		MULTIPLE-CHOICE QUESTIONS
		PROBLEMS
		DISCUSSION CASE
		INTERNET ASSIGNMENT
		HANDS-ON CASES
		TABLEAU
		LEARNING OBJECTIVES
		RELEVANT ACCOUNTING AND AUDITING PRONOUNCEMENTS*
Chapter 5 Evidence and Documentation
	The Relationship of Audit Evidence to the Audit Report
	Management Assertions
		Assertions about Classes of Transactions and Events, and Related Disclosures, for the Period under Audit
		Assertions about Account Balances, and Related Disclosures, at the Period End
	Understanding Audit Evidence
		Information Used as Audit Evidence
		The Sufficiency and Appropriateness of Audit Evidence
		The Evaluation of Audit Evidence
	Audit Procedures for Obtaining Audit Evidence
		Inspection
		Observation
		Inquiry
		Confirmation
		Recalculation
		Reperformance
		Analytical Procedures
	Reliability of Evidence
	The Audit Testing Hierarchy
		An “Assurance Bucket” Analogy
	Audit Documentation
		Purposes of Audit Documentation
		Content of Audit Documentation
		Examples of Audit Documentation
		Format of Audit Documentation
		Organization of Audit Documentation
		Ownership of Audit Documentation
		Audit Document Archiving and Retention
	Advanced Module: Analytical Procedures
		Risk Assessment Analytical Procedures
		Substantive Analytical Procedures
	Auditor Decision Process-Analytical Procedures
		Final Analytical Procedures
	Types of Analytical Procedures
		KEY TERMS
		REVIEW QUESTIONS
		MULTIPLE-CHOICE QUESTIONS
		PROBLEMS
		DISCUSSION CASES
		INTERNET ASSIGNMENT
		HANDS-ON CASES
		TABLEAU
		CHAPTER 6
		CHAPTER 7
		LEARNING OBJECTIVES
		RELEVANT ACCOUNTING AND AUDITING PRONOUNCEMENTS*
Chapter 6 Internal Control in a Financial Statement Audit
	Introduction
		Definition of Internal Control
		Controls Relevant to the Audit
	Internal Control—an Overview
		The Effect of Information Technology on Internal Control
	The COSO Framework
		Components of Internal Control
		Control Environment
		The Entity’s Risk Assessment Process
		Control Activities
		Information and Communication
		Monitoring of Controls
	Planning an Audit Strategy
		Substantive Strategy
		Reliance Strategy
	Obtain an Understanding of Internal Control
		Overview
		Understanding the Control Environment
		Understanding the Entity’s Risk Assessment Process
		Understanding Control Activities
		Understanding the Information System and Communications
		Understanding Monitoring of Controls
		Documenting the Understanding of Internal Control
		The Effect of Entity Size on Internal Control
		The Limitations of an Entity’s Internal Control
	Assessing Control Risk
		Identifying Specific Controls That Will Be Relied Upon
		Performing Tests of Controls
		Concluding on the Achieved Level of Control Risk
		Documenting the Achieved Level of Control Risk
		An Example
	Substantive Procedures
	Timing of Audit Procedures
		Interim Tests of Controls
		Interim Substantive Procedures
	Auditing Accounting Applications Processed by Service Organizations
	Communication of Internal Control–Related Matters
	Advanced Module 1: Types of Controls in an IT Environment
		General Controls
		Application Controls
	Advanced Module 2: Flowcharting Techniques
		Symbols
		Organization and Flow
		KEY TERMS
		REVIEW QUESTIONS
		MULTIPLE-CHOICE QUESTIONS
		PROBLEMS
		DISCUSSION CASES
		HANDS-ON CASES
		LEARNING OBJECTIVES
		RELEVANT ACCOUNTING AND AUDITING PRONOUNCEMENTS*
Chapter 7 Auditing Internal Control over Financial Reporting
	Management Responsibilities under Section 404
	Auditor Responsibilities under Section 404 and AS 2201
	Internal Control over Financial Reporting Defined
	Internal Control Deficiencies Defined
		Control Deficiency
		Material Weakness
		Significant Deficiency
		Likelihood and Magnitude
	Management’s Assessment Process
		Identify Financial Reporting Risks and Related Controls
		Consider Which Locations to Include in the Evaluation
		Evaluate Evidence about the Operating Effectiveness of ICFR
		Reporting Considerations
		Management’s Documentation
	Performing an Audit of ICFR
	Plan the Audit of ICFR
		The Role of Risk Assessment and the Risk of Fraud
		Scaling the Audit
		Using the Work of Others
	Identify Controls to Test
		Identify Entity-Level Controls
		Identifying Significant Accounts and Disclosures and Their Relevant Assertions
		Understanding Likely Sources of Misstatements
		Select Controls to Test
	Evaluate the Design and Test the Operating Effectiveness of Controls
		Evaluating Design Effectiveness of Controls
		Testing and Evaluating Operating Effectiveness of Controls
	Evaluating Identified Control Deficiencies
		Examples of Control Deficiency Evaluation
	Remediation of a Material Weakness
	Written Representations
	Auditor Documentation Requirements
	Auditor Reporting on ICFR
		Elements of the Auditor’s Report
		Unqualified Opinion
		Adverse Opinion for a Material Weakness
		Disclaimer for Scope Limitation
	Other Reporting Issues
		Management’s Report Incomplete or Improperly Presented
		The Auditor Decides to Refer to the Report of Other Auditors
		Subsequent Events
		Management’s Report Contains Additional Information
		Reporting on a Remediated Material Weakness at an Interim Date
	Additional Required Communications in an Audit of ICFR
	Advanced Module 1: Special Considerations for an Audit of Internal Control
		Use of Service Organizations
		Safeguarding of Assets
	Advanced Module 2: Using Technology in the Audit of ICFR
		Generalized Audit Software
		Custom Audit Software
		Test Data
		KEY TERMS
		REVIEW QUESTIONS
		MULTIPLE-CHOICE QUESTIONS
		PROBLEMS
		INTERNET ASSIGNMENTS
		HANDS-ON CASES
		TABLEAU
		CHAPTER 8
		CHAPTER 9
		LEARNING OBJECTIVES
		RELEVANT ACCOUNTING AND AUDITING PRONOUNCEMENTS*
Chapter 8 Audit Sampling: An Overview and Application to Tests of Controls
	Overview of Audit Sampling
	Definitions and Key Concepts
		Audit Sampling
		Sampling Risk
		Confidence Level
		Tolerable and Expected Error
		Audit Evidence Choices That Do and Do Not Involve Sampling
	Types of Audit Sampling
		Nonstatistical versus Statistical Sampling
		Types of Statistical Sampling Techniques
	Attribute Sampling Applied to Tests of Controls
		Planning
		Performance
		Evaluation
	Nonstatistical Sampling for Tests of Controls
		Determining the Sample Size
		Selecting the Sample Items
		Calculating the Computed Upper Deviation Rate
	Conclusion
	Advanced Module 1: Considering the Effect on Sample Size of a Small Population
		KEY TERMS
	Advanced Module 2: Comparing Terminology for Attribute Sampling between IDEA and Sampling Tables
		REVIEW QUESTIONS
		MULTIPLE-CHOICE QUESTIONS
		PROBLEMS
		DISCUSSION CASE
		HANDS-ON CASES
		LEARNING OBJECTIVES
		RELEVANT ACCOUNTING AND AUDITING PRONOUNCEMENTS*
Chapter 9 Audit Sampling: An Application to Substantive Tests of Account Balances
	Sampling for Substantive Tests of Details of Account Balances
	Monetary-Unit Sampling
		Advantages
		Disadvantages
		Applying Monetary-Unit Sampling
		Planning
		Performance
		Evaluation
	Nonstatistical Sampling for Tests of Account Balances
		Identifying Individually Significant Items
		Determining the Sample Size
		Selecting Sample Items
		Calculating the Sample Results
		An Example of Nonstatistical Sampling
	Advanced Module 1: Classical Variables Sampling
		Advantages
		Disadvantages
		Applying Classical Variables Sampling
	Advanced Module 2: Comparing Terminology for Monetary-Unit Sampling between IDEA and Manual Calculation
		KEY TERMS
		REVIEW QUESTIONS
		MULTIPLE-CHOICE QUESTIONS
		PROBLEMS
		DISCUSSION CASES
		HANDS-ON CASES
		CHAPTER 10
		CHAPTER 11
		CHAPTER 12
		CHAPTER 13
		CHAPTER 14
		CHAPTER 15
		CHAPTER 16
		LEARNING OBJECTIVES
		RELEVANT ACCOUNTING AND AUDITING PRONOUNCEMENTS*
Chapter 10 Auditing the Revenue Process
	Revenue Recognition
	Overview of the Revenue Process
		Types of Transactions and Financial Statement Accounts Affected
		Types of Documents and Records
		The Major Functions
		Key Segregation of Duties
	Inherent Risk Assessment
		Industry-Related Factors
		The Complexity and Contentiousness of Revenue Recognition Issues
		The Difficulty of Auditing Transactions and Account Balances
		Misstatements Detected in Prior Audits
	Control Risk Assessment
		Understand and Document Internal Control
		Plan and Perform Tests of Controls
		Set and Document Control Risk
	Control Activities and Tests of Controls— Revenue Transactions
		Occurrence of Revenue Transactions
		Completeness of Revenue Transactions
		Authorization of Revenue Transactions
		Accuracy of Revenue Transactions
		Cutoff of Revenue Transactions
		Classification of Revenue Transactions
		Presentation of Revenue Transactions and Events
	Control Activities and Tests of Controls—Cash Receipts Transactions
		Occurrence of Cash Receipts Transactions
		Completeness of Cash Receipts Transactions
		Authorization of Cash Discounts
		Accuracy of Cash Receipts Transactions
		Cutoff of Cash Receipts Transactions
		Classification of Cash Receipts
	Control Activities and Tests of Controls—Sales Returns and Allowances Transactions
	Relating the Assessed Level of Control Risk to Substantive Procedures
	Auditing Revenue-Related Accounts
	Substantive Analytical Procedures
	Tests of Details of Classes of Transactions, Account Balances, and Disclosures
		Completeness
		Cutoff
		Existence
		Rights and Obligations
		Accuracy, Valuation, and Allocation
		Classification
		Presentation
	The Confirmation Process—Accounts Receivable
		Types of Confirmations
		Timing
		Confirmation Procedures
		Alternative Procedures
	Auditing Other Receivables
	Evaluating the Audit Findings— Revenue-Related Accounts
		KEY TERMS
		REVIEW QUESTIONS
		MULTIPLE-CHOICE QUESTIONS
		PROBLEMS
		DISCUSSION CASES
		INTERNET ASSIGNMENTS
		HANDS-ON CASES
		TABLEAU
		LEARNING OBJECTIVES
		RELEVANT ACCOUNTING AND AUDITING PRONOUNCEMENTS*
Chapter 11 Auditing the Purchasing Process
	Expense and Liability Recognition
	Overview of the Purchasing Process
		Types of Transactions and Financial Statement Accounts Affected
		Types of Documents and Records
		The Major Functions
		The Key Segregation of Duties
	Inherent Risk Assessment
		Industry-Related Factors
		Misstatements Detected in Prior Audits
	Control Risk Assessment
		Understand and Document Internal Control
		Plan and Perform Tests of Controls
		Set and Document Control Risk
	Control Activities and Tests of Controls—Purchase Transactions
		Occurrence of Purchase Transactions
		Completeness of Purchase Transactions
		Authorization of Purchase Transactions
		Accuracy of Purchase Transactions
		Cutoff of Purchase Transactions
		Classification of Purchase Transactions
		Presentation of Purchase Transactions
	Control Activities and Tests of Controls—Cash Disbursement Transactions
		Occurrence of Cash Disbursement Transactions
		Completeness of Cash Disbursement Transactions
		Authorization of Cash Disbursement Transactions
		Accuracy of Cash Disbursement Transactions
		Cutoff of Cash Disbursement Transactions
		Classification of Cash Disbursement Transactions
	Control Activities and Tests of Controls—Purchase Return Transactions
	Relating the Assessed Level of Control Risk to Substantive Procedures
	Auditing Accounts Payable and Accrued Expenses
	Substantive Analytical Procedures
	Tests of Details of Classes of Transactions, Account Balances, and Disclosures
		Completeness
		Existence
		Cutoff
		Rights and Obligations
		Accuracy, Valuation, and Allocation
		Classification
		Presentation
	Accounts Payable Confirmations
	Evaluating the Audit Findings—Accounts Payable and Related
	Advanced Module: Auditing the Tax Provision and Related Balance Sheet Accounts
		KEY TERMS
		REVIEW QUESTIONS
		MULTIPLE-CHOICE QUESTIONS
		PROBLEMS
		DISCUSSION CASE
		INTERNET ASSIGNMENTS
		HANDS-ON CASES
		TABLEAU
		LEARNING OBJECTIVES
		RELEVANT ACCOUNTING AND AUDITING PRONOUNCEMENTS*
Chapter 12 Auditing the Human Resource Management Process
	Overview of the Human Resource Management Process
		Types of Transactions and Financial Statement Accounts Affected
		Types of Documents and Records
		The Major Functions
		The Key Segregation of Duties
	Inherent Risk Assessment
	Control Risk Assessment
		Understand and Document Internal Control
		Plan and Perform Tests of Controls
		Set and Document the Control Risk
	Control Activities and Tests of Controls—Payroll Transactions
		Occurrence of Payroll Transactions
		Authorization of Payroll Transactions
		Accuracy of Payroll Transactions
		Classification of Payroll Transactions
		Presentation of Payroll Transactions and Compensation Data
	Relating the Assessed Level of Control Risk to Substantive Procedures
	Auditing Payroll-Related Accounts
	Substantive Analytical Procedures
	Tests of Details of Classes of Transactions, Account Balances, and Disclosures
		Payroll Expense Accounts
		Accrued Payroll Liabilities
	Evaluating the Audit Findings—Payroll-Related Accounts
	Advanced Module: Share-Based Compensation
		KEY TERMS
		REVIEW QUESTIONS
		MULTIPLE-CHOICE QUESTIONS
		PROBLEMS
		DISCUSSION CASES
		INTERNET ASSIGNMENT
		HANDS-ON CASES
		TABLEAU
		LEARNING OBJECTIVES
		RELEVANT ACCOUNTING AND AUDITING PRONOUNCEMENTS*
Chapter 13 Auditing the Inventory Management Process
	Overview of the Inventory Management Process
		Types of Documents and Records
		The Major Functions
		The Key Segregation of Duties
	Inherent Risk Assessment
		Industry-Related Factors
		Engagement and Operating Characteristics
	Control Risk Assessment
		Understand and Document Internal Control
		Plan and Perform Tests of Controls
		Set and Document the Control Risk
	Control Activities and Tests of Controls—Inventory Transactions
		Occurrence of Inventory Transactions
		Completeness of Inventory Transactions
		Authorization of Inventory Transactions
		Accuracy of Inventory Transactions
		Cutoff of Inventory Transactions
		Classification of Inventory Transactions
		Presentation of Inventory
	Relating the Assessed Level of Control Risk to Substantive Procedures
	Auditing Inventory
	Substantive Analytical Procedures
		Materials
		Labor
		Overhead
	Auditing Standard Costs
	Observing Physical Inventory
	Tests of Details of Classes of Transactions, Account Balances, and Disclosures
		Accuracy
		Cutoff
		Existence
		Completeness
		Rights and Obligations
		Valuation, Accuracy, and Allocation
		Classification and Presentation
	Evaluating the Audit Findings—Inventory
		KEY TERMS
		REVIEW QUESTIONS
		MULTIPLE-CHOICE QUESTIONS
		PROBLEMS
		DISCUSSION CASE
		INTERNET ASSIGNMENT
		HANDS-ON CASES
		TABLEAU
		LEARNING OBJECTIVES
		RELEVANT ACCOUNTING AND AUDITING PRONOUNCEMENTS*
Chapter 14 Auditing the Financing/Investing Process: Prepaid Expenses, Intangible Assets, and Property, Plant, and Equipment
	Auditing Prepaid Expenses
	Inherent Risk Assessment—Prepaid Expenses
	Control Risk Assessment—Prepaid Expenses
		Substantive Analytical Procedures for Prepaid Insurance
	Substantive Procedures—Prepaid Insurance
		Tests of Details of the Prepaid Insurance
		Existence and Completeness
		Rights and Obligations
		Valuation
		Classification
	Auditing Intangible Assets
	Inherent Risk Assessment—Intangible Assets
	Control Risk Assessment—Intangible Assets
	Substantive Procedures—Intangible Assets
		Substantive Analytical Procedures for Intangible Assets
		Tests of Details of Intangible Assets
	Auditing the Property Management Process
		Types of Transactions
		Overview of the Property Management Process
		Misstatements Detected in Prior Audits
		Complex Accounting Issues
		Difficult-to-Audit Transactions
	Inherent Risk Assessment—Property Management Process
	Control Risk Assessment—Property Management Process
		Occurrence and Authorization
		Completeness
		Segregation of Duties
		Substantive Analytical Procedures—Property, Plant, and Equipment
	Substantive Procedures—Property, Plant, and Equipment
		Tests of Details of Transactions, Account Balances, and Disclosures—Property, Plant, and Equipment
		KEY TERMS
	Evaluating the Audit Findings—Property, Plant, and Equipment
		REVIEW QUESTIONS
		MULTIPLE-CHOICE QUESTIONS
		PROBLEMS
		DISCUSSION CASE
		INTERNET ASSIGNMENTS
		HANDS-ON CASES
		TABLEAU
		LEARNING OBJECTIVES
		RELEVANT ACCOUNTING AND AUDITING PRONOUNCEMENTS*
Chapter 15 Auditing the Financing/Investing Process: Long-Term Liabilities, Stockholders’ Equity, and Income Statement Accounts
	Auditing Long-Term Debt
	Inherent Risk Assessment—Long-Term Debt
	Control Risk Assessment—Long-Term Debt
		Assertions and Related Control Activities
	EarthWear Substantive Procedures—Long-Term Debt
	Auditing Stockholders’ Equity
	Control Risk Assessment—Stockholders’ Equity
		Assertions and Related Control Activities
		Segregation of Duties
	Auditing Capital-Stock Accounts
		Occurrence and Completeness
		Valuation
		Completeness of Disclosures
	Auditing Dividends
	Auditing Retained Earnings
	Auditing Income Statement Accounts
	Assessing Control Risk for Business Processes—Income Statement Accounts
	Substantive Procedures—Income Statement Accounts
		Direct Tests of Balance Sheet Accounts
		Substantive Analytical Procedures for Income Statement Accounts
		Tests of Selected Account Balances
		KEY TERMS
		REVIEW QUESTIONS
		MULTIPLE-CHOICE QUESTIONS
		PROBLEMS
		DISCUSSION CASE
		INTERNET ASSIGNMENT
		HANDS-ON CASES
		TABLEAU
		LEARNING OBJECTIVES
		RELEVANT ACCOUNTING AND AUDITING PRONOUNCEMENTS*
Chapter 16 Auditing the Financing/Investing Process: Cash and Investments
	Auditing Cash
	Types of Bank Accounts
		General Cash Account
		Imprest Cash Accounts
		Branch Accounts
	Control Risk Assessment—Cash
	Substantive Procedures—Cash
		Substantive Analytical Procedures—Cash
		Substantive Tests of Details of Transactions and Balances—Cash
		Auditing the General Cash Account
		Fraud-Related Audit Procedures
		Auditing a Payroll or Branch Imprest Account
		Auditing a Petty Cash Fund
		Disclosure Issues for Cash
	Auditing Investments
	Control Risk Assessment—Investments
		Assertions and Related Control Activities
		Segregation of Duties
	Substantive Procedures—Investments
		Substantive Analytical Procedures—Investments
		Tests of Details—Investments
		Understanding How Management Makes Fair Value Measurements
		Considering Whether Specialized Skills or Knowledge Is Required
		Testing the Entity’s Fair Value Measurements
		Evaluating the Reasonableness of the Fair Value Measurements
		KEY TERMS
		REVIEW QUESTIONS
		MULTIPLE-CHOICE QUESTIONS
		PROBLEMS
		INTERNET ASSIGNMENT
		HANDS-ON CASE
		TABLEAU
		CHAPTER 17
		CHAPTER 18
		LEARNING OBJECTIVES
		RELEVANT ACCOUNTING AND AUDITING PRONOUNCEMENTS*
Chapter 17 Completing the Audit Engagement
	Review for Contingent Liabilities
		Audit Procedures for Identifying Contingent Liabilities
		Letters of Audit Inquiry
	Commitments
	Review of Subsequent Events for Audit of Financial Statements
		Dual Dating
		Audit Procedures for Subsequent Events
	Review of Subsequent Events for the Audit of Internal Control over Financial Reporting
	Final Steps and Evidence Evaluation
		Final Analytical Procedures
		Management Representation Letter
		Audit Work Paper Review
		Evaluation of Audit Results
		Evaluating Financial Statement Presentation and Disclosure
		Engagement Quality Review
		Archiving and Retention
		Going-Concern Considerations
	Communications with Those Charged with Governance and Management
		Communications Regarding the Audit of Internal Control over Financial Reporting
		Management Letter
	Subsequent Discovery of Facts Existing at the Date of the Auditor’s Report
		KEY TERMS
		REVIEW QUESTIONS
		MULTIPLE-CHOICE QUESTIONS
		PROBLEMS
		DISCUSSION CASES
		INTERNET ASSIGNMENTS
		HANDS-ON CASES
		TABLEAU
		LEARNING OBJECTIVES
		RELEVANT ACCOUNTING AND AUDITING PRONOUNCEMENTS*
Chapter 18 Reports on Audited Financial Statements
	The Standard Unqualified Audit Report for Public Companies
		Critical Audit Matters: More Information and Insight in the Audit Report
	Reporting on the Financial Statement Audit: The Standard Unqualified/Unmodified Audit Report
		The Standard Unmodified Audit Report for Entities Other Than Public Companies
	Explanatory Language Added to the Standard Unqualified/Unmodified Financial Statement Audit Report
		Explanatory Language to Refer to Reports of Other Auditors
		Substantial Doubt about the Entity’s Ability to Continue as a Going Concern
		Lack of Comparability of Financial Statements between Periods
		Management Reports on ICFR but Audit of ICFR Not Required
		Circumstances in Which the Auditor Wishes to Emphasize a Matter
	Departures from an Unqualified/Unmodified Financial Statement Audit Report
		Conditions for Departure
		Types of Financial Statement Audit Opinions Other Than Unqualified/Unmodified
		The Effect of Materiality on Financial Statement Reporting
	Discussion of Conditions Requiring Other Types of Financial Statement Audit Reports
		Scope Limitation
		Statements Not in Conformity with GAAP
		Auditor Not Independent
	Special Reporting Issues
	Reports on Comparative Financial Statements
		Different Reports on Comparative Financial Statements
		A Change in Report on the Prior-Period Financial Statements
		Report by a Predecessor Auditor
	Other Information in Documents Containing Audited Financial Statements
	Special Reports Relating to Financial Statements
		Financial Statements Prepared According to Other Comprehensive Bases of Accounting
		Specified Elements, Accounts, or Items of a Financial Statement
		Compliance Reports Related to Audited Financial Statements
	The First Significant Change to the Auditor’s Report in More Than 70 Years
		KEY TERMS
		REVIEW QUESTIONS
		MULTIPLE-CHOICE QUESTIONS
		PROBLEMS
		DISCUSSION CASE
		HANDS-ON CASES
		CHAPTER 19
		CHAPTER 20
		LEARNING OBJECTIVES
		RELEVANT ACCOUNTING AND AUDITING PRONOUNCEMENTS*
Chapter 19 Professional Conduct, Independence, and Quality Management
	Ethics and Professional Conduct
		Ethics and Professionalism Defined
		Theories of Ethical Behavior
		Example—An Ethical Challenge
	An Overview of Ethics and Professionalism in Public Accounting
		A Tale of Two Companies
		Standards for Auditor Professionalism
	The AICPA Code of Professional Conduct: A Comprehensive Framework for Auditors
		Principles of Professional Conduct
		Rules of Conduct
	Integrity, Objectivity, and Independence
		Integrity and Objectivity—Framework, Rule, and Interpretations
		Independence
	Other Rules in the Code of Professional Conduct
		General Standards and Accounting Principles
		Confidential Information
		Fees and Other Types of Remuneration
		Acts Discreditable
		Advertising and Other Forms of Solicitation
		Form of Organization and Name
		Disciplinary Actions
		Don’t Lose Sight of the Forest for the Trees
	Quality Management Standards
		The New Quality Management Paradigm
		PCAOB Inspections of Registered Public Accounting Firms
		KEY TERMS
		REVIEW QUESTIONS
		MULTIPLE-CHOICE QUESTIONS
		PROBLEMS
		DISCUSSION CASES
		INTERNET ASSIGNMENT
		HANDS-ON CASES
		LEARNING OBJECTIVES
		RELEVANT ACCOUNTING AND AUDITING PRONOUNCEMENTS*
Chapter 20 Legal Liability
	Historical Perspective
	Introduction
		Overview of Auditor Legal Liability
	Common Law—Clients
		Breach of Contract—Client Claims
		Negligence—Client Claims
		Fraud—Client Claims
		Ordinary Negligence—Third-Party Claims
	Common Law—Third Parties
		Fraud and Gross Negligence—Third-Party Claims
		Damages under Common Law
	Statutory Law—Civil Liability
		Securities Act of 1933
		Securities Exchange Act of 1934
		Private Securities Litigation Reform Act of 1995, the Securities Litigation Uniform Standards Act of 1998, and the Class Action Fairness Act of 2005
		Sarbanes-Oxley Act of 2002
		SEC and PCAOB Sanctions
		Foreign Corrupt Practices Act
		Racketeer Influenced and Corrupt Organizations Act
	Statutory Law—Criminal Liability
		KEY TERMS
		REVIEW QUESTIONS
		MULTIPLE-CHOICE QUESTIONS
		PROBLEMS
		DISCUSSION CASES
		HANDS-ON CASES
		CHAPTER 21
		LEARNING OBJECTIVES
		RELEVANT ACCOUNTING AND AUDITING PRONOUNCEMENTS*
Chapter 21 Assurance, Attestation, and Internal Auditing Services
	Types of Assurance Services
	Assurance Services
	Attestation Engagements
		Types of Attestation Engagements
	Financial Forecasts and Projections
		Types of Prospective Financial Statements
		Examination of Prospective Financial Statements
		Agreed-Upon Procedures for Prospective Financial Statements
	Accounting and Review Services
		Preparation of Financial Statements
		Compilation of Financial Statements
		Review of Financial Statements
	Internal Auditing
		Internal Auditing Defined
		The Institute of Internal Auditors
		IIA Standards
		Internal Auditors’ Roles
		Interactions between Internal and External Auditors
	Advanced Module: An Example of An Assurance Service—Trust Services
		Trust Services
		Trust Services and SOC 2 , SOC 3 , and SOC for Cybersecurity Reports
		KEY TERMS
		REVIEW QUESTIONS
		MULTIPLE-CHOICE QUESTIONS
		PROBLEMS
		DISCUSSION CASE
		INTERNET ASSIGNMENTS
		HANDS-ON CASES
		LEARNING OBJECTIVES
		RELEVANT ACCOUNTING AND AUDITING PRONOUNCEMENTS
	What Are Data Analytics and How Did We Get Here?
	Introduction
	Data Analytics in the Audit Setting
	The 5-Step Process to Performing Audit Data Analytics (ADAs)
		Step One: Plan the ADA
		Step Two: Access and Prepare the Data
		Step Three: Consider the Relevance and Reliability of the Data
		Step Four: Perform the ADA
		Step Five: Evaluate Results
		How to Implement the 5-step Process Throughout the Audit: Examples
		How to Use ADAs in Risk Assessment Procedures
		How to Use ADAs in Substantive Analytical Procedures
		How to Use ADAs in Tests of Detail
		How to Use ADAs When Forming an Overall Conclusion on the Audit
	What’s Next? How to Keep Skills Current Amid Constant Change
		A Model of a Good Judgment Process
	The Importance of Professional Judgment in Auditing
		Traps That Catch Us in the Early Steps of the Judgment Process
		Professional Skepticism and “Judgment Framing”
		Judgment Tendencies That Can Result in Bias
		Mitigating the Effects of Judgment Biases
	Conclusion
Index