Auditing: The art and Scienc eof Assurance Engagements

Cover
Title Page
Copyright Page
Contents
Preface
Acknowledgments
Part 1: The Auditing Profession
	1. The Demand for Audit and Other Assurance Services
		Learning Objectives
		Nature and Relevance of Auditing
		Distinction Between Auditing and Accounting
		Economic Demand for Auditing
		Causes of Information Risk
		Reducing Information Risk
		Common Types of Audits
		Types of Auditors
		Assurance and Nonassurance Services Offered by Public Accounting Firms
		Summary
		Review Questions
		Multiple Choice Questions
		Discussion Questions and Problems
		Professional Judgment Problems and Cases
	2. The Public Accounting Profession and Audit Quality
		Learning Objectives
		An Overview of the Canadian Public Accounting Industry
		Organizations Affecting the Canadian Public Accounting Profession
		An Overview of CPA Canada Assurance Standards
		Purpose of the Financial Statement Audit
		The Drivers of Audit Quality
		Quality Control
		Summary
		Review Questions
		Multiple Choice Questions
		Discussion Questions and Problems
		Professional Judgment Problems and Cases
	3. Professional Ethics and Legal Liability
		Learning Objectives
		Professional Ethics and Public Accountants
		A Framework for Ethical Reasoning
		Ethical Blind Spots
		Professional Guidance on Ethical Conduct
		The Independence Standard for Assurance Engagements
		Enforcement of the Code of Professional Conduct
		The Expectations Gap and Auditor Litigation
		Major Sources of Auditor Liability
		The Profession’s Response to Legal Liability
		Summary
		Review Questions
		Multiple Choice Questions
		Discussion Questions and Problems
		Professional Judgment Problems and Cases
Part 2: The Audit Process and Risk Assessment
	4. Audit Responsibilities and Objectives
		Learning Objectives
		The Objective of Conducting an Audit of Financial Statements
		Management’s Responsibilities
		Responsibilities of Those Charged With Governance
		Auditor’s Responsibilities
		A Framework for Professional Judgment
		Professional Skepticism
		Financial Statement Cycles
		Setting Audit Objectives
		Management Assertions and Audit Objectives
		Linking Assertions With Audit Objectives
		The Audit Process: How Audit Objectives Are Met
		Summary
		Review Questions
		Multiple Choice Questions
		Discussion Questions and Problems
		Professional Judgment Problems and Cases
	5. Audit Evidence
		Learning Objectives
		Nature of Audit Evidence
		Audit Evidence Decisions
		Persuasiveness of Evidence
		Specific Types of Audit Procedures
		Design Analytical Procedures
		Documentation
		Preparation of Working Papers
		Effect of Technology on Audit Evidence and Audit Documentation
		Professional Skepticism, Evidence, and Documentation
		Appendix 5A: Common Financial Ratios
		Summary
		Review Questions
		Multiple Choice Questions and Task-Based Simulations
		Discussion Questions and Problems
		Professional Judgment Problems and Cases
	6. Client Acceptance, Planning, and Materiality
		Learning Objectives
		The Importance of Audit Planning
		Client Acceptance and Continuance
		Understand the Nature of Client’s Business and Environment
		Perform Preliminary Analytical Review
		Develop Overall Audit Strategy
		Materiality
		Determine Overall Materiality
		Determine Performance Materiality
		Determine Specific Materiality
		Applying Materiality—Evaluating Results and Completing the Audit
		Summary
		Review Questions
		Multiple Choice Questions and Task-Based Simulations
		Discussion Questions and Problems
		Professional Judgment Problems and Cases
	7. Assessing the Risk of Material Misstatement
		Learning Objectives
		Audit Risk
		Risk Assessment Procedures
		Identification of Significant Risks
		Considering Fraud Risk
		Conditions for Fraud
		Responding to Risks of Material Misstatements Due to Fraud
		The Audit Risk Model
		Assessing Acceptable Audit Risk
		Assessing Inherent Risk
		Relationship of Risks to Evidence and Factors Influencing Risks
		Summary
		Review Questions
		Multiple Choice Questions and Task-Based Simulations
		Discussion Questions and Problems
		Professional Judgment Problems and Cases
	8. Internal Control and COSO Framework
		Learning Objectives
		Internal Control Objectives
		The Responsibilities of Management and the Auditor
		COSO Components of Internal Control
		Understanding Controls of Small Businesses
		Summary
		Review Questions
		Multiple Choice Questions and Task-Based Simulations
		Discussion Questions and Problems
		Professional Judgment Problems and Cases
	9. Assessing Control Risk and Designing Tests of Controls
		Learning Objectives
		Obtain and Document Understanding of Internal Control
		Assess Control Risk
		Tests of Controls
		Understanding and Assessing Controls of Outsourced Systems
		Evaluate Results, Decide on Planned Detection Risk, and Design Substantive Tests
		Impact of IT Environment on Control Risk Assessment and Testing
		Auditor Reporting on Internal Control
		Reporting on Internal Controls for Some Public Companies
		Summary
		Review Questions
		Multiple Choice Questions and Task-Based Simulations
		Discussion Questions and Problems
		Professional Judgment Problems and Cases
	10. Develop Risk Response: Audit Strategy and Audit Program
		Learning Objectives
		Audit Strategy
		Types of Tests
		Selecting Which Types of Tests to Perform
		Evidence Mix and Audit Strategy
		Design of the Audit Programs
		Summary of Audit Process
		Summary
		Review Questions
		Multiple Choice Questions and Task-Based Simulations
		Discussion Questions and Problems
		Professional Judgment Problems and Cases
	11. Audit Sampling Concepts
		Learning Objectives
		What Is Audit Sampling?
		Representative Sampling and Its Risks
		Statistical versus Nonstatistical Sampling
		Sample Selection Methods
		The Audit Sampling Process for Tests of Controls and Substantive Tests of Details
		Using Sampling for Tests of Controls
		Nonstatistical Sampling Approach to Testing Controls
		Using Sampling for Substantive Tests of Details
		Nonstatistical Sampling for Substantive Tests of Details
		Statistical Sampling for Substantive Tests of Details
		Adequate Documentation and Professional Judgment
		Summary
		Review Questions
		Multiple Choice Questions and Task-Based Simulations
		Discussion Questions and Problems
		Professional Judgment Problems and Cases
Part 3: Application of the Audit Process
	12. Audit of the Revenue Cycle
		Learning Objectives
		Overview of the Revenue Cycle
		Business Functions in the Cycle, and Related Documents and Records
		An Overview of the Audit Process for the Revenue Cycle
		Identify Significant Risks and Assess Risk of Material Misstatement
		Identify Key Controls and Assess Effectiveness of Controls
		Determine Audit Approach (Strategy) for Revenue Cycle
		Design and Perform Substantive Analytical Procedures
		Substantive Tests of Details for Revenue
		Substantive Tests for Accounts Receivable
		Substantive Tests of Details for Accounts Receivable: External Confirmations
		Design and Perform Fraud-Related Substantive Procedures
		Summary
		Review Questions
		Multiple Choice Questions and Task-Based Simulations
		Discussion Questions and Problems
		Professional Judgment Problems and Cases
	13. Audit of the Acquisition and Payment Cycle
		Learning Objectives
		An Overview of the Acquisition and Payment Cycle
		The Four Business Functions and Their Documents and Records
		Identify Significant Risks and Assess Risk of Material Misstatement
		Understand Internal Control and Assess Control Risk
		Determine Audit Approach (Strategy) for Acquisition and Payment Cycle
		Design and Perform Tests of Controls for Acquisition and Payment Cycle
		Design and Perform Substantive Analytical Procedures for Accounts Payable and Related Accounts
		Design and Perform Tests of Details of Accounts Payable and Accrued Liabilities
		Reliability of Audit Evidence
		Examining Other Accounts and Related Party Transactions
		Summary
		Review Questions
		Multiple Choice Questions and Task-Based Simulations
		Discussion Questions and Problems
		Professional Judgment Problems and Cases
	14. Audit of the Inventory and Distribution Cycle
		Learning Objectives
		Overview of the Inventory and Distribution Cycle
		Inventory Cycle Business Functions, Documents, and Records
		Identify Significant Risks
		Understanding and Assessing Control Risk
		Key Controls
		Develop an Audit Approach (Strategy) for Inventory
		Design and Perform Tests of Controls
		Perform Substantive Analytical Procedures
		Substantive Tests of Details for Inventory Balances
		Designing Fraud Substantive Procedures for Inventory
		Summary
		Review Questions
		Multiple Choice Questions and Task-Based Simulations
		Discussion Questions and Problems
		Professional Judgment Problems and Cases
	15. Audit of the Human Resources and Payroll Cycle
		Learning Objectives
		An Overview of the Human Resources and Payroll Cycle
		Functions in the Cycle, and Related Documents and Records
		The Audit Process for Human Resource and Payroll Cycle
		Identify Significant Risks and Assess Risk of Material Misstatement
		Understanding Internal Control and Assessing Control Risk
		Develop an Audit Approach for Human Resources and Payroll
		Design and Perform Tests of Controls
		Design and Perform Substantive Analytical Procedures
		Design and Perform Substantive Tests
		Summary
		Review Questions
		Multiple Choice Questions and Task-Based Simulations
		Discussion Questions and Problems
		Professional Judgment Problems and Cases
	16. Audit of the Capital Acquisition and Repayment Cycle
		Learning Objectives
		An Overview of the Capital Acquisition and Repayment Cycle
		Notes Payable
		Understanding Internal Control and Assessing Control Risk
		Develop Audit Approach (Strategy) for Notes Payable and Related Accounts
		Audit of Owners’ Equity
		Summary
		Review Questions
		Multiple Choice Questions and Task-Based Simulations
		Discussion Questions and Problems
		Professional Judgment Problems and Cases
	17. Audit of Cash Balances
		Learning Objectives
		Types of Cash Accounts
		The Relationship Between Cash in the Bank and Transaction Cycles
		Identify Significant Risks and Assess Risk of Material Misstatement in Cash
		Understand Internal Control and Assess Control Risk
		Design and Perform Substantive Tests for Cash
		Fraud-Oriented Procedures
		Summary
		Review Questions
		Multiple Choice Questions and Task-Based Simulations
		Discussion Questions and Problems
		Professional Judgment Problems and Cases
Part 4: Completing the Audit, Reporting, and Other Assurance Engagements
	18. Completing the Audit
		Learning Objectives
		Complete Final Evidence Gathering
		Accumulate Final Evidence
		Evaluate Results
		Communicate With the Audit Committee and Management
		Summary
		Review Questions
		Multiple Choice Questions
		Discussion Questions and Problems
		Professional Judgment Problems and Cases
	19. Audit Reports on Financial Statements
		Learning Objectives
		The Audit Opinion and the Auditors’ Reporting Responsibilities
		The Unmodified Audit Opinion
		Elements of the Auditor’s Report
		Reporting Material Uncertainty for Going Concern
		Identify and Disclose Key Audit Matters
		Determine Whether Emphasis of Matter or Other Matter Paragraphs are Necessary
		Decide Whether Modifications to the Audit Opinion Are Necessary
		Qualified Audit Opinions
		Adverse Audit Opinion
		Disclaimer of Opinion
		How the Audit Report Adds Value
		Summary
		Review Questions
		Multiple Choice Questions
		Discussion Questions and Problems
		Professional Judgment Problems and Cases
	20. Other Assurance and Nonassurance Services
		Learning Objectives
		Overview of Other Canadian Standards
		Reviews and Compilations of Financial Statements
		The Review Engagement Process
		Compilation Engagements
		Review of Interim Financial Statements
		Assurance Engagements for Nonfinancial Information
		Assurance Over Compliance With Agreements and Regulations
		Related Service Engagements
		Specified Procedures Engagements
		Reports on Supplemental Matters Arising From an Audit or Review Engagement
		The Future of Assurance Services
		Summary
		Review Questions
		Multiple Choice Questions
		Discussion Questions and Problems
		Professional Judgment Problems and Cases
Appendix: Hillsburg Hardware Limited
Index
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