Why and How Audits Must Change: Practical Guidance to Improve Your Audits

Why and How Audits Must Change PRACTICAL GUIDANCE TO IMPROVE YOUR AUDITS......Page 3
About the Author......Page 6
Contents......Page 7
Preface......Page 9
1. A WAKE-UP CALL FOR ALL AUDITORS......Page 11
“Please, Don’t Compare Us to Andersen!”......Page 14
Fundamental Change Is Still Needed......Page 17
Purpose of This Book......Page 19
2. RISK-BASED AUDITING: SAVIOR OR VILLAIN?......Page 23
Why Many Firms Resist Risk-Based Auditing......Page 26
Progress Must Be Made......Page 29
3. THE RISK OF “COOKING THE BOOKS”......Page 31
General Methods of Cooking the Books......Page 34
Why Companies Cook the Books......Page 37
How Auditors Should Assess the Risk that a Client Has Cooked the Books......Page 45
Tailoring Audit Programs......Page 57
4. OTHER RISKS AND CONSIDERATIONS......Page 63
Ask “Anticipation” Questions......Page 66
Perform Proactive Research about the Client’s Business......Page 67
Perform a Diligent Preliminary Analytical Review......Page 72
Risk Assessments During Fieldwork......Page 73
5. THE MANY BENEFITS OF ANALYTICAL PROCEDURES......Page 77
Quality......Page 81
Efficiency......Page 84
Client Service......Page 86
Staff Morale......Page 88
6. COMMON PITFALLS OF ANALYTICAL PROCEDURES......Page 91
Uncorroborated Client Explanations......Page 94
Imprecise Explanations......Page 99
Lack of Informed Expectations......Page 103
Setting Scopes for Variance Analyses......Page 111
7. AN EASY APPROACH TO IMPLEMENTING ANALYTICAL PROCEDURES......Page 113
Step One: Think Analytical First......Page 115
Step Two: Determine the Proper Strength......Page 129
Step Three: Test and Evaluate Results......Page 133
Lousy Internal Controls......Page 139
Closing Thoughts......Page 142
8. INTERNAL CONTROL: THE MISUNDERSTOOD CHILD......Page 145
Types of Controls......Page 149
Minimum Audit Requirements......Page 156
9. TO TEST OR NOT TO TEST......Page 165
Step One: Evaluate Cost-Benefits......Page 169
Step Two: Identify Specific Controls to Test......Page 174
Step Three: Select and Perform Control Tests......Page 179
Step Four: Arrive at Conclusions......Page 183
Conclusion......Page 185
10. TALKIN’ TO THE CLIENT......Page 187
Who Should Ask the Questions?......Page 190
How Reliable Is the Evidence Source?......Page 191
Do You Hear What I Hear?......Page 192
11. DATA EXTRACTION SOFTWARE......Page 197
Purpose of This Chapter......Page 200
Benefits of Data Extraction Software......Page 201
Case Study......Page 206
How to Proceed......Page 209
12. ACTION STEPS......Page 217
Thinkers and Robots......Page 219
Three Essential Steps for Transforming Your Firm......Page 221
Closing Thoughts......Page 237
Index......Page 239