BOOK
Auditing and Assurance Services, Global Edition
Alvin A. Arens | Randal J. Elder | Mark S. Beasley
(2016)
Additional Information
Book Details
Abstract
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, the text’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.
MyAccountingLab® not included. Students, if MyAccountingLab is a recommended/mandatory component of the course, please ask your instructor for the correct ISBN and course ID. MyAccountingLab should only be purchased when required by an instructor. Instructors, contact your Pearson representative for more information.
MyAccountingLab is an online homework, tutorial, and assessment product designed to personalize learning and improve results. With a wide range of interactive, engaging, and assignable activities, students are encouraged to actively learn and retain tough course concepts.
Table of Contents
| Section Title | Page | Action | Price |
|---|---|---|---|
| Cover | Cover | ||
| Title Page | 1 | ||
| Copyright Page | 2 | ||
| Contents | 5 | ||
| Preface | 17 | ||
| Part 1 The Auditing Profession | 26 | ||
| Chapter 1 The Demand for Audit and Other Assurance Services | 27 | ||
| 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 | 43 | ||
| Chapter 2 The CPA Profession | 48 | ||
| 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 | 70 | ||
| 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 | 102 | ||
| 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 | 138 | ||
| 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 | 159 | ||
| Case | 164 | ||
| Part 2 The Audit Process | 165 | ||
| Chapter 6 Audit Responsibilities and Objectives | 166 | ||
| 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 | 197 | ||
| Chapter 7 Audit Evidence | 219 | ||
| 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 | 260 | ||
| 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 | 301 | ||
| 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 | 337 | ||
| 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 | 375 | ||
| 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 Infrastucture 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 | 407 | ||
| 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 | 448 | ||
| 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 | ||
| Part 3 Application of the Audit Process to the Sales and Collection Cycle | 485 | ||
| Chapter 14 Audit of the Sales and Collection Cycle: Tests of Controls and Substantive Tests of Transactions | 486 | ||
| 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 | 522 | ||
| 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 | 564 | ||
| 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 | 604 | ||
| 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 | 641 | ||
| ACL Problem | 642 | ||
| Part 4 Application of the Audit Process to Other Cycles | 643 | ||
| Chapter 18 Audit of the Acquisition and Payment Cycle: Tests of Controls, Substantive Tests of Transactions, and Accounts Payable | 644 | ||
| 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 | 676 | ||
| 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 | 702 | ||
| 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 | ||
| Review Questions | 716 | ||
| Essential Terms | 716 | ||
| Multiple Choice Questions from CPA Examinations | 717 | ||
| Discussion Questions and Problems | 719 | ||
| Case | 723 | ||
| Chapter 21 Audit of the Inventory and Warehousing Cycle | 725 | ||
| 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 | 755 | ||
| Learning Objectives | 755 | ||
| Accounts in the Cycle | 756 | ||
| Notes Payable | 757 | ||
| Owners’ Equity | 761 | ||
| Essential Terms Summary | 767 | ||
| Review Questions | 768 | ||
| Multiple Choice Questions from CPA Examinations | 768 | ||
| Discussion Questions and Problems | 770 | ||
| Chapter 23 Audit of Cash and Financial Instruments | 776 | ||
| 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 | ||
| Essential Terms Summary | 796 | ||
| Review Questions | 797 | ||
| Multiple Choice Questions from CPA Examinations | 798 | ||
| Discussion Questions and Problems | 799 | ||
| Part 5 Completing the Audit | 805 | ||
| Chapter 24 Completing the Audit | 806 | ||
| 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 | ||
| Part 6 Other Assurance and Nonassurance Services | 838 | ||
| Chapter 25 Other Assurance Services | 839 | ||
| 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 | 866 | ||
| 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 |