Auditing : An Integrated Approach

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ISBN: 9780130827357 | 0130827355
Cover: Hardcover
Copyright: 10/1/1999

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The undisputed #1 market leader now features major contributions from leading scholars: Mark Beasley and Randy Elder. The new edition has been extensively revised to reflect changes in information technology, incorporate valuable in-text Internet references (created by Steve Glover at BYU), adds material on assurance services, and a new PHLIP/CW site. There is also a new casebook by Buckless/Beasley/Glover/Prawitt available.

Preface

PART I The Auditing Profession

The Demand for Audit and Assurance Services

(22)

Learning Objectives

(15)

Assurance Services

(5)

Economic Demand for Auditing

(2)

Nature of Auditing

(2)

Distinction between Auditing and Accounting

(1)

Types of Audits

(2)

Types of Auditors

(1)

Certified Public Accountant

(1)

Summary

(1)

Essential Terms

(1)

Review Questions

(1)

Multiple Choice Questions from CPA Examinations

(1)

Discussion Questions and Problems

(3)

Assurance Services

(2)

The CPA Profession

(20)

Learning Objectives

(14)

Certified Public Accounting Firms

(1)

Activities of CPA Firms

(1)

Structure of CPA Firms

(2)

AICPA

(1)

Generally Accepted Auditing Standards

(2)

Statements on Auditing Standards

(2)

Quality Control

(3)

Securities and Exchange Commission

(1)

Summary

(1)

Essential Terms

(1)

Review Questions

(1)

Multiple Choice Questions from CPA Examinations

(1)

Discussion Questions and Problems

(2)

CPA Vision Project

(2)

Audit Reports

(32)

Learning Objectives

(19)

Standard Unqualified Audit Report

(3)

Unqualified Audit Report with Explanatory Paragraph or Modified Wording

(3)

Departures from an Unqualified Audit Report

(2)

Materiality

(3)

Discussion of Conditions Requiring a Departure

(4)

Auditor's Decision Process for Audit Reports

(3)

Summary

(1)

Essential Terms

(1)

Review Questions

(1)

Multiple Choice Questions from CPA Examinations

(2)

Discussion Questions and Problems

(6)

Case

(2)

Research Annual Reports

(2)

Professional Ethics

(36)

Learning Objectives

(26)

What are Ethics?

(1)

Ethical Dilemmas

(3)

Special Need for Ethical Conduct in Professions

(2)

Code of Professional Conduct

(4)

Independence

(6)

Other Rules of Conduct

(7)

Enforcement

(1)

Summary

100

(1)

Essential Terms

101

(1)

Review Questions

101

(1)

Multiple Choice Questions from CPA Examinations

102

(1)

Discussion Questions and Problems

103

(3)

Case

106

(3)

AICPA Code of Professional Conduct---Ethics Rulings and Case

109

(2)

Legal Liability

111

(30)

Learning Objectives

111

(19)

Changed Legal Environment

112

(1)

Distinction among Business Failure, Audit Failure, and Audit Risk

113

(1)

Legal Concepts Affecting Liability

114

(1)

Liability to Clients

115

(4)

Liability to Third Parties under Common Law

119

(2)

Civil Liability under the Federal Securities Laws

121

(4)

Criminal Liability

125

(2)

The Profession's Response to Legal Liability

127

(1)

Protecting Individual CPAs from Legal Liability

128

(2)

Summary

130

(1)

Essential Terms

130

(1)

Review Questions

131

(1)

Multiple Choice Questions from CPA Examinations

132

(1)

Discussion Questions and Problems

133

(4)

Cases

137

(2)

SEC Enforcement

139

(2)

PART II The Audit Process

Audit Responsibilities and Objectives

141

(34)

Learning Objectives

141

(23)

Objective of Conducting an Audit of Financial Statements

142

(1)

Management's Responsibilities

143

(1)

Auditor's Responsibilities

143

(6)

Financial Statement Cycles

149

(5)

Setting Audit Objectives

154

(2)

Transaction-Related Audit Objectives

156

(2)

Balance-Related Audit Objectives

158

(2)

How Audit Objectives Are Met

160

(3)

Summary

163

(1)

Essential Terms

164

(1)

Review Questions

164

(1)

Multiple Choice Questions from CPA Examinations

165

(2)

Discussion Questions and Problems

167

(5)

Case

172

(1)

Assertions and Evidence Associated with New Assurance Services

173

(2)

Audit Evidence

175

(42)

Learning Objectives

175

(28)

Nature of Evidence

176

(1)

Audit Evidence Decisions

176

(2)

Persuasiveness of Evidence

178

(3)

Types of Audit Evidence

181

(7)

Analytical Procedures

188

(2)

Five Types of Analytical Procedures

190

(4)

Using Statistical Techniques and Computer Software

194

(2)

Common Financial Ratios

196

(1)

Short-Term Debt-Paying Ability

196

(1)

Short-Term Liquidity

197

(1)

Ability to Meet Long-Term Debt Obligations and Preferred Dividends

198

(1)

Operating and Performance Ratios

198

(2)

Illustration

200

(3)

Essential Terms

203

(1)

Review Questions

204

(1)

Multiple Choice Questions from CPA Examinations

205

(1)

Discussion Questions and Problems

206

(8)

Case

214

(1)

Analytical Procedures---Industry Comparisons

215

(2)

Audit Planning and Documentation

217

(32)

Learning Objectives

217

(21)

Planning

218

(1)

Preplan the Audit

219

(5)

Obtain Background Information

224

(2)

Obtain Information about Client's Legal Obligations

226

(1)

Perform Preliminary Analytical Procedures

227

(1)

Summary of the Purposes of Audit Planning

228

(2)

Working Papers

230

(7)

Summary of Working Papers

237

(1)

Essential Terms

238

(1)

Review Questions

238

(2)

Multiple Choice Questions from CPA Examinations

240

(1)

Discussion Questions and Problems

241

(5)

Case

246

(1)

Industry Research and Client Acceptance

247

(2)

Materiality and Risk

249

(38)

Learning Objectives

249

(24)

Materiality

250

(1)

Set Preliminary Judgment about Materiality

251

(3)

Allocate Preliminary Judgment about Materiality to Segments (Tolerable Misstatement)

254

(2)

Estimate Misstatement and Compare with Preliminary Judgment

256

(1)

Risk

257

(2)

Types of Risks

259

(2)

Factors Affecting Acceptable Audit Risk

261

(3)

Factors Affecting Inherent Risk

264

(3)

Other Materiality and Risk Considerations

267

(4)

Evaluating Results

271

(2)

Essential Terms

273

(1)

Review Questions

274

(1)

Multiple Choice Questions from CPA Examinations

275

(1)

Discussion Questions and Problems

276

(7)

Cases

283

(3)

Materiality and Tolerable Misstatement

286

(1)

Internal Control and Control Risk

287

(42)

Learning Objectives

287

(28)

Client and Auditor Concerns

288

(4)

Components of Internal Control

292

(9)

Procedures to Obtain an Understanding of Internal Control

301

(4)

Assess Control Risk

305

(6)

Tests of Controls

311

(2)

Decide Planned Detection Risk and Design Substantive Tests

313

(1)

Summary

313

(2)

Essential Terms

315

(1)

Review Questions

316

(1)

Multiple Choice Questions from CPA Examinations

317

(2)

Discussion Questions and Problems

319

(5)

Case

324

(1)

Integrated Case Application---Pinnacle Manufacturing: Part 1

325

(3)

Corporate Governance

328

(1)

The Impact of Information Technology on the Audit Process

329

(30)

Learning Objectives

329

(17)

How Information Technologies Enhance Internal Control

330

(1)

Assessing Risks of Information Technology

331

(1)

Internal Controls Specific to Information Technology

332

(6)

Impact of Information Technology on the Audit Process

338

(5)

Issues for Different IT Environments

343

(3)

Summary

346

(1)

Essential Terms

346

(1)

Review Questions

347

(1)

Multiple Choice Questions from CPA Examinations

348

(1)

Discussion Questions and Problems

349

(6)

Case

355

(2)

COBIT

357

(2)

Overall Audit Plan and Audit Program

359

(38)

Learning Objectives

359

(24)

Types of Tests

360

(6)

Selecting Which Types of Tests to Perform

366

(4)

Evidence Mix

370

(1)

Design of the Audit Program

371

(8)

Summary of the Audit Process

379

(4)

Essential Terms

383

(1)

Review Questions

383

(2)

Multiple Choice Questions from CPA Examinations

385

(1)

Discussion Questions and Problems

386

(5)

Cases

391

(6)

PART III Application of the Audit Process to the Sales and Collection Cycle

Audit of the Sales and Collection Cycle: Tests of Controls and Substantive Tests of Transactions

397

(40)

Learning Objectives

397

(27)

Accounts and Classes of Transactions in the Sales and Collection Cycle

398

(1)

Business Functions in the Cycle and Related Documents and Records

399

(4)

Methodology for Designing Tests of Controls and Substantive Tests of Transactions for Sales

403

(8)

Sales Returns and Allowances

411

(1)

Methodology for Designing Tests of Controls and Substantive Tests of Transactions for Cash Receipts

412

(2)

Audit Tests for Uncollectible Accounts

414

(1)

Additional Internal Controls over Account Balances

415

(1)

Effect of Results of Tests of Controls and Substantive Tests of Transactions

415

(1)

Case Illustration---Hillsburg Hardware, Part I

416

(8)

Summary

424

(1)

Essential Terms

424

(1)

Review Questions

425

(1)

Multiple Choice Questions from CPA Examinations

426

(2)

Discussion Questions and Problems

428

(6)

Case

434

(1)

Integrated Case Application---Pinnacle Manufacturing: Part II

435

(1)

Electronic Funds Transfer

436

(1)

Audit Sampling for Tests of Controls and Substantive Tests of Transactions

437

(38)

Learning Objectives

437

(28)

Representative Samples

438

(1)

Statistical versus Nonstatistical Sampling and Probabilistic versus Nonprobabilistic Sample Selection

439

(1)

Nonprobailistic Sample Selection Methods

440

(1)

Probabilistic Sample Selection Methods

441

(2)

Sampling for Exception Rates

443

(1)

Application of Nonstatistical Audit Sampling

444

(9)

Statistical Audit Sampling

453

(1)

Sampling Distribution

453

(1)

Application of Attributes Sampling

454

(4)

Case Illustration---Hillsburg Hardware, Part II

458

(7)

Essential Terms

465

(1)

Review Questions

466

(2)

Multiple Choice Questions from CPA Examinations

468

(1)

Discussion Questions and Problems

469

(4)

Case

473

(1)

Integrated Case Application---Pinnacle Manufacturing: Part III

474

(1)

Completing the Tests in the Sales and Collection Cycle: Accounts Receivable

475

(38)

Learning Objectives

475

(22)

Methodology for Designing Tests of Details of Balances

476

(6)

Designing Tests of Details of Balances

482

(6)

Confirmation of Accounts Receivable

488

(5)

Case Illustration---Hillsburg Hardware, Part III

493

(4)

Essential Terms

497

(1)

Review Questions

498

(1)

Multiple Choice Questions from CPA Examinations

499

(1)

Discussion Questions and Problems

500

(6)

Case

506

(1)

Integrated Case Application---Pinnacle Manufacturing: Part IV

507

(5)

Revenue Recognition

512

(1)

Audit Sampling for Tests of Details of Balances

513

(44)

Learning Objectives

513

(33)

Comparisons of Audit Sampling for Tests of Details of Balances and for Tests of Controls and Substantive Tests of Transactions

514

(1)

Nonstatistical Sampling

514

(8)

Monetary Unit Sampling

522

(11)

Variables Sampling

533

(5)

Illustration Using Difference Estimation

538

(7)

Formulas for Monetary Unit Sampling

545

(1)

Essential Terms

546

(1)

Review Questions

547

(1)

Multiple Choice Questions from CPA Examinations

548

(1)

Discussion Questions and Problems

549

(5)

Cases

554

(3)

PART IV Application of the Audit Process to Other Cycles

Audit of the Payroll and Personnel Cycle

557

(24)

Learning Objectives

557

(14)

Accounts and Transactions in the Payroll and Personnel Cycle

558

(1)

Business Functions in the Cycle and Related Documents and Records

558

(4)

Methodology for Designing Tests of Controls and Substantive Tests of Transactions

562

(5)

Methodology for Designing Tests of Details of Balances

567

(3)

Summary

570

(1)

Essential Terms

571

(1)

Review Questions

571

(1)

Multiple Choice Questions from CPA Examinations

572

(1)

Discussion Questions and Problems

573

(6)

Case

579

(2)

Audit of the Acquisition and Payment Cycle: Tests of Controls, Substantive Tests of Transactions, and Accounts Payable

581

(32)

Learning Objectives

581

(19)

Accounts and Classes of Transactions in the Acquisition and Payment Cycle

582

(1)

Business Functions in the Cycle and Related Documents and Records

583

(3)

Methodology for Designing Tests of Controls and Substantive Tests of Transactions

586

(6)

Methodology for Designing Tests of Details of Balances for Accounts Payable

592

(7)

Summary

599

(1)

Essential Terms

600

(1)

Review Questions

601

(1)

Multiple Choice Questions from CPA Examinations

602

(1)

Discussion Questions and Problems

603

(7)

Cases

610

(3)

Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts

613

(32)

Learning Objectives

613

(21)

Types of Other Accounts in the Acquisition and Payment Cycle

614

(1)

Audit of Property, Plant, and Equipment

615

(7)

Audit of Prepaid Expenses

622

(5)

Audit of Accrued Liabilities

627

(1)

Audit of Income and Expense Accounts

628

(6)

Summary

634

(1)

Essential Terms

634

(1)

Review Questions

634

(1)

Multiple Choice Questions from CPA Examinations

635

(2)

Discussion Questions and Problems

637

(3)

Cases

640

(5)

Audit of the Inventory and Warehousing Cycle

645

(32)

Learning Objectives

645

(19)

Business Functions in the Cycle and Related Documents and Records

646

(3)

Parts of the Audit of Inventory

649

(1)

Audit of Cost Accounting

650

(3)

Analytical Procedures

653

(1)

Methodology for Designing Tests of Details of Balances

653

(2)

Physical Observation of Inventory

655

(4)

Audit of Pricing and Compilation

659

(3)

Integration of the Tests

662

(1)

Summary

663

(1)

Essential Terms

664

(1)

Review Questions

664

(1)

Multiple Choice Questions from CPA Examinations

665

(2)

Discussion Questions and Problems

667

(6)

Cases

673

(4)

Audit of the Capital Acquisition and Repayment Cycle

677

(22)

Learning Objectives

677

(14)

Accounts in the Cycle

678

(2)

Notes Payable

680

(5)

Owners' Equity

685

(6)

Summary

691

(1)

Essential Terms

691

(1)

Review Questions

691

(1)

Multiple Choice Questions from CPA Examinations

692

(1)

Discussion Questions and Problems

693

(6)

Audit of Cash Balances

699

(28)

Learning Objectives

699

(17)

Cash in the Bank and Transaction Cycles

700

(2)

Types of Cash Accounts

702

(1)

Audit of the General Cash Account

703

(7)

Fraud-Oriented Procedures

710

(5)

Audit of the Imprest Payroll Bank Account

715

(1)

Audit of Imprest Petty Cash

715

(1)

Summary

716

(1)

Essential Terms

716

(1)

Review Questions

716

(2)

Multiple Choice Questions from CPA Examinations

718

(1)

Discussion Questions and Problems

719

(4)

Case

723

(4)

PART V Completing the Audit

Completing the Audit

727

(30)

Learning Objectives

727

(18)

Review for Contingent Liabilities and Commitments

728

(5)

Review for Subsequent Events

733

(2)

Final Evidence Accumulation

735

(3)

Evaluate Results

738

(3)

Issue the Audit Report

741

(1)

Communicate with the Audit Committee and Management

742

(1)

Subsequent Discovery of Facts

743

(2)

Essential Terms

745

(1)

Review Questions

745

(2)

Multiple Choice Questions from CPA Examinations

747

(1)

Discussion Questions and Problems

748

(4)

Cases

752

(3)

Subsequent Events

755

(2)

PART VI Other Assurance and Nonassurance Services

Other Audit, Attestation Services, and Compilation Engagements

757

(34)

Learning Objectives

757

(23)

Review and Compilation Services

758

(4)

Review of Interim Financial Information for Public Companies

762

(1)

Other Audits or Limited Assurance Engagements

763

(6)

Attestation Engagements

769

(3)

Prospective Financial Statements

772

(3)

Reporting on Internal Control

775

(2)

Agreed-Upon Procedures Engagements

777

(2)

Summary

779

(1)

Essential Terms

780

(1)

Review Questions

781

(1)

Multiple Choice Questions from CPA Examinations

782

(3)

Discussion Questions and Problems

785

(6)

Internal and Governmental Financial Auditing and Operational Auditing

791

(26)

Learning Objectives

791

(16)

Internal Financial Auditing

792

(2)

Governmental Financial Auditing

794

(3)

Operational Auditing

797

(10)

Summary

807

(1)

Essential Terms

807

(1)

Review Questions

808

(1)

Multiple Choice Questions from CPA, IIA, and CMA Examinations

809

(2)

Cases

811

(6)

Index

817

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Auditing : An Integrated Approach

Summary

Table of Contents

Supplemental Materials

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Auditing : An Integrated Approach

Summary

Table of Contents

Supplemental Materials

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