Cover......Page 1
Statement......Page 2
Title Page
......Page 3
Copyright......Page 4
Dedication......Page 5
Brief Contents......Page 7
Contents......Page 9
Preface......Page 25
About the Authors......Page 35
Through Studying this Chapter, You Will Be Able to Achieve these Learning Objectives:......Page 38
Overview of the External Auditing Profession......Page 39
Audit Quality......Page 50
Achieving Audit Quality and Minimizing Lawsuits......Page 52
Significant Terms ......Page 57
True-False Questions ......Page 59
Multiple-Choice Questions ......Page 60
Review and Short Case Questions......Page 62
Contemporary and Historical Cases......Page 64
Application Activities ......Page 66
Academic Research Case ......Page 67
Through Studying this Chapter, You Will Be Able to Achieve these Learning Objectives:......Page 68
The Audit Opinion Formulation Process ......Page 69
Fraud Defined......Page 70
The Fraud Triangle......Page 71
Recent History of Fraudulent Financial Reporting......Page 74
An Overview of the Auditor’s Fraud-Related Responsibilities and Users’ Expectations......Page 80
The Sarbanes–Oxley Act of 2002 as a Regulatory Response to Fraud......Page 81
The Post Sarbanes-Oxley World: A Time of Improved Corporate Governance......Page 85
Summary and Next Steps......Page 89
True-False Questions ......Page 90
Multiple-Choice Questions ......Page 91
Review and Short Case Questions......Page 94
Contemporary and Historical Cases......Page 99
Application Activities ......Page 103
Academic Research Cases ......Page 105
Ford and Toyota......Page 106
Through Studying this Chapter, You Will Be Able to Achieve these Learning Objectives:......Page 108
The Audit Opinion Formulation Process ......Page 109
Importance of Internal Control Over Financial Reporting......Page 110
Defining Internal Control......Page 111
Components and Principles of Internal Control......Page 113
Management’s Responsibilities Related to Internal Control Over Financial Reporting......Page 126
Significant Terms ......Page 133
True-False Questions ......Page 135
Multiple-Choice Questions ......Page 136
Review and Short Case Questions......Page 139
Contemporary and Historical Cases......Page 146
Application Activities ......Page 147
Academic Research Cases ......Page 148
Ford and Toyota......Page 149
Through Studying this Chapter, You Will Be Able to Achieve these Learning Objectives:......Page 150
The Audit Opinion Formulation Process ......Page 151
The Legal Environment and the Effects of Lawsuits on Audit Firms......Page 152
Applicable Laws and Causes of Legal Action......Page 153
Auditor Liability under Common Law and Contract Law......Page 155
Auditor Liability under Statutory Law......Page 158
A Framework for Professional Decision Making......Page 161
A Framework for Ethical Decision Making......Page 166
Professional Guidance on Decision Making......Page 170
Significant Terms ......Page 175
True-False Questions ......Page 178
Multiple-Choice Questions ......Page 179
Review and Short Case Questions......Page 181
Contemporary and Historical Cases......Page 188
Application Activities ......Page 189
Academic Research Cases ......Page 190
Ford and Toyota......Page 191
Through Studying this Chapter, You Will Be Able to Achieve these Learning Objectives:......Page 192
The Audit Opinion Formulation Process ......Page 193
Professional Auditing Standards......Page 194
The Audit Opinion Formulation Process ......Page 197
Audit Example: Assessing Control Design Effectiveness, Implementation, and Operating Effectiveness......Page 223
Significant Terms ......Page 225
True-False Questions ......Page 227
Multiple-Choice Questions ......Page 228
Review and Short Case Questions......Page 232
Contemporary and Historical Cases......Page 239
Application Activities ......Page 240
Academic Research Cases ......Page 241
Appendix ......Page 242
Through Studying this Chapter, You Will Be Able to Achieve these Learning Objectives:......Page 248
The Audit Opinion Formulation Process ......Page 249
Obtaining Sufficient Appropriate Audit Evidence......Page 250
Appropriateness of Audit Evidence......Page 251
Type and Timing of Audit Procedures......Page 257
Sufficiency of Audit Evidence......Page 269
Additional Evidence Considerations......Page 272
Documenting Audit Evidence......Page 275
Significant Terms ......Page 280
True-False Questions ......Page 282
Multiple-Choice Questions ......Page 283
Review and Short Case Questions......Page 287
Contemporary and Historical Cases......Page 291
Application Activities ......Page 298
Academic Research Cases ......Page 299
ACL......Page 300
Through Studying this Chapter, You Will Be Able to Achieve these Learning Objectives:......Page 302
The Audit Opinion Formulation Process ......Page 303
Assessing Materiality......Page 304
Identifying and Assessing Risks of Material Misstatement......Page 307
Responding to Identified Risks of Material Misstatement......Page 322
Significant Terms ......Page 328
True-False Questions ......Page 329
Multiple-Choice Questions ......Page 330
Review and Short Case Questions......Page 333
Contemporary and Historical Cases......Page 341
Application Activities ......Page 348
Academic Research Cases ......Page 349
Ford and Toyota......Page 351
Through Studying this Chapter, You Will Be Able to Achieve these Learning Objectives:......Page 352
The Audit Opinion Formulation Process ......Page 353
Overview of Sampling and GAS as Tools for Gathering Audit Evidence......Page 354
Objectives of Sampling and Risks Associated with Sampling......Page 355
Nonstatistical and Statistical Sampling......Page 358
Attributes Sampling......Page 359
Using Sampling to Gather Evidence about Misstatements in Account Balances and Associated Assertions......Page 371
Using Generalized Audit Software to Obtain Evidence......Page 383
Significant Terms ......Page 387
True-False Questions ......Page 390
Multiple-Choice Questions ......Page 391
Review and Short Case Questions......Page 394
Academic Research Case ......Page 401
Through Studying this Chapter, You Will Be Able to Achieve these Learning Objectives:......Page 402
The Audit Opinion Formulation Process ......Page 403
Significant Accounts, Disclosures, and Relevant Assertions......Page 404
Performing Risk Assessment Procedures in the Revenue Cycle......Page 408
Obtaining Evidence about Internal Control Operating Effectiveness in the Revenue Cycle......Page 422
Obtaining Substantive Evidence about Accounts, Disclosures, and Assertions in the Revenue Cycle......Page 425
Significant Terms ......Page 440
True-False Questions ......Page 441
Multiple-Choice Questions ......Page 442
Review and Short Case Questions......Page 445
Contemporary and Historical Cases......Page 460
Application Activities ......Page 470
Academic Research Cases ......Page 471
ACL......Page 472
Through Studying this Chapter, You Will Be Able to Achieve these Learning Objectives:......Page 474
The Audit Opinion Formulation Process ......Page 475
Significant Accounts and Relevant Assertions......Page 476
Performing Risk Assessment Procedures for Cash Accounts......Page 478
Obtaining Evidence about Internal Control Operating Effectiveness for Cash......Page 489
Obtaining Substantive Evidence about Cash Accounts, Disclosures, and Assertions......Page 493
Auditing Marketable Securities......Page 501
Significant Terms ......Page 507
True-False Questions ......Page 508
Multiple-Choice Questions ......Page 510
Review and Short Case Questions......Page 513
Contemporary and Historical Cases......Page 526
Application Activities ......Page 533
Academic Research Cases ......Page 534
Ford and Toyota......Page 535
Through Studying this Chapter, You Will Be Able to Achieve these Learning Objectives:......Page 536
The Audit Opinion Formulation Process ......Page 537
Significant Accounts and Relevant Assertions......Page 538
Performing Risk Assessment Procedures in the Acquisition and Payment Cycle......Page 540
Obtaining Evidence about Internal Control Operating Effectiveness in the Acquisition and Payment Cycle......Page 553
Obtaining Substantive Evidence about Accounts, Disclosures, and Assertions in the Acquisition and Payment Cycle......Page 554
Summary and Next Steps......Page 571
Significant Terms ......Page 572
True-False Questions ......Page 573
Multiple-Choice Questions ......Page 574
Review and Short Case Questions......Page 577
Contemporary and Historical Cases......Page 586
Application Activities ......Page 591
Academic Research Cases ......Page 592
ACL......Page 594
Through Studying this Chapter, You Will Be Able to Achieve these Learning Objectives:......Page 596
Significant Accounts, Disclosures, and Relevant Assertions......Page 597
Performing Risk Assessment Procedures for Long-Lived Assets......Page 599
Obtaining Evidence about Internal Control Operating Effectiveness for Long-Lived Asset Accounts and Related Expenses......Page 607
Obtaining Substantive Evidence about Accounts, Disclosures, and Assertions for Long-Lived Asset Accounts and Related Expenses......Page 608
Summary and Next Steps......Page 615
True-False Questions ......Page 616
Multiple-Choice Questions ......Page 617
Review and Short Case Questions......Page 619
Contemporary and Historical Cases......Page 626
Application Activities ......Page 627
Academic Research Case ......Page 628
Ford and Toyota......Page 629
Through Studying this Chapter, You Will Be Able to Achieve these Learning Objectives:......Page 630
The Audit Opinion Formulation Process ......Page 631
Significant Accounts, Disclosures, and Relevant Assertions......Page 632
Performing Risk Assessment Procedures for Debt Obligations and Stockholders’ Equity Transactions......Page 634
Obtaining Substantive Evidence in Auditing Debt Obligations and Stockholders’ Equity Transactions......Page 639
Significant Terms ......Page 645
True-False Questions ......Page 646
Multiple-Choice Questions ......Page 647
Review and Short Case Questions......Page 649
Contemporary and Historical Cases......Page 652
Application Activities ......Page 654
Academic Research Case ......Page 655
Through Studying this Chapter, You Will Be Able to Achieve these Learning Objectives:......Page 656
The Audit Opinion Formulation Process ......Page 657
Review Activities......Page 658
Communicating with Management and the Audit Committee (And Those Charged with Governance)......Page 681
Issues Relating to Audit Firm Portfolio Management, Audit Partner Rotation, and Audit Firm Rotation......Page 685
Significant Terms ......Page 692
True-False Questions ......Page 694
Multiple-Choice Questions ......Page 696
Review and Short Case Questions......Page 702
Contemporary and Historical Cases......Page 710
Application Activities ......Page 715
Academic Research Case ......Page 718
Ford and Toyota......Page 719
Through Studying this Chapter, You Will Be Able to Achieve these Learning Objectives:......Page 720
The Audit Opinion Formulation Process ......Page 721
Standard Unqualified Audit Reports on Financial Statements......Page 722
Unqualified Audit Reports with Explanatory Language......Page 727
Qualified Reports, Adverse Reports, and Disclaimers......Page 733
Audit Reports on Internal Control Over Financial Reporting......Page 740
Significant Terms ......Page 744
True-False Questions ......Page 745
Multiple-Choice Questions ......Page 746
Review and Short Case Questions......Page 748
Contemporary and Historical Cases......Page 757
Application Activities ......Page 759
Academic Research Cases ......Page 760
Ford and Toyota......Page 761
Through Studying this Chapter, You Will Be Able to Achieve these Learning Objectives:......Page 762
The Audit Opinion Formulation Process ......Page 763
Complex Auditing Judgments......Page 764
Making Materiality Judgments......Page 765
Evaluating Misstatements......Page 770
Assessing Long-Term Liabilities Involving Significant Subjective Judgment......Page 773
Auditing Merger and Acquisition Activities......Page 776
Auditing Management’s Fair Value Estimates and Related Impairment Judgments......Page 779
Auditing Financial Instruments......Page 787
Assessing Deficiencies in Internal Control over Financial Reporting......Page 792
Evaluating a Client’s Internal Audit Function......Page 795
Significant Terms ......Page 802
True-False Questions ......Page 804
Multiple-Choice Questions ......Page 805
Contemporary and Historical Cases......Page 819
Application Activities ......Page 821
Academic Research Cases ......Page 823
ACL......Page 824
Through Studying this Chapter, You Will Be Able to Achieve these Learning Objectives:......Page 826
Attestation Services Provided by Audit Firms......Page 827
Reviews and Compilations......Page 830
Reviews of Interim Financial Information for Public Companies......Page 836
Special Considerations for Reporting......Page 837
Attestation on Agreed-Upon Procedures, Financial Forecasts and Projections, and Pro Forma Financial Information......Page 845
Forensic Accounting......Page 854
Sustainability Reporting and Assurance......Page 855
Summary......Page 864
Significant Terms ......Page 865
True-False Questions ......Page 867
Multiple-Choice Questions ......Page 868
Review and Short Case Questions......Page 871
Application Activities ......Page 874
Academic Research Case ......Page 875
ACL Appendix......Page 877
Case Index......Page 893
Index......Page 895
