Wiley CPAexcel Exam Review 2019 Study Guide: Auditing and Attestation

Table of Contents:
About the Authors xi About the Auditing and Attestation Professors xiii Welcome to Auditing and Attestation xv Ethics, Professional Responsibilities, and General Principles 1 AICPA Code of Professional Conduct 2 Introduction and Preface 2 Members in Public Practice 5 MIPPs Introduction and Conceptual Framework 5 MIPPs Nonindependence Rules 7 Conflicts of Interest, Directorships, and Gifts 7 Reporting Income and Subordination of Judgment 9 Advocacy, Third-Party Service Providers (TSPs), General Standards, and Accounting Principles 11 Discreditable Acts 13 Fees 15 Advertising and Confidentiality 16 Form of Organization and Names 18 MIPPs Independence Rules 20 Introduction to MIPPs Independence Rules 20 Network Firms and Affiliates 22 Reissues, Engagement Letters, ADR, and Unpaid Fees 24 Financial Interests 25 Overview and Unsolicited Financial Interests 25 Mutual Funds and Retirement Plans 27 Partnerships, 529s, Trust and Estates, Employee Benefit Plans 29 Depository Accounts, Brokerage Accounts, and Insurance Policies 31 Loans, Leases, and Business Relationships 32 Family Relationships 34 Employment Relationships 36 Current Employment 36 Subsequent Employment 38 Other Associations and Relationships 40 Nonaudit Services 42 Code Provisions 42 Specific Services 45 Members in Business 52 Other Members 55 Requirements of SEC and PCAOB 56 Securities and Exchange Commission (SEC) 56 Public Company Accounting Oversight Board (PCAOB) 62 Requirements of GAO and DOL 65 Government Accountability Office (GAO) 65 Department of Labor (DOL) 73 Assessing Risk and Developing a Planned Response 75 Financial Statement Audits 76 Accounting vs. Auditing 76 GAAS and Principles 78 Professional Standards 80 Quality Control Standards (SQCS) 82 Overview of Audit Process 84 Overview of Auditor’s Report 85 Different Types of Engagements 89 PCAOB Responsibilities 90 PCAOB on Engagement Quality Review 92 Planning Activities 94 Pre-Engagement Planning Issues 94 Planning and Supervision 99 Materiality 101 Audit Risk 103 Analytical Procedures 106 Detecting Fraud 108 Fraud: Evaluation and Communication 113 Detecting Illegal Acts 115 Using the Work of a “Specialist” 117 Required Communications with Those Charged with Governance 120 PCAOB on Communications with Audit Committees 123 Internal Control—Concepts and Standards 126 Obtaining an Understanding of Internal Control 126 Evaluating Internal Control 128 Assessing Control Risk under AICPA Standards 131 Performing Procedures in Response to Assessed Risks 135 Required Communications 138 Using the Work of an Internal Audit Function 141 Performing Further Procedures and Obtaining Evidence 145 Internal Control: Transaction Cycles 146 Specific Transaction Cycles 146 Revenue/Receipts—Sales 148 Revenue/Receipts—Cash 150 Expenditures/Disbursements 152 Payroll Cycle 155 Miscellaneous Cycles 157 Audit Evidence: Concepts and Standards 159 Overview of Substantive Procedures 159 Nature of Evidence 1 163 Assertions and Types of Audit Procedures 167 PCAOB Risk Assessment Audit Standards 170 Evaluation of Misstatements Identified During the Audit 174 Audit Documentation 176 PCAOB on Audit Documentation 180 Confirmation 182 Accounting Estimates 184 Fair Value Estimates 186 Lawyer’s Letters 188 Management Representations Letters 191 Related-Party Issues 194 PCAOB on Related Parties 197 Subsequent Events and Related Issues 200 Going Concern Issues 203 Audit Evidence: Specific Audit Areas 207 Introduction to Auditing Individual Areas 207 Cash 209 Accounts Receivable 212 Inventory 214 Investments in Securities and Derivative Instruments 217 Fixed Assets 223 Current Liabilities 224 Long-Term Liabilities 226 Stockholders’ Equity 227 Payroll 228 Audit Sampling 230 Introduction to Sampling 230 Attributes Sampling 232 Variables Sampling 234 Probability-Proportional-to-Size (PPS) Sampling 238 Example Problems 240 Difference Estimation Problem 240 Difference Estimation Solution 241 Ratio Estimation Problem 242 Ratio Estimation Solution 243 MPU Estimation Problem 244 MPU Estimation Solution 245 PPS Sampling Problem 246 PPS Sampling Solution 247 IT (Computer) Auditing 248 IT Controls—General Controls 248 IT Controls—Application Controls 250 IT Evidence-Gathering Procedures 252 Other IT Considerations 254 Forming Conclusions and Reporting 257 Audit Reports 258 Introduction to Audit Reports 258 PCAOB on Audit Reports 265 Audits of Group Financial Statements 269 Emphasis-of-Matter Paragraphs and Other-Matter Paragraphs 273 Qualified for Scope Limitation 276 Qualified for Misstatement 279 Adverse Opinion 281 Disclaimer of Opinion 283 Consistency of Financial Statements 285 PCAOB on Evaluating Consistency of Financial Statements 287 Opening Balances—Initial Audits 289 Other Information Along with Financial Statements 293 Supplementary Information Related to Financial Statements 295 Required Supplementary Information 297 PCAOB on Auditing Supplemental Information 299 Alert to Restrict Report 302 Financial Statements Using Another Country’s Framework 304 Reporting on Summary Financial Statements 306 Interim Financial Information 309 Sample Reports 314 Unmodified Opinion (Reference to Legal Requirements) 314 Unmodified Opinion (No Reference to Legal Requirements) 316 Unmodified Opinion (Sentence by Sentence) 318 Unmodified in Current Year, Balance Sheet in Prior Year 320 Unmodified in Prior Year, Qualified in Current Year 322 Qualified for Scope 324 Qualified for Material Misstatement 326 Qualified for Inadequate Disclosure 328 Adverse Opinion 329 Disclaimer of Opinion for Scope 331 Unmodified on B/S, Disclaimer on I/S and Cash Flows 332 Emphasis-of-Matter Paragraph 334 Other-Matter Paragraph 336 Reference to Component Auditor 338 Single Financial Statement 339 Specific Element (Special Purpose Framework) 340 Incomplete Presentation 341 Application of Accounting Principles (Second Opinion) 342 Report on Summary Financial Statements 343 Review Report on Interim Financial Statements 344 Other Types of Reports 345 Reports on Application of Requirements of Framework 345 F/S with Special Purpose Frameworks 348 Audits of Single F/S and Specific Elements, Accounts, or Items 351 Reporting on Compliance with Requirements in an F/S Audit 354 Service Organizations—User Auditors 358 Service Organizations—Service Auditors 360 Comfort Letters 363 Government Auditing Standards 368 Compliance Audits 372 SSARSs—General Principles 375 SSARSs—Preparation of Financial Statements 378 SSARSs—Compilation Engagements 380 SSARSs—Review Engagements 384 SSARSs—Other Topics 388 Sample Reports 392 F/S Prepared on Cash Basis 392 F/S Prepared on Regulatory Basis (for General Use) 393 Profit Participation 395 Sample Review Report on Financial Statements 396 Sample Compilation Report on Financial Statements 397 Separate Report on Compliance (No Instances of Noncompliance) 398 Separate Report on Compliance (with Noncompliance Identified) 399 Combined Report on Audited Financial Statements and Compliance Issues 400 Other Professional Services 402 AICPA on Reporting on Internal Control in an Integrated Audit 402 PCAOB on Reporting on Internal Control in an Integrated Audit 411 PCAOB on Reporting Whether a Previously Reported MaterialWeakness Continues to Exist 417 Auditing Employee Benefit Plans 420 Introduction to Attestation Standards 425 Attestation Standards—Common Concepts 428 Examination Engagements 431 Examination Reports 435 Review Engagements 439 Review Reports 442 Agreed-Upon Procedures Engagements 446 Prospective Information 451 Pro Forma Financial Information 458 Compliance Attestation 463 Management’s Discussion and Analysis (MD&A) 467 Assurance Services 471 Sample Reports 473 Examination of Forecast 473 AUP of Forecast 474 Compilation of Forecast 475 Examination of Pro Forma 476 Review of Pro Forma 477 Examination for Compliance 478 AUP for Compliance 479 Example Management Report (with No MaterialWeaknesses Reported) 480 Unmodified Opinions on Financial Statements and ICFR (Combined Report) 481 Unmodified Opinion on ICFR (Separate Report on ICFR) 483 Adverse Opinion on ICFR (Separate Report on ICFR) 485 Examination of MD&A 487 Review of MD&A 488 Index 489  

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