Wiley CPAexcel Exam Review July 2020 Study Guide: Auditing and Attestation

Table of Contents:
About the Authors ix About the Auditing and Attestation Professors xi Welcome to Auditing and Attestation xii 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 Information 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 17 Form of Organization and Names 19 MIPPs Independence Rules 21 Introduction to MIPPs Independence Rules 21 Network Firms and Affiliates 23 Reissues, Engagement Letters, ADR, and Unpaid Fees 25 Financial Interests 26 Overview and Unsolicited Financial Interests 26 Mutual Funds and Retirement Plans 28 Partnerships, 529s, Trust and Estates, Employee Benefit Plans 30 Depository Accounts, Brokerage Accounts, and Insurance Policies 32 Loans, Leases, and Business Relationships 33 Family Relationships 35 Employment Relationships 37 Current Employment 37 Subsequent Employment 39 Other Associations and Relationships 41 Nonaudit Services 43 Code Provisions 43 Specific Services 46 Members in Business 53 Other Members 56 Requirements of SEC and PCAOB 57 Securities and Exchange Commission (SEC) 57 Public Company Accounting Oversight Board (PCAOB) 63 Requirements of GAO and DOL 66 Government Accountability Office (GAO) 66 Department of Labor (DOL) 74 Assessing Risk and Developing a Planned Response 77 Financial Statement Audits 78 Accounting vs. Auditing 78 GAAS and Principles 80 Professional Standards 82 Quality Control Standards (SQCS) 84 Overview of Audit Process 86 Overview of Auditor’s Report 87 Different Types of Engagements 91 PCAOB Responsibilities 93 PCAOB on Engagement Quality Review 95 Planning Activities 97 Pre-Engagement Planning Issues 97 Planning and Supervision 103 Materiality 105 Audit Risk 107 Analytical Procedures 110 Audit Data Analytics 112 Detecting Fraud 116 Fraud: Evaluation and Communication 121 Detecting Illegal Acts 123 Using the Work of a “Specialist” 125 Required Communications with Those Charged with Governance 128 PCAOB on Communications with Audit Committees 131 Internal Control—Concepts and Standards 134 Obtaining and Understanding Internal Control 134 Evaluating Internal Control 136 Assessing Control Risks Under AICPA Standards 139 Performing Procedures in Response to Assessed Risks 143 Required Communications 146 Using the Work of an Internal Audit Function 149 Performing Further Procedures and Obtaining Evidence 153 Internal Control: Transaction Cycles 154 Specific Transaction Cycles 154 Revenue/Receipts—Sales 156 Revenue/Receipts—Cash 158 Expenditures/Disbursements 160 Payroll Cycle 163 Miscellaneous Cycles 165 Audit Evidence: Concepts and Standards 167 Overview of Substantive Procedures 167 The Nature of Audit Evidence 171 Assertions and Types of Audit Procedures 175 PCAOB Risk Assessment Audit Standards 178 Evaluation of Misstatements Identified During the Audit 182 Audit Documentation 184 PCAOB on Audit Documentation 188 Confirmation 190 Accounting Estimates 192 Fair Value Estimates 194 Lawyer’s Letters 196 Management Representations Letters 199 Related-Party Issues 202 PCAOB on Related Parties 205 Subsequent Events and Related Issues 208 Going Concern Issues 212 Audit Evidence: Specific Audit Areas 216 Introduction to Auditing Individual Areas 216 Cash 218 Accounts Receivable 221 Inventory 223 Investments in Securities and Derivative Instruments 226 Fixed Assets 232 Current Liabilities 234 Long-Term Liabilities 236 Stockholders’ Equity 237 Payroll 238 Audit Sampling 240 Introduction to Sampling 240 Attributes Sampling 242 Variables Sampling 244 Probability-Proportional-to-Size (PPS) Sampling 248 IT (Computer Auditing) 250 IT General and Application Controls 250 Other IT Considerations 254 Forming Conclusions and Reporting 257 Audit Reports 258 Introduction to Audit Reports 258 PCAOB on Audit Reports 266 Audits of Group Financial Statements 270 Emphasis-of-Matter Paragraphs and Other-Matter Paragraphs 274 Qualified for Scope Limitation 277 Qualified for Misstatement 280 Adverse Opinion 282 Disclaimer of Opinion 284 Consistency of Financial Statements 286 PCAOB on Evaluating Consistency of Financial Statements 288 Opening Balances—Initial Audits 290 Other Information Along with Financial Statements 294 Supplementary Information Related to Financial Statements 296 Required Supplementary Information 298 PCAOB on Auditing Supplemental Information 300 Alert to Restrict Report 303 Financial Statements Using Another Country’s Framework 305 Reporting on Summary Financial Statements 307 Interim Financial Information 310 Other Types of Reports 315 Reports on Application of Requirements of Framework 315 F/S with Special Purpose Frameworks 318 Audits of Single F/S and Specific Elements, Accounts, or Items 321 Reporting on Compliance with Requirements in an F/S Audit 324 Service Organizations—User Auditors 327 Service Organizations—Service Auditors 329 Comfort Letters 332 Government Auditing Standards 337 Compliance Audits 340 SSARSs—General Principles 343 SSARSs—Preparation of Financial Statements 346 SSARSs—Compilation Engagements 348 SSARSs—Review Engagements 352 SSARSs—Other Topics 356 Other Professional Services 361 AICPA on Reporting on Internal Control in an Integrated Audit 361 PCAOB on Reporting on Internal Control in an Integrated Audit 370 PCAOB on Reporting Whether a Previously Reported Material Weakness Continues to Exist 376 Auditing Employee Benefit Plans 379 Introduction to Attestation Standards 384 Attestation Standards—Common Concepts 387 Examination Engagements 390 Examination Reports 394 Review Engagements 398 Review Reports 402 Agreed-Upon Procedures Engagements 406 Prospective Financial Information 411 Pro Forma Financial Information 418 Compliance Attestation 423 Management’s Discussion and Analysis (MD&A) 427 Assurance Services 431 Index 433

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