Chapter 1: The Demand for audit and assurance Services Ob jectives After studying this chapter, you should be able to: 1. Describe assurance services and distinguish audit services from other assurance and nonassurance services provided by 2. Explain the importance of auditing in reducing information 3. List the causes of information risk, and explain how this risk may be reduced Describe auditing 5. Distinguish between auditing and accounting 6. Differentiate the three main types of audits 7. Identify the primary types of auditors 8. Describe the requirements for becoming a cpa Chapter 2: The CPA Profession Objectives After studying this chapter, you should be able to 1. Describe the nature of CPa firms, what they do, and their structure 2. Describe the key functions performed by the aicpa 3. Use generally accepted auditing standards as a basis for further study. 4. Identify quality control standards and practices within the accounting profession. 5. Summarize the role of the Securities and Exchange Commission in accounting and auditing Chapter 3: Audit Reports Objectives After studying this chapter, you should be able to
Chapter 1: The Demand for Audit and Assurance Services Objectives After studying this chapter, you should be able to: 1. Describe assurance services and distinguish audit services from other assurance and nonassurance services provided by CPAs. 2. Explain the importance of auditing in reducing information risk. 3. List the causes of information risk, and explain how this risk may be reduced. 4. Describe auditing. 5. Distinguish between auditing and accounting. 6. Differentiate the three main types of audits. 7. Identify the primary types of auditors. 8. Describe the requirements for becoming a CPA. Chapter 2: The CPA Profession Objectives After studying this chapter, you should be able to: 1. Describe the nature of CPA firms, what they do, and their structure. 2. Describe the key functions performed by the AICPA. 3. Use generally accepted auditing standards as a basis for further study. 4. Identify quality control standards and practices within the accounting profession. 5. Summarize the role of the Securities and Exchange Commission in accounting and auditing. Chapter 3: Audit Reports Objectives After studying this chapter, you should be able to:
1. Describe the parts of the standard unqualified audit report. 2. Specify the conditions required to issue the standard unqualified audit report. 3. Describe the five circumstances when an unqualified report with an explanatory paragraph or modified wording is appropriate 4. Identify the types of audit reports that can be issued when an unqualified opinion is not justified 5. Explain how materiality affects audit reporting decisions 6. Draft appropriately modified audit reports under a variety of circumstances 7. Determine the appropriate audit report for a given audit situation Chapter 4: Professional ethics Objectives After studying this chapter, you should be able to 1. Distinguish ethical from unethical behavior in personal and professional contexts. 2. Resolve ethical dilemmas using an ethical framework. 3. Explain the importance of ethical conduct for the accounting profession 4. Describe the purpose and content of the aicpa code of Professional conduct 5. Apply the AICPa Code rules and interpretations on independence and explain their importance 6. Understand the requirements of other rules under the aicpa 7. Describe the enforcement mechanisms for the rules of conduct Chapter 5: Legal liability Ob ject After studying this chapter, you should be able to Understand the litigious environment in which CPAs practice
1. Describe the parts of the standard unqualified audit report. 2. Specify the conditions required to issue the standard unqualified audit report. 3. Describe the five circumstances when an unqualified report with an explanatory paragraph or modified wording is appropriate. 4. Identify the types of audit reports that can be issued when an unqualified opinion is not justified. 5. Explain how materiality affects audit reporting decisions. 6. Draft appropriately modified audit reports under a variety of circumstances. 7. Determine the appropriate audit report for a given audit situation. Chapter 4: Professional Ethics Objectives After studying this chapter, you should be able to: 1. Distinguish ethical from unethical behavior in personal and professional contexts. 2. Resolve ethical dilemmas using an ethical framework. 3. Explain the importance of ethical conduct for the accounting profession. 4. Describe the purpose and content of the AICPA Code of Professional Conduct. 5. Apply the AICPA Code rules and interpretations on independence and explain their importance. 6. Understand the requirements of other rules under the AICPA Code. 7. Describe the enforcement mechanisms for the rules of conduct. Chapter 5: Legal Liability Objectives After studying this chapter, you should be able to: 1. Understand the litigious environment in which CPAs practice
2. Explain why the failure of financial statement users to differentiate among business failure, audit failure, and audit risk has resulted in lawsuits 3. Use the primary legal concepts and terms concerning accountants' liability as a basis for study ing legal liability of auditors 4. Describe accountants' liability to clients and related defenses 5. Describe accountants liability to third parties under common law and related defenses 6. Describe accountants' civil liability under the federal securities laws and related defenses 7. Specify what constitutes criminal liability for accountants 8. Describe what the profession and the individual CPa can do and what is being done to reduce the threat of litigation Chapter 6: Audit Responsibilities and Objectives Objectives After studying this chapter, you should be able to 2. Distinguish management's responsibilities for preparing financi T 1. Explain the objective of conducting an audit of financial statemen statements from the auditor 's responsibilities for verifying those financial statement 3. Explain the auditor's responsibility for discovering material misstatements 4. Classify transactions and account balances into financial statement cycles and identify benefits of a cycle approach to segmenting the audit 5. Describe why the auditor obtains a combination of assurance by auditing classes of transactions and ending balances in accounts 6. Distinguish among the five categories of management assertions about financial information 7. Link the six general transaction- related audit objectives to the five management assertions 8. Link the nine general balance-related audit objectives to the five management assert 9. Explain the relationship between audit objectives and the accumulation of audit evidence
2. Explain why the failure of financial statement users to differentiate among business failure, audit failure, and audit risk has resulted in lawsuits. 3. Use the primary legal concepts and terms concerning accountants’ liability as a basis for studying legal liability of auditors. 4. Describe accountants’ liability to clients and related defenses. 5. Describe accountants’ liability to third parties under common law and related defenses. 6. Describe accountants’ civil liability under the federal securities laws and related defenses. 7. Specify what constitutes criminal liability for accountants. 8. Describe what the profession and the individual CPA can do and what is being done to reduce the threat of litigation. Chapter 6: Audit Responsibilities and Objectives Objectives After studying this chapter, you should be able to: 1. Explain the objective of conducting an audit of financial statements. 2. Distinguish management's responsibilities for preparing financial statements from the auditor's responsibilities for verifying those financial statements. 3. Explain the auditor's responsibility for discovering material misstatements. 4. Classify transactions and account balances into financial statement cycles and identify benefits of a cycle approach to segmenting the audit. 5. Describe why the auditor obtains a combination of assurance by auditing classes of transactions and ending balances in accounts. 6. Distinguish among the five categories of management assertions about financial information. 7. Link the six general transaction-related audit objectives to the five management assertions. 8. Link the nine general balance-related audit objectives to the five management assertions. 9. Explain the relationship between audit objectives and the accumulation of audit evidence
Cha pter 7: Audit Evidence Objectives After studying this chapter, you should be able to 1. Contrast audit evidence with evidence used by other professions 2. Identify the four audit ev idence decisions that are needed to create an audit program 3. Specify the characteristics that determine the persuasiveness of evidence 4. Identify and apply the seven types of evidence used in auditing. 5. State the purposes of analytical procedures and the timing of each purpose 6. Select the most appropriate analytical procedure from among the five major type 7. Explain the benefits of using statistical techniques and computer software for analytical procedures Chapter 8: Audit Planning and Documentation Obj After studying this chapter, you should be able to Discuss why adequate audit planning is essential 2. Preplan the audit 3. Obtain appropriate background information about an audit client 4. Obtain information about an audit client's legal obligations 5. Discuss the nature and purposes of preliminary analytical procedures 6. Understand the purposes of audit working papers 7. Prepare organized audit working papers Chapter 9: Materiality and risk Objectives After studying this chapter, you should be able to 1. Apply the concept of materiality to the audit 2. Make a preliminary judgment about what amounts to consider material 3. Allocate preliminary materiality to segments of the audit during planning 4. Use materiality to evaluate audit findings 5. Define risk in auditing 6. Describe the audit risk model and its components 7. Consider the impact of business risk on acceptable audit risk 8. Consider the impact of several factors on the assessment of inherent risk 9. Discuss risk for segments and measurement difficulties
Chapter 7: Audit Evidence Objectives After studying this chapter, you should be able to: 1. Contrast audit evidence with evidence used by other professions. 2. Identify the four audit evidence decisions that are needed to create an audit program. 3. Specify the characteristics that determine the persuasiveness of evidence. 4. Identify and apply the seven types of evidence used in auditing. 5. State the purposes of analytical procedures and the timing of each purpose. 6. Select the most appropriate analytical procedure from among the five major types. 7. Explain the benefits of using statistical techniques and computer software for analytical procedures. Chapter 8: Audit Planning and Documentation Objectives After studying this chapter, you should be able to: 1. Discuss why adequate audit planning is essential. 2. Preplan the audit. 3. Obtain appropriate background information about an audit client. 4. Obtain information about an audit client's legal obligations. 5. Discuss the nature and purposes of preliminary analytical procedures. 6. Understand the purposes of audit working papers. 7. Prepare organized audit working papers. Chapter 9: Materiality and Risk Objectives After studying this chapter, you should be able to: 1. Apply the concept of materiality to the audit. 2. Make a preliminary judgment about what amounts to consider material. 3. Allocate preliminary materiality to segments of the audit during planning. 4. Use materiality to evaluate audit findings. 5. Define risk in auditing. 6. Describe the audit risk model and its components. 7. Consider the impact of business risk on acceptable audit risk. 8. Consider the impact of several factors on the assessment of inherent risk. 9. Discuss risk for segments and measurement difficulties
10. Discuss how materiality and risk are relate d and integrated into the audit pre ocess Chapter 10: Internal Control and Control risk After studying this chapter, you should be able to 1. Contrast management's need for internal control with the auditor's need to consider internal control when designing an audit 2. Explain the five components of internal control 3. Explain methods used to obtain an understanding of internal control 4. Assess control risk by linking strengths and weaknesses of internal control to transaction-related audit objectives 5. Describe the process of designing and performing tests of controls Chapter 11: The impact of Information Technology on the audit Process Ob jectives After studying this chapter, you should be able to 1. De scribe how It improves internal control. 2. Identify risks that arise from using an it-based accounting system 3. Explain how specific types of general controls and application controls reduce risks associated with using It based accounting systems 4. Describe how the strength of general controls affects the auditor s testing of application controls. 5. Use test data, parallel simulation, and embedded audit module approaches when auditing through the computer. 6. Identify issues for environments involving microcomputers, networks, database management sy stems, and outsourced computer service centers
10.Discuss how materiality and risk are related and integrated into the audit process. Chapter 10: Internal Control and Control Risk Objectives After studying this chapter, you should be able to: 1. Contrast management's need for internal control with the auditor's need to consider internal control when designing an audit. 2. Explain the five components of internal control. 3. Explain methods used to obtain an understanding of internal control. 4. Assess control risk by linking strengths and weaknesses of internal control to transaction-related audit objectives. 5. Describe the process of designing and performing tests of controls. Chapter 11: The Impact of Information Technology on the Audit Process Objectives After studying this chapter, you should be able to: 1. Describe how IT improves internal control. 2. Identify risks that arise from using an IT -based accounting system. 3. Explain how specific types of general controls and application controls reduce risks associated with using IT - based accounting systems. 4. Describe how the strength of general controls affects the auditor's testing of application controls. 5. Use test data, parallel simulation, and embedded audit module approaches when auditing through the computer. 6. Identify issues for environments involving microcomputers, networks, database management systems, and outsourced computer service centers
Chapter 12: Overall Audit Plan and Audit Program Objectives After studying this chapter, you should be able to 1. Use the five types of audit tests to determine whether financial statements are fairl y state 2. Select the appropriate types of audit tests. 3. Understand the concept of evidence mix and how it should be varied in different circumstances 4. Design an audit program. 5. Compare and contrast transaction -related audit ob jectives and balance-related audit ob jectives 6. Integrate the four phases of the audit process. Chapter 13: Audit of the Sales and collection Cycle: Tests of Controls and Substantive Tests of Transactions ob jectives After studying this chapter, you should be able to 1. Identify the accounts and the classes of transactions in the sales and collection cycle. 2. Describe the business functions and the related documents and records in the sales and collection cycle 3. Understand internal control and design and perform tests of controls and substantive tests of transactions for sales 4. Apply the methodology for controls over sales transactions to controls over sales returns and allowances 5. Understand internal control and design and perform tests of controls and substantive tests of transactions for cash receipts. 6. apply the methodology for controls over the sales and collection cycle to write-offs of uncollectible accounts receival 7. Develop an integrated audit plan for the sales and
Chapter 12: Overall Audit Plan and Audit Program Objectives After studying this chapter, you should be able to: 1. Use the five types of audit tests to determine whether financial statements are fairly stated. 2. Select the appropriate types of audit tests. 3. Understand the concept of evidence mix and how it should be varied in different circumstances. 4. Design an audit program. 5. Compare and contrast transaction-related audit objectives and balance-related audit objectives. 6. Integrate the four phases of the audit process. Chapter 13: Audit of the Sales and Collection Cycle: Tests of Controls and Substantive Tests of Transactions Objectives After studying this chapter, you should be able to: 1. Identify the accounts and the classes of transactions in the sales and collection cycle. 2. Describe the business functions and the related documents and records in the sales and collection cycle. 3. Understand internal control and design and perform tests of controls and substantive tests of transactions for sales. 4. Apply the methodology for controls over sales transactions to controls over sales returns and allowances. 5. Understand internal control and design and perform tests of controls and substantive tests of transactions for cash receipts. 6. Apply the methodology for controls over the sales and collection cycle to write-offs of uncollectible accounts receivable. 7. Develop an integrated audit plan for the sales and collection cycle
Chapter 14: Audit Sampling for Tests of Controls and substantive Tests of transactions Ob jectives After studying this chapter, you should be able to 1. Explain the concept of representative sampling. 2. Distinguish between statistical and nonstatistical sampling nd between probabilistic and nonprobabilistic sample selection 3. Select representative samples. 4. Define and describe audit sampling for exception rates. 5. Use nonstatistical sampling in tests of controls and substantive tests of transactions 6. Define and describe attributes sampling and a sampling distribution 7. Use attributes sampling in tests of controls and substantive tests of transactions 8. Apply sampling concepts and me thodology to the audit plan for the sales and collectior Chapter 15: Completing the Tests in the Sales and collection Cycle: Accounts receivable After studying this chapter, you should be able to: 1. Describe the me thodology for designing tests of details of balances using the audit risk model. 2. Design and perform analytical procedures for accounts in the sales and collection cycle 3. Design and perform tests of details of balances for accounts receivable for each balance-related audit objective 4. obtain and evaluate Ints receivable 5. Design audit procedures for the audit of accounts receivable, using an evidence planning worksheet as a guide
Chapter 14: Audit Sampling for Tests of Controls and Substantive Tests of Transactions Objectives After studying this chapter, you should be able to: 1. Explain the concept of representative sampling. 2. Distinguish between statistical and nonstatistical sampling and between probabilistic an d nonprobabilistic sample selection. 3. Select representative samples. 4. Define and describe audit sampling for exception rates. 5. Use nonstatistical sampling in tests of controls and substantive tests of transactions. 6. Define and describe attributes sampling and a sampling distribution. 7. Use attributes sampling in tests of controls and substantive tests of transactions. 8. Apply sampling concepts and methodology to the audit plan for the sales and collection cycle. Chapter 15: Completing the Tests in th e Sales and Collection Cycle: Accounts Receivable Objectives After studying this chapter, you should be able to: 1. Describe the methodology for designing tests of details of balances using the audit risk model. 2. Design and perform analytical procedures for accounts in the sales and collection cycle. 3. Design and perform tests of details of balances for accounts receivable for each balance-related audit objective. 4. Obtain and evaluate accounts receivable confirmations. 5. Design audit procedures for the audit of accounts receivable, using an evidence planning worksheet as a guide
Chapter 16: Audit Sampling for Tests of Details of Balances Objectives After studying this chapter, you should be able to 1. Differentiate audit sampling for tests of details of balances and for tests of controls and substantive tests oftransactions Apply nonstatistical sampling to tests of details of balances 3. Apply monetary unit sampling 4. Describe variables sampling 5. Use difference estimation in tests of details of balances Chapter 17: Audit of the Payroll and Personnel cycle Objectives After studying this chapter, you should be able to 1. Identify the accounts and transactions in the payroll and personnel cycle 2. Describe the business functions and the related documents and re cords in the payroll and personnel cycle 3. Understand internal control and design and perform tests of controls and substantive tests of transactions for the payroll and personnel cycle 4. Design and perform analytical procedures for the payroll and personnel 5. Design and perform tests of details of balances for accounts in the payroll and personnel cycle Chapter 18: Audit of the Acquisition and Payment Cycle: Tests of Controls, Substantive Tests of Transactions, and Accounts payable Objectives After studying this chapter, you should be able to 1. Identify the accounts and the classes of transactions in the acquisition and payment cycle 2. Describe the business functions and the related documents and records in the acquisition and payment cycle 3. Understand internal control and design and perform tests of controls and substantive tests of transactions for the acquisition and pay ment cycl 4. Describe the methodology for designing tests of details of balances for accounts payable using the audit risk model 5. Design and perform analytical procedures for accounts payable
Chapter 16: Audit Sampling for Tests of Details of Balances Objectives After studying this chapter, you should be able to: 1. Differentiate audit sampling for tests of details of balances and for tests of controls and substantive tests of transactions. 2. Apply nonstatistical sampling to tests of details of balances. 3. Apply monetary unit sampling. 4. Describe variables sampling. 5. Use difference estimation in tests of details of balances. Chapter 17: Audit of the Payroll and Personnel Cycle Objectives After studying this chapter, you should be able to: 1. Identify the accounts and transactions in the payroll and personnel cycle. 2. Describe the business functions and the related documents and re cords in the payroll and personnel cycle. 3. Understand internal control and design and perform tests of controls and substantive tests of transactions for the payroll and personnel cycle. 4. Design and perform analytical procedures for the payroll and personnel cycle. 5. Design and perform tests of details of balances for accounts in the payroll and personnel cycle. Chapter 18: Audit of the Acquisition and Payment Cycle: Tests of Controls, Substantive Tests of Transactions, and Accounts Payable Objectives After studying this chapter, you should be able to: 1. Identify the accounts and the classes of transactions in the acquisition and payment cycle. 2. Describe the business functions and the related documents and records in the acquisition and payment cycle. 3. Understand internal control and design and perform tests of controls and substantive tests of transactions for the acquisition and payment cycle. 4. Describe the methodology for designing tests of details of balances for accounts payable using the audit risk model. 5. Design and perform analytical procedures for accounts payable
6. Design and perform tests of details of balances for accounts payable including out-of-period liability tests 7. Distinguish the reliability of vendors'invoices, vendors' statements, and confirmations of accounts payable as audit evidence Chapter 19: Completing the Tests in the acquisition and Payment cycle Verification of selected Accounts After studying this chapter, you should be able to 1. Recognize the many accounts in the acquisition and payment cycle 2. Design and perform audit tests of property, plant, and equipment and related accounts 3. Design and perform audit tests of prepaid expenses 4. Design and perform audit tests of accrued liabilities 5. Design and perform audit tests of income and expense accounts Chapter 20: Audit of the Inventory and warehousing Cycle Objectives After studying this chapter, you should be able to 1. Describe the business functions and the related documents and records in the inventory and warehousing cycle 2. Explain the five parts of the audit of the inventory and warehousing cycle 3. Design and perform audit tests of cost accounting 4. Apply analytical procedures to the accounts in the inventory and warehousing cycle 5. Design and perform physical observation audit tests for inventory 6. Design and perform audit tests of pricing and compilation for inventory 7. Integrate the various parts of the audit of the inventory and warehousing cycle Chapter 21: Audit of the Capital Acquisition and Repayment Cycle Objectives After studying this chapter, you should be able to
6. Design and perform tests of details of balances for accounts payable, including out-of-period liability tests. 7. Distinguish the reliability of vendors' invoices, vendors' statements, and confirmations of accounts payable as audit evidence. Chapter 19: Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts Objectives After studying this chapter, you should be able to: 1. Recognize the many accounts in the acquisition and payment cycle. 2. Design and perform audit tests of property, plant, and equipment and related accounts. 3. Design and perform audit tests of prepaid expenses. 4. Design and perform audit tests of accrued liabilities. 5. Design and perform audit tests of income and expense accounts. Chapter 20: Audit of the Inventory and Warehousing Cycle Objectives After studying this chapter, you should be able to: 1. Describe the business functions and the related documents and records in the inventory and warehousing cycle. 2. Explain the five parts of the audit of the inventory and warehousing cycle. 3. Design and perform audit tests of cost accounting. 4. Apply analytical procedures to the accounts in the inventory and warehousing cycle. 5. Design and perform physical observation audit tests for inventory. 6. Design and perform audit tests of pricing and compilation for inventory. 7. Integrate the various parts of the audit of the inventory and warehousing cycle. Chapter 21: Audit of the Capital Acquisition and Repayment Cycle Objectives After studying this chapter, you should be able to:
1. Identify the accounts and the unique characteristics of the capital acquisition and repayment cycle 2. Design and perform audit tests of notes payable and related accounts and transactions 3. Identify the primary concerns in the audit of owners' equity transactions 4. Design and perform tests of controls, substantive tests of transactions and tests of details of balances for capital stock and retained earnings Chapter 22: Audit of Cash Balances Objectives After studying this chapter, you should be able to 1. Show the relationship of cash in the bank to the various transaction cycles Identify the major types of cash accounts maintained by business entities 3. Design and perform audit tests of the general cash account 4. Recognize when to extend audit tests of the general cash account to test further for material fraud 5. Design and perform audit tests of the imprest payroll bank account 6. Design and perform audit tests of imprest petty cash Chapter 23: Completing the Audit Objectives After studying this chapter, you should be able to 1. Conduct a review for contingent liabilities and commitments 2. Obtain and evaluate letters from the client's attorneys 3. Conduct a post-balance-sheet review for subsequent events 4. Design and perform the final steps in the evidence-accumulation segment of the audit 5. Integrate the audit evidence gathered, and evaluate the overall audit results 6. Communicate effectively with the audit committee and management 7. Identify the auditor's responsibilities when facts affecting the audit report are discovered after its issuance Chapter 24: Other Audit, Attestation Services, and Compilation Engagements Objectives After studying this chapter, you should be able to
1. Identify the accounts and the unique characteristics of the capital acquisition and repayment cycle. 2. Design and perform audit tests of notes payable and related accounts and transactions. 3. Identify the primary concerns in the audit of owners' equity transactions. 4. Design and perform tests of controls, substantive tests of transactions, and tests of details of balances for capital stock and retained earnings. Chapter 22: Audit of Cash Balances Objectives After studying this chapter, you should be able to: 1. Show the relationship of cash in the bank to the various transaction cycles. 2. Identify the major types of cash accounts maintained by business entities. 3. Design and perform audit tests of the general cash account. 4. Recognize when to extend audit tests of the general cash account to test further for material fraud. 5. Design and perform audit tests of the imprest payroll bank account. 6. Design and perform audit tests of imprest petty cash. Chapter 23: Completing the Audit Objectives After studying this chapter, you should be able to: 1. Conduct a review for contingent liabilities and commitments. 2. Obtain and evaluate letters from the client's attorneys. 3. Conduct a post-balance-sheet review for subsequent events. 4. Design and perform the final steps in the evidence-accumulation segment of the audit. 5. Integrate the audit evidence gathered, and evaluate the overall audit results. 6. Communicate effectively with the audit committee and management. 7. Identify the auditor's responsibilities when facts affecting the audit report are discovered after its issuance. Chapter 24: Other Audit, Attestation Services, and Compilation Engagements Objectives After studying this chapter, you should be able to:
