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Wiley CPAexcel Exam Review 2018 Study Guide. Auditing and Attestation

  • ID: 4450669
  • Book
  • March 2018
  • 528 Pages
  • John Wiley and Sons Ltd
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All the Information You Need to Master the 2018 CPA Exam

The Wiley CPAexcel Study Guides four–volume set, fully updated for the 2018 CPA Exam, reviews all four parts of the exam. The Study Guides provide the detailed information candidates need to master or reinforce tough topic areas. Content is organized into Bite–Sized Lessons that map perfectly to the Wiley CPAexcel online course. The books are designed to supplement the online course but may also be used as a stand–alone study tool.

  • Detailed text covers the complete AICPA content blueprint
  • Organized in Bite–Sized Lesson format
  • Maps perfectly to the Wiley CPAexcel online course
  • Explains every topic tested
  • Used by leading review providers


Auditing and Attestation Business Environment and Concepts Financial Accounting and Reporting Regulation

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About the Authors ix

About the Auditing and Attestation Professors x

Welcome to Auditing and Attestation xi

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 10

Discreditable Acts 12

Fees 14

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 51

Other Members 54

Requirements of SEC and PCAOB 55

Securities and Exchange Commission (SEC) 55

Public Company Accounting Oversight Board (PCAOB) 61

Requirements of GAO and DOL 64

Government Accountability Office (GAO) 64

Department of Labor (DOL) 72

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

The Nature of Evidence 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 220

Current Liabilities 221

Long–Term Liabilities 223

Stockholders Equity 224

Payroll 225

Audit Sampling 227

Introduction to Sampling 227

Attributes Sampling 229

Variables Sampling 231

Probability–Proportional–to–Size (PPS) Sampling 235

Example Problems 237

Difference Estimation Problem 237

Difference Estimation Solution 238

Ratio Estimation Problem 239

Ratio Estimation Solution 240

MPU Estimation Problem 241

MPU Estimation Solution 242

PPS Sampling Problem 243

PPS Sampling Solution 244

IT (Computer) Auditing 245

IT Controls General Controls 245

IT Controls Application Controls 247

IT Evidence–Gathering Procedures 249

Other IT Considerations 251

Forming Conclusions and Reporting 253

Audit Reports 254

Introduction to Audit Reports 254

PCAOB on Audit Reports 261

Audits of Group Financial Statements 263

Emphasis–of–Matter Paragraphs and Other–Matter Paragraphs 267

Qualified for Scope Limitation 270

Qualified for Misstatement 273

Adverse Opinion 275

Disclaimer of Opinion 277

Consistency of Financial Statements 280

PCAOB on Evaluating Consistency of Financial Statements 282

Opening Balances Initial Audits 284

Other Information Along with Financial Statements 288

Supplementary Information Related to Financial Statements 290

Required Supplementary Information 292

PCAOB on Auditing Supplemental Information 294

Alert to Restrict Report 297

Financial Statements Using Another Country s Framework 299

Reporting on Summary Financial Statements 301

Interim Financial Information 304

Sample Reports 309

Unmodified Opinion (Reference to Legal Requirements) 309

Unmodified Opinion (No Reference to Legal Requirements) 311

Unmodified Opinion (Sentence by Sentence) 313

Unmodified in Current Year, Balance Sheet in Prior Year 315

Unmodified in Prior Year, Qualified in Current Year 317

Qualified for Scope 319

Qualified for Material Misstatement 321

Qualified for Inadequate Disclosure 323

Adverse Opinion 324

Disclaimer of Opinion for Scope 326

Unmodified on B/S, Disclaimer on I/S and Cash Flows 327

Emphasis–of–Matter Paragraph 329

Other–Matter Paragraph 331

Reference to Component Auditor 333

Single Financial Statement 334

Specific Element (Special Purpose Framework) 335

Incomplete Presentation 336

Application of Accounting Principles (Second Opinion) 337

Report on Summary Financial Statements 338

Review Report on Interim Financial Statements 339

Other Reports 340

Reports on Application of Requirements of Framework 340

F/S with Special Purpose Frameworks 343

Audits of Single F/S and Specific Elements, Accounts, or Items 346

Reporting on Compliance with Requirements in an F/S Audit 349

Service Organizations User Auditors 353

Service Organizations Service Auditors 355

Comfort Letters 358

Government Auditing Standards 363

Compliance Audits 367

SSARSs General Principles 370

SSARSs Preparation of Financial Statements 373

SSARSs Compilation Engagements 375

SSARSs Review Engagements 379

SSARSs Other Topics 383

Sample Reports 387

F/S Prepared on Cash Basis 387

F/S Prepared on Regulatory Basis (for General Use) 388

Profit Participation 390

Sample Review Report on Financial Statements 391

Sample Compilation Report on Financial Statements 392

Separate Report on Compliance (No Instances of Noncompliance) 393

Separate Report on Compliance (with Noncompliance Identified) 394

Combined Report on Audited Financial Statements and Compliance Issues 395

Other Professional Services 397

AICPA on Reporting on Internal Control in an Integrated Audit 397

PCAOB on Reporting on Internal Control in an Integrated Audit 407

PCAOB on Reporting Whether a Previously Reported Material Weakness Continues to Exist 413

Auditing Employee Benefit Plans 416

Introduction to Attestation Standards 421

Attestation Standards Common Concepts 424

Examination Engagements 427

Examination Reports 431

Review Engagements 435

Review Reports 438

Agreed ]Upon Procedures Engagements 442

Prospective Financial Information 447

Pro Forma Financial Information 454

Compliance Attestation 459

Management s Discussion and Analysis (MD&A) 463

Assurance Services 467

Sample Reports 469

Examination of Forecast 469

AUP of Forecast 470

Compilation of Forecast 471

Examination of Pro Forma 472

Review of Pro Forma 473

Examination for Compliance 474

AUP for Compliance 475

Example Management Report (with No Material Weaknesses Reported) 476

Unmodified Opinions on Financial Statements and ICFR (Combined Report) 477

Unmodified Opinion on ICFR (Separate Report on ICFR) 479

Adverse Opinion on ICFR (Separate Report on ICFR) 481

Examination of MD&A 483

Review of MD&A 484

Index 485

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Note: Product cover images may vary from those shown