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Wiley CPAexcel Exam Review April 2017 Study Guide: Auditing and Attestation

ISBN: 978-1-119-36937-0
672 pages
January 2017
Wiley CPAexcel Exam Review April 2017 Study Guide: Auditing and Attestation (1119369371) cover image


The Wiley CPAexcel Study Guide: Auditing and Attestation arms CPA test-takers with detailed text and skill-building problems to help identify, focus on, and master the specific topics that may need additional reinforcement to pass the AUD section of the CPA Exam.

This essential study guide:

  • Covers the complete AICPA content blueprint in AUD
  • Explains every topic tested with 656 pages of study text, 502 multiple-choice questions, and 38 task-based simulations in AUD
  • Organized in Bite-Sized Lesson format with 142 lessons in AUD
  • Maps perfectly to the Wiley CPAexcel online course; may be used to complement the course or as a stand-alone study tool
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Table of Contents

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

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

Internal Control Concepts 1 126

Internal Control Concepts 2 128

Internal Control Standards 1 131

Internal Control Standards 2 135

Internal Control—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

Nature of Evidence 2 167

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 206

Introduction to Auditing Individual Areas 206

Cash 208

Accounts Receivable 211

Inventory 213

Investments in Securities and Derivative Instruments 216

Fixed Assets 219

Current Liabilities 220

Long-Term Liabilities 222

Stockholders’ Equity 223

Payroll 224

Audit Sampling 226

Introduction to Sampling 226

Attributes Sampling 228

Variables Sampling 230

Probability-Proportional-to-Size (PPS) Sampling 234

Example Problems 236

Difference Estimation Problem 236

Difference Estimation Solution 237

Ratio Estimation Problem 238

Ratio Estimation Solution 239

MPU Estimation Problem 240

MPU Estimation Solution 241

PPS Sampling Problem 242

PPS Sampling Solution 243

IT (Computer) Auditing 244

IT Controls—General Controls 244

IT Controls—Application Controls 246

IT Evidence—Gathering Procedures 248

Other IT Considerations 250

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 386

F/S Prepared on Cash Basis 386

F/S Prepared on Regulatory Basis (for General Use) 387

Profit Participation 389

Sample Review Report on Financial Statements 390

Sample Compilation Report on Financial Statements 391

Separate Report on Compliance (No Instances of Noncompliance) 392

Separate Report on Compliance (with Noncompliance Identified) 393

Combined Report on Audited Financial Statements and Compliance Issues 394

Other Professional Services 396

PCAOB on Reporting on Internal Control in an Integrated Audit 396

PCAOB on Reporting Whether a Previously Reported Material Weakness Continues to Exist 402

Attestation Standards 405

Financial Forecasts and Projections 410

Pro Forma Financial Information 414

Compliance Attestation 417

Reporting on Internal Control in an Integrated Audit 420

Management’s Discussion and Analysis (MD&A) 437

Assurance Services 441

Sample Reports 443

Examination of Forecast 443

AUP of Forecast 444

Compilation of Forecast 445

Examination of Pro Forma 446

Review of Pro Forma 447

Examination for Compliance 448

AUP for Compliance 449

Example Management Report (with No Material Weaknesses Reported) 450

Unmodified Opinions on Financial Statements and ICFR (Combined Report) 451

Unmodified Opinion on ICFR (Separate Report on ICFR) 453

Adverse Opinion on ICFR (Separate Report on ICFR) 455

Examination of MD&A 457

Review of MD&A 458

Multiple Choice Questions 459

Task-Based Simulations 573

Index 647

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