Auditing : the art and science of assurance engagements

743 Pages·2021·33.35 MB·English

by  Alvin A Arens, Randal J Elder, Mark S Beasley, Chris E Hogan, Joanne C Jones

Contents
Preface ix 3 Professional Ethics and Legal Liability 50
LEARNING OBJECTIVES 50
1 The Demand for Audit and Other
Professional Ethics and Public Accountants 51
Assurance Services 1 A Framework for Ethical Reasoning 52
Ethical Blind Spots 57
LEARNING OBJECTIVES 1
What are Assurance Engagements? 2 Professional Guidance on Ethical Conduct 57
What is Auditing? 3 The Independence Standard for Assurance
Engagements 61
Why are Audits and Other Assurance Engagements
Needed? 7 Enforcement of the Code of Professional Conduct 67
Common Types of Assurance Engagements 10 The Expectations Gap 68
Types of Auditors 11 Audit Failure and Audit Liability 70
Accounting vs. Auditing 14 Summary 75
Assurance and Nonassurance Services Offered Review Questions 76
by Public Accountants 15 Multiple Choice Questions 76
Summary 19 Discussion Questions and Problems 78
Review Questions 19 Professional Judgment Problems and Cases 82
Multiple Choice Questions 20 Applying Your Professional Judgment to Hillsburg Hardware 85
Discussion Questions and Problems 21
Professional Judgment Problems and Cases 23 4 Audit Responsibilities and Objectives 86
Applying Your Professional Judgment to Hillsburg
LEARNING OBJECTIVES 86
Hardware 24
Management’s Responsibilities 87
Responsibilities of those Charged with Governance 88
2 The Public Accounting Profession Auditor’s Responsibilities 89
and Audit Quality 25 Framework for Professional Judgment 94
Professional Skepticism 97
LEARNING OBJECTIVES 25
Financial Statement Cycles 99
An Overview of the Canadian Public Accounting
Management Assertions 104
Industry 26
An Overview of the Audit Process 112
Organizations Affecting the Canadian Public
Summary 117
Accounting Profession 29
Review Questions 117
CPA Canada Assurance Standards 32
Principles Underlying the Financial Statement Multiple Choice Questions 118
Audit 33 Discussion Questions and Problems 119
The Drivers of Audit Quality 39 Professional Judgment Problems and Cases 123
Quality Control 40 Applying Your Professional Judgment to Hillsburg 125
Summary 43
Review Questions 44 5 Audit Evidence 126
Multiple Choice Questions 44
LEARNING OBJECTIVES 126
Discussion Questions and Problems 46 Nature of Audit Evidence 127
Professional Judgment Problems and Cases 47 Audit Evidence Decisions 128
Applying Your Professional Judgment at Hillsburg 48 Persuasiveness of Evidence 130
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A01_AREN1983_15_SE_FM.indd 5 30/03/21 3:58 PM
Types of Audit Procedures 134 8 Understanding the Internal
Design Analytical Procedures 143 Control System 255
Use of Audit Data Analytics and Advanced
LEARNING OBJECTIVES 255
Technologies 150
Internal Control Objectives 256
Documentation 156
Management’s Responsibility for Internal Control 257
Professional Skepticism, Evidence, and Documentation 160
Auditors Responsibilities for Internal Control 258
APPENDIX 5A: Common Financial Ratios 162
COSO Components of Internal Control 260
Summary 164
Internal Controls Specific to Information
Review Questions 164
Technology 273
Multiple Choice Questions and Task-Based Simulations 165
Impact of Information Technology on the System of
Discussion Questions and Problems 168 Internal Control 278
Professional Judgment Problems and Cases 171 Impact of Emerging Technologies on Internal
Applying Your Professional Judgment to Hillsburg Hardware 172 Control 284
Understanding Controls of Small Businesses 285
6 Client Acceptance, Preliminary
Summary 286
Planning, and Materiality 174 Review Questions 287
LEARNING OBJECTIVES 174 Multiple Choice Questions and Task-Based Simulations 288
Planning for What Can Go Wrong 175 Discussion Questions and Problems 290
Client Acceptance and Continuance 177 Professional Judgment Problems and Cases 291
Overall Audit Strategy 185 Applying Your Professional Judgment to Hillsburg Hardware 293
Understand the Entity and Its Environment and the
Applicable Accounting Framework 188
9 Control Risk Assessment 294
Risk Assessment Procedures and Information from
Other Sources 192 LEARNING OBJECTIVES 294
Understand and Evaluate Internal Control 295
Preliminary Analytical Review 196
Control Risk Assessment 311
Materiality 199
Tests of Controls 314
Determine Overall Materiality 200
Auditor Reporting on Internal Control 319
Determine Performance Materiality 204
Reporting on Internal Controls for Some Public
Determine Specific Materiality 208
Companies 320
Applying Materiality—Evaluating Results and
Completing the Audit 208 Summary 321
Summary 211 Review Questions 321
Review Questions 211 Multiple Choice Questions and Task-Based Simulations 322
Multiple Choice Questions and Task-Based Simulations 212 Discussion Questions and Problems 324
Discussion Questions and Problems 215 Professional Judgment Problems and Cases 327
Professional Judgment Problems and Cases 218 Applying Your Professional Judgment to Hillsburg Hardware 329
Applying Your Professional Judgment to Hillsburg Hardware 221
10 Risk Response: Audit Strategy, Overall
7 Risk Assessment and Inherent Risk 222 Approach, and Audit Program 330
LEARNING OBJECTIVES 222 LEARNING OBJECTIVES 330
The Audit Risk Model 223 Overall Audit Strategy 331
Inherent Risk Assessment 229 Audit Plan and Audit Procedures 335
Risk Response for Levels of Risk 234 Appropriate Mix of Audit Procedures and Audit
Considering Fraud Risk 236 Approach 340
Conditions for Fraud 238 Design Effective Further Audit Procedures 346
Risk Response for Fraud Risks 242 Design Audit Programs 350
Summary 244 Summary 352
Review Questions 244 Review Questions 352
Multiple Choice Questions and Task-Based Simulations 245 Multiple Choice Questions and Task-Based Simulations 353
Discussion Questions and Problems 248 Discussion Questions and Problems 356
Professional Judgment Problems and Cases 251 Professional Judgment Problems and Cases 357
Applying Your Professional Judgment to the Hillsburg Audit 253 Applying Your Professional Judgment to Hillsburg Hardware 361
vi CONTENTS
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11 Audit Sampling Concepts 362 Design Substantive Procedures 482
Auditing Property, Plant, and Equipment 487
LEARNING OBJECTIVES 362
Summary 493
Selecting Items to Test and Sampling 363
Representative Sampling and Its Risks 364 Review Questions 494
Statistical vs. Nonstatistical Sampling and Probabilistic Multiple Choice Questions and Task-Based Simulations 495
vs. Nonprobabilistic Sample Selection 365 Discussion Questions and Problems 497
Sample Selection Methods 367 Professional Judgment Problems and Cases 500
An Overview of the Audit Sampling Process 370 Applying Your Professional Judgment to Hillsburg
Using Sampling for Tests of Controls 372 Hardware 502
Statistical Sampling for Tests of Controls 382
Using Sampling for Substantive Tests of Details 384 14 Audit of the Inventory and
Nonstatistical Sampling for Substantive Tests 384
Distribution Cycle 504
Statistical Sampling for Substantive Tests of Details 392
LEARNING OBJECTIVES 504
Audit Data Analytics vs. Sampling 395
Overview of the Inventory and Distribution Cycle 505
Adequate Documentation and Professional Judgment 397
Identify Inherent Risks and Determine Significant
Summary 398
Risks 509
Review Questions 399
Assess Control Risk 513
Multiple Choice Questions and Task-Based Simulations 400
Determine Audit Approach for Inventory and
Discussion Questions and Problems 401 Distribution Cycle 516
Professional Judgment Problems and Cases 403 Design Tests of Controls 518
Applying Your Professional Judgment to Design Substantive Procedures 519
Hillsburg Hardware 405 Design Fraud Procedures for Inventory 525
Summary 526
12 Audit of the Revenue Cycle 407 Review Questions 526
LEARNING OBJECTIVES 407 Multiple Choice Questions and Task-Based
Overview of the Revenue Process 408 Simulations 527
Identify Inherent Risk Factors and Determine Significant Discussion Questions and Problems 529
Risks 415 Professional Judgment Problems and Cases 532
Assess Control Risk 423 Applying Your Professional Judgment to Hillsburg
Determine Audit Approach for Revenue Cycle 424 Hardware 534
Design Tests of Controls 426
Design Substantive Procedures 433 15 Audit of the Human Resources
Design Fraud Procedures for Revenue 447
and Payroll Cycle 536
Summary 448
LEARNING OBJECTIVES 536
Review Questions 449
An Overview of the Human Resources and Payroll
Multiple Choice Questions and Task-Based Simulations 450
Cycle 537
Discussion Questions and Problems 452 Identify Inherent Risk Factors and Determine Significant
Professional Judgment Problems and Cases 455 Risks 540
Applying Your Professional Judgment to Hillsburg Understand Key Controls 542
Hardware 460 Determine Audit Approach for Human Resources and
Payroll 546
13 Audit of the Acquisition and Design Tests of Controls 547
Design Substantive Procedures 547
Payment Cycle 462
Design Fraud Procedures for Human Resources and
LEARNING OBJECTIVES 462
Payroll 551
An Overview of the Acquisition and
Summary 552
Payment Cycle 463
Review Questions 553
Identify Inherent Risk factors and Determine Significant
Multiple Choice Questions and Task-Based Simulations 554
Risks 469
Understand Key Controls 475 Discussion Questions and Problems 555
Determine Audit Approach for Acquisition and Payment Professional Judgment Problems and Cases 556
Cycle 477 Applying Your Professional Judgment to Hillsburg
Design Tests of Controls 478 Hardware 558
CONTENTS vii
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16 Audit of Cash and Cash Determine Whether Emphasis of Matter or Other
Matter Paragraphs are Necessary 630
Equivalents 559
Decide Whether Modifications to the Audit Opinion are
LEARNING OBJECTIVES 559
Necessary 633
Overview of Cash Accounts 561
Qualified Audit Opinions 636
Identify Inherent Risk Factors and Determine
Adverse Audit Opinion 640
Significant Risks 562
Disclaimer of Opinion 640
Understand Key Controls and Assess Control Risk 563
How the Audit Report Adds Value 642
Design Substantive Procedures 565
Summary 643
Design Fraud Procedures for Cash 570
Review Questions 644
Summary 574
Multiple Choice Questions 645
Review Questions 575
Discussion Questions and Problems 646
Multiple Choice Questions and Task-Based Simulations 576
Professional Judgment Problems and Cases 648
Discussion Questions and Problems 577
Applying Your Professional Judgment to Hillsburg 650
Professional Judgment Problems and Cases 579
Applying Your Professional Judgment to Hillsburg
19 Other Audits, Assurance Engagements,
Hardware 580
and Related Services 651
17 Completing the Audit 581 LEARNING OBJECTIVES 651
Deciding which Standards Apply 652
LEARNING OBJECTIVES 581
Reviews and Compilations of Financial information 657
Complete Final Evidence Gathering 582
The Review Engagement Process 659
Review for Contingent Liabilities and
Commitments 584 Compilation Engagements 665
Obtain Confirmations from Client’s External and/or Review of Interim Financial Statements 668
In-House Legal Counsel 588 Assurance Engagements for Nonfinancial
Review for Subsequent Events 591 Information 669
Accumulate Final Evidence 594 Assurance Over Compliance with Agreements and
Regulations 675
Evaluate Results 597
Agreed-upon Procedures Engagements 678
Evaluate Other Information 604
Reports on Supplemental Matters Arising from an Audit
Communicate with the Audit Committee and
or Review Engagement 683
Management 606
The Future of Assurance Services 684
Summary 610
Summary 685
Review Questions 610
Review Questions 686
Multiple Choice Questions 611
Multiple Choice Questions 687
Discussion Questions and Problems 612
Discussion Questions and Problems 687
Professional Judgment Problems and Cases 616
Professional Judgment Problems and Cases 689
Applying Your Professional Judgment to Hillsburg 617
Applying Your Professional Judgment to Hillsburg 691
18 Audit Reports on Financial
Online
Statements 619
LEARNING OBJECTIVES 619
The Audit Opinion and the Auditors’ Reporting 20 Audit of the Capital Acquisition and
Responsibilities 620 Repayment Cycle
The Unmodified Audit Opinion 622
Elements of the Auditor’s Report 622
Appendix: Hillsburg Hardware Limited 692
Reporting Material Uncertainty for Going
Concern 628 Index 701
Identify and Disclose Key Audit Matters 629 Credits 719
viii CONTENTS
A01_AREN1983_15_SE_FM.indd 8 27/03/21 9:55 PM
Preface
Auditing: The Art and Science of Assurance Engagements New Coverage of Audit Data
is an introduction to auditing and assurance services. It
Analytics and Other Automated
is intended for use in an introductory auditing course,
for one-semester or two-semester instruction at the Tools and Techniques
undergraduate or graduate level. The book’s primary
The internet and extensive use of technologies and
emphasis is on the auditor’s decision-making process in
automation by entities to engage in all types of business
a financial statement audit and, to a lesser degree, other
transactions and services have dramatically increased
types of audits and assurance engagements.
the amount of data available for analysis. The audit
To offer a deeper learning experience, we
profession is rapidly exploring how audit data analytics
recommend pairing the text content with MyLab
(ADAs) and advanced technologies might allow them to
Accounting, which is the teaching and learning plat-
increase both audit quality and efficiency. The 15th edi-
form that empowers you to reach every student. By
tion of this textbook includes new coverage of how ADAs
combining trusted author content with digital tools and
are being used in all phases of the audit, spanning from
a flexible platform, MyLab personalizes the learning
initial planning through the completion of the audit.
experience and will help your students learn and retain
We provide an extensive introduction to ADAs in
key course concepts while developing skills that future
Chapter 5, including coverage of best practices related
employers are seeking in their candidates. Learn more
to accessing and preparing the data, evaluating the
at www.pearson.com/mylab/accounting.
relevance and reliability of that data, addressing large
numbers of exceptions for further consideration, and
What’s New to This Edition? documenting the use of ADAs. We also include cover-
age of different types of automated tools and techniques,
Despite its practical nature, many students often view including artificial intelligence, robotics, machine
auditing as an abstract subject. To address this, we con- learning, and deep learning. In Chapters 6 and 7, we
tinue to work on revising the book so that the material discuss, and provide several examples, of how ADAs
is more relatable and understandable to students. We are used to perform risk assessment procedures and to
highlight the more substantive changes below. identify unusual transactions and account balances. In
Chapter 11, we explain the difference between ADAs
and sampling and how they complement each other. In
Current Coverage of Auditing Chapters 12 to 16, which cover the financial statement
cycles, we highlight different ways auditors are using
Standards
ADAs and various automated tools and techniques to
perform risk assessment procedures, control tests, sub-
New auditing standards are released without regard
stantive tests, and fraud procedures. Throughout the
to textbook revision cycles. As auditing instructors, we
textbook, we provide several Auditing in Action boxes
appreciate how critical it is to have the most current
that provide real examples of auditors using various
content available. This edition includes coverage of the
ADAs and other automated tools and techniques, such
most recent standards released and that are effective
as drones and machine learning.
January 1, 2022, (early adoption is encouraged). The
edition has been revised to include CAS 315 (Revised),
Identifying and Assessing Risks of Material Misstate-
New Dataset for Students to
ment, CSRS 4200, Compilation Engagements and
CSRS 4600, Agreed-Upon Procedures Engagements. Perform Audit Data Analytics
As with the previous edition, we continue to revise the
book so that the concepts and terminology are closely To provide students hands-on experience in using
aligned with the Canadian Audit Standards. various audit data analytics tools, we have developed
ix
A01_AREN1983_15_SE_FM.indd 9 11/03/21 4:24 PM
an entirely new dataset that includes different files of The Impact of the COVID-19
transaction data related to the sales and collection cycle
Pandemic
for a hypothetical company, JA Tire Manufacturing.
This dataset, which students can access from MyLab
The COVID-19 pandemic has had a significant impact
Accounting, includes different sub-files that contain
on the audit profession. This provides a unique oppor-
transaction data related to JA Tire Manufacturing’s
tunity to have students and instructors “think outside
sales orders, bills of lading, invoices, cash receipts, cus-
the box” and address the challenges auditors face when
tomer master file, and product master file (an excerpt
clients are working remotely or when past historical
of a summary of the sub-files is shown below). We have
financial information is no longer relevant in identify-
developed several new homework problems included
ing misstatements or evaluating estimates. Throughout
in Chapters 5, 6, 7, and 12 that require students to ana-
the textbook, we have provided numerous examples of
lyze data in the various sub-files of the dataset for JA
the impact of the pandemic on various business models
Tire Manufacturing. Because the dataset is in Excel,
and the risk of misstatement. We have also developed
the new homework problems allow students to use any
questions, Concept Checks, and Auditing in Actions to
software, such as AuditBond (formerly ACL), Excel,
help students develop their change management skills,
IDEA, Power BI, or Tableau, to conduct their data
which is one of the key skills that has emerged during
analysis. Thus, instructors have the flexibility to choose
the pandemic.
which software tool they would like students to use to
perform the analyses.
The Expectations Gap
New Case for Students to use
We have introduced new material in Chapter 3 to help
MindBridge Ai deepen students’ understanding of the expectations
gap, its underlying causes and the role of the auditor
In partnership with MindBridge Ai, Pearson Canada in society.
has worked with a subject matter expert and the author
of this text to include the addition of an entirely new
case to the 15th edition. This includes a general led- A Refresh of Risk Assessment
ger dataset that provides students hands-on experience
and Risk Response
with using the machine learning tool, MindBridge Ai,
the world’s first AI-powered auditing solution. We intro-
We continue to refine the textbook material to promote
duce the case in Chapter 6 and provide information
deeper learning and to enable students to better under-
on the company and its environment. In this compo-
stand how to perform a risk assessment and develop an
nent of the case, students learn how to use MindBridge
appropriate risk response. In addition to incorporating
Ai and perform preliminary analytical review of two
automated tools and techniques into Chapters 6 to 10,
years of general ledger data in order to identify high
we have significantly revised those chapters to reflect
risk areas. As we develop more components to the case,
changes in CAS 315 (Revised).
they will be added to the MyLab Accounting.
In Chapter 6, which covers client acceptance and
Recognized as a technology pioneer by the World
continuance, preliminary planning, and materiality,
Economic Forum in 2020 for their innovative strength
we have revised our discussion of engagement risk
in transforming the accounting and financial services
and understanding the entity and its environment. We
professions, MindBridge Ai provides deeper insights
have also placed a greater emphasis on the accounting
that go beyond traditional audit techniques, cover-
framework. In Chapter 7, to enhance students’ under-
ing entire data sets to extract new value in data and
standing of the underlying logic of the audit process,
reporting.
we have revised our discussion of components of the
audit risk model and have introduced new diagrams.
Reflective of revised CAS 315, Chapter 7 introduces
Additional Audit Data Analysis
the five new inherent risk factors to aid in risk assess-
Problems ment and the spectrum of inherent risk. For both
Chapter 6 and 7, we have developed new diagrams to
In addition to the new JA Tire Manufacturing home- illustrate these concepts.
work problems and the MindBridge Ai case, we have Chapters 8 and 9 have also been revised to help stu-
also included several other problems in the text that dents understand how to apply professional judgment
can be completed using Excel templates that are avail- in evaluating control effectiveness and designing tests
able in MyLab Accounting. of controls. We distinguish between direct and indirect
xx PREFACE
A01_AREN1983_15_SE_FM.indd 10 11/03/21 4:24 PM
controls and have developed several diagrams to illus- have found students tend to find confusing. The con-
trate the underlying logic of the control risk assessment versations are light in tone, but are designed to provide
and its connection with risk of material misstatement. analogies or examples that students can relate to and,
Consistent with the CAS 315 (Revised), we include hopefully, they will “get it.” We cover questions such
much more on information technology, particularly as “Audit Opinions—Clean or Dirty?” and “Data Ana-
general controls. lytics and Artificial Intelligence in Audit. What, How,
Chapter 10 brings the discussion together in its and Why?”
focus on overall audit strategy and approach. The subse-
quent chapters that address the transaction cycles have
been revised to be consistent with CAS 315 (Revised) Applying Your Professional
as well as provide examples of ADAs for risk assessment Judgment to Hillsburg
procedures, tests of controls, substantive tests, and
Hardware Limited
fraud procedures. We continue to provide up-to-date,
real-life examples drawn from actual audit plans and
We continue to develop Hillsburg Hardware Limited,
audit reports to illustrate the different types of audit
which has been a feature of this book for a very long
approaches employed in the various transaction cycles.
time, to reflect the ever-evolving Canadian business
environment. At the end of each chapter, we provide
a transcript of a conversation among the various audit
Emerging Technologies
team members that cover the concepts in the chap-
and Cybersecurity Risk ters. Students are then asked to apply their professional
judgment and answer the related questions. Many of
Building upon the 14th edition, we continue to empha- the questions highlight issues that have occurred due to
size the role of the IT system and provide new material the impact of COVID on Hillsburg’s operations.
on the entity’s use of information technology, including
emerging technologies, and its impact on the system
of internal control and the conduct of the audit. We New and Revised Problems
provide new material on cybersecurity risk, the inter-
and Cases
net of things, smart contracts and blockchain, and arti-
ficial intelligence. We have also developed vignettes
All chapters include several new and revised profes-
to illustrate the challenges of auditing in complex IT
sional judgment problems and cases. Many of the
environments.
problems are based upon actual companies. Addition-
ally, each chapter identifies new or revised Discussion
Questions and Problems that instructors can use in
Other Audits, Assurance
class to generate discussion about important topics.
Engagements, and Related These problems are highlighted by an “in-class” discus-
sion icon in the margin next to the related question.
Services
Our coverage of other audits, assurance engagements,
A Focus on Enhancing Teaching
and related services in Chapters 1 and 19 highlights
those engagements that are beyond the financial state- and Learning
ment audit. Chapter 19, which focuses on other audits
and engagements that fall outside of the traditional As the title of the book suggests, auditing is both an art
financial statement audit, has been revised to include and a science. To be a good auditor, it requires a com-
discussion of audits of special purpose financial state- bination of the professional judgment (the art) and
ments as well as the new standards for compilations and knowledge of the relevant standards, rules, and proce-
agreed-upon procedures engagements. New material dures (the science). This text aims to both build stu-
has been added to explain how auditors decide which dents’ knowledge of auditing and the audit profession
standards apply to the relevant information. as well as develop their critical thinking skills.
These first three chapters provide background to
help students understand why there is a demand for
Still Confused? Read This. audits and auditors perform audits the way they do.
These chapters introduce students to key threshold
We have developed several conversations in which the concepts and emphasizes the role of auditing and ethi-
two junior auditors, Mitch and AJ, ask questions about cal standards, as well as various organizations, in ensur-
various concepts that, through our years of teaching, we ing audit quality.
PREFACE xi
A01_AREN1983_15_SE_FM.indd 11 11/03/21 4:24 PM
Chapter 4 explains auditors’ and management’s students recap content covered within different sec-
responsibilities as well as assertions, provides a frame- tions of the chapter. These short in-chapter review
work for professional judgment, and introduces the questions are intended to help call students’ attention
audit process. The remaining chapters focus on the to key concepts and test their comprehension as they
activities related to planning—in particular, risk assess- read the material in the chapter.
ment and developing an appropriate risk response.
To understand how auditing is done in practice, it STILL CONFUSED? READ THIS Each chapter includes
is important to understand how auditing concepts are conversation transcripts in which two junior auditors
applied to specific auditing areas. Chapter 11 focuses ask their audit senior or manager questions to explain
on the sampling process, while the remaining chap- key audit concepts. The explanations provided use
ters demonstrate the application of the risk-based audit analogies to which students can relate and are designed
process to classes of transactions and account balances to make the concepts less abstract.
in the following cycles: revenue, acquisition and pay-
ment, inventory and distribution, human resources and AUDITING IN ACTION Each chapter includes short
payroll, and cash. Each of the cycle chapters follows vignettes referred to as Auditing in Action. These vignettes
the same format, starting with an overview of the cycle, provide real-world events or insights from audit research
inherent risk factors and significant risks, key controls, to help students understand the concepts covered.
overall approach, tests of controls, and substantive tests.
APPLYING YOUR PROFESSIONAL JUDGMENT TO HILL-
Each chapter highlight ADAs and some chapters also
highlight fraud procedures. SBURG HARDWARE Each chapter concludes with a
Chapters 17 and 18 cover the final two phases of the transcript of a conversation among various members of
audit process—conclusion and reporting. The last the Hillsburg audit team that address several concepts
chapter, Chapter 19, expands upon Chapter 1’s discus- from the chapter. Students apply their professional
sion of other audits, assurance engagements, and related judgment to answer questions related to the issues
services. In this chapter, we explore the other Canadian discussed.
standards that apply to engagements that fall outside In addition to those core features, the chapters that
the audit of general purpose financial statements. focus on the audit process and its application, Chapters 5
to 18, include the following:
Chapter Format
AUDIT PROCESS DIAGRAM Each chapter provides
In order to enhance student learning and to ensure
a diagram of the audit process, detailing the relevant
future success in their career as well as their profes-
phase(s) of the process, along with the primary objec-
sional education, all chapters include the following
tives of the applicable phase and the related activities
core features:
in the chapter.
LEARNING OBJECTIVES AND STANDARDS REFER-
DETAILED ILLUSTRATIONS OF REAL-LIFE AUDIT
ENCED IN THE CHAPTER Each chapter starts with
PRACTICE Many chapters include working papers that
learning objectives designed to reflect the expected
illustrate how auditors document and perform key parts
level of competency for an undergraduate student, as
of the audit, such as develop the overall audit strategy
described in the CPA Canada Competency Map. The
and determine materiality.
textbook covers all the standards as outlined in the
competency map.
EXCERPTS FROM REAL-LIFE AUDIT PLANS AND
REPORTS Many chapters have excerpts from actual
OPENING VIGNETTE To help students connect the
audit plans, such as the City of Toronto and the
important auditing concepts to real-world situations,
Regional Municipality of Halifax, and other communi-
each chapter begins with an opening vignette that illus-
cations such as excerpts of the results of the audit report
trates practice issues relevant to that chapter’s content.
for the City of Ottawa and from the key audit matters
section of audit reports of a different types of entities
DETAILED ILLUSTRATIONS OF KEY DECISION PRO-
from around the world to illustrate how auditors assess
CESSES These illustrations help students understand
the risk of material misstatement and develop an appro-
complex concepts and to visualize the decision-making
priate risk response.
process involved in key audit judgments, including eth-
ical and professional judgment.
MyLab Accounting
CONCEPT CHECKS All chapters include several con- MyLab Accounting delivers proven results in help-
cept checks, which appear periodically within each ing individual students succeed. It provides engaging
chapter and highlight short-answer questions to help experiences that personalize, stimulate, and measure
xii PREFACE
A01_AREN1983_15_SE_FM.indd 12 11/03/21 4:24 PM
learning for each student, including a personalized eText offers interactive and sharing features. Instructors
study plan. can share their comments or highlights, and students
MyLab Accounting for the Fifteenth Canadian can add their own, creating a tight community of learn-
Edition of Auditing: The Art and Science of Assurance ers within the class.
Engagements includes many valuable assessments and
study tools to help students practise and understand key DIGITAL LEARNING MANAGERS Pearson’s learning
concepts from the text. Students can practise and be solutions managers work with faculty and campus
assessed on an expanded number of select end-of-chapter course designers to ensure that Pearson technology
questions (an assignment map is available within the products, assessment tools, and online course materials
instructor resources tab on the MyLab), data analytics are tailored to meet your specific needs. This highly
projects, review key terms with glossary flashcards, and qualified team is dedicated to helping schools take full
explore integrated case content. advantage of a wide range of educational resources,
MyLab Accounting can be used by itself or linked by assisting in the integration of a variety of instruc-
to any learning management system. To learn more tional materials and media formats. Your local Pearson
about how MyLab Accounting combines proven learn- Canada sales representative can provide you with more
ing applications with powerful assessment, visit www details on this service program.
.pearson.com/mylab
Acknowledgments
Instructional Support Materials
I thank all the editorial and production staff at Pearson
INSTRUCTOR’S RESOURCE MANUAL The Instructor’s Canada for putting together a high-quality product,
Resource Manual assists the instructor in teaching the including Keara Emmett (Portfolio Manager), K amilah
course more effectively. The features include instruc- Reid-Burrell (Content Manager), Daniella B alabuk
tions for assignments, practical examples to help the and Tamara Capar (Content Developers), Anita
students understand the material, and helpful sugges- Smale (Media Content Developer), Jessica H ellen
tions on how to teach each chapter effectively. It also (Senior Project Manager), Darcey Pepper (M arketing
includes a sample course outline and mapping the Manager), and Aishwarya Panday (Senior Project
chapters’ topics to the CPA Competency Map. Manager at SPI Global).
Joanne C. Jones
INSTRUCTOR’S SOLUTIONS MANUAL This comprehen-
sive resource provides detailed solutions to all the end- We thank our families, who encourage and support
of-chapter review questions, multiple-choice questions, us through the many hours of writing, researching,
problems, and cases. and rewriting; our students, who push us to think
“out of the box”; our colleagues, particularly Sandra
COMPUTERIZED TESTBANK Pearson’s computerized Iacobelli, who developed many of the end-of-chapter
test banks allow instructors to filter and select questions questions, Romi-lee Sevel, and Larry Yarmolinsky;
to create quizzes, tests, or homework. Instructors can and the numerous practitioners who continue to
revise questions or add their own, and may be able to keep us up-to-date with the ever-changing audit
choose print or online options. These questions are environment.
also available in Microsoft Word format. Joanne C. Jones
Bartosz Amerski
POWERPOINT SLIDES Electronic colour slides are
available in Microsoft PowerPoint. The slides illumi-
nate and build on key concepts in the text. About the Canadian Authors
IMAGE LIBRARY The Image Library is an impressive
Joanne C. Jones, PhD, FCPA, FCA
resource that helps instructors create vibrant lecture
presentations. Almost all figures and tables in the This is the third Canadian edition to be authored by
text are included and organized by chapter for con- Joanne C. Jones, who is an associate professor of audit-
venience. These images can easily be imported into ing at York University. Joanne teaches graduate and
Microsoft PowerPoint to create new presentations or to undergraduate auditing and her research focuses on
add to existing ones. issues such as professionalism and ethics in accounting,
audit practice, and globalization and the diversity
PEARSON eTEXT Pearson eText gives students access to of the accounting profession. She also investigates
their textbook anytime, anywhere. In addition to note academic ethics and accounting education and has
taking, highlighting, and bookmarking, the Pearson published several instructional audit cases in academic
PREFACE xiii
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