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 .. 1Oe
Aud1t1ng,
Assurance Services
& Ethics
in Australia
Arens Best f Shailer Fiedler Elder f Beasley
 C ONTENTS IN FU LL vii

Summary 165 C HAPTER S Internal control and

Questions and problems 166 control risk 264
Online issue 177
Client and auditor concerns 265
Appendix: Common financial ratios 178
Effect of information technology on internal
control 268
PART 2 THE AUDIT PROCESS: Components of internal control 269
DECISIONS AND Procedures to obtain an understanding of
PLANNING 181 internal control 279
Assessing control risk 284
C HAPTE R 6 Audit planning and
Tests of controls 290
documentation 183
Summary 292
Planning 185
Questions and problems 294
Accepting audit engagement and performing
Online issue 303
initial audit planning 186
Case study: Integrated case application-
Understanding the client's business and industry 191
Pinnacle Manufacturing: Part III 303
Assessing client business risk 196
Performing preliminary analytical procedures 197 C HAPTER 9 Fraud auditing 306
Purposes of audit documentation 199
Types of fraud 307
Content and organisation of audit files 200
Conditions for fraud 309
Effect of technology on audit evidence and audit
Assessing the risk of fraud 312
documentation 206
Corporate governance oversight to reduce fraud
Summary 208
risks 316
Questions and problems 209
Responding to the risk of fraud 321
Online issue 217
Specific fraud risk areas 323
Case study: Integrated case application-
Responsibilities when fraud is suspected 329
Pinnacle Manufacturing: Part l 217
Summary 331
CHAPTE R 7 Materiality and risk 221 Questions and problems 332
Materiality 223 Online issue 338
Materiality for financial statements as a whole 224
C HAPTER 10 The impact of information
Determine performance materiality 227
technology on the audit
Estimate misstatement and compare with
preliminary judgment 230
process 339
Audit risk 232 How information technologies enhance internal
Audit risk model for planning 232 control 341
Assessing acceptable audit risk 236 Assessing the risks of information technology 341
Assessing inherent risk 239 Internal controls specific to IT 343
Relationship of risks to evidence and factors Impact of IT on the audit process 349
influencing risks 242 Auditing with use of the computer 352
Relationship of risk and materiality to Using a microcomputer as an audit tool 362
audit evidence 246 Issues for different IT environments 365
Summary 247 Summary 370
Questions and problems 248 Questions and problems 370
Online issue 262 Online issue 382
Case study: integrated case application- Appendix: Other computer-assisted audit
Pinnacle Manufacturing: Part II 262 techniques 382

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 viii I COl'<TENT S IN Fuu.

CHAPTER 11 Overall audit plan and audit Confirmation of accounts receivable 472
program 384 Developing the 'tests of details' audit program 478
Types of tests 386 Summary 481
Selecting which types of tests to perform 391 Questions and problems 481
Impact of information technology on audit testing 395 Online issue 492
Evidence mix 395
Design of the audit program 396 C HAPTER 14 Audit sampling 493
Relationship of transaction-related audit The role of audit sampling 494
objectives with balance-related and Representative samples 495
presentation and disclosure-related audit Statistical vs non-statistical sampling and
objectives 404 probabilistic vs non-probabilistic sample
Summary of the audit process 406 selection 496
Summary 409 Application of statistical and non-statistical
Questions and problems 410 sampling 497
Online issue 421 Non-probabilistic sample selection methods 498
Probabilistic sample selection methods 499
CHAPTER 12 Audit of the sales and Sampling for deviation rates and
collection cycle: Tests of misstatements 500
controls and substantive Application of non-statistical audit sampling 501
tests of transactions 422 Application of non-statistical audit sampling
Accounts and classes of transactions in the sales for tests of controls and substantive tests
and collection cycle 423 of transactions 502
Business functions in the cycle and related Non-statistical sampling for tests of details
documents and records 424 of balances 513
Methodology for designing tests of controls and Statistical audit sampling 519
substantive tests of transactions for sales 429 Application of attributes sampling 520
Sales returns and allowances 439 Monetary unit sampling 524
Methodology for designing tests of controls and Variables sampling 533
substantive tests of transactions for
Summary 534
cash receipts 439
Questions and problems 535
Audit tests for the write-off of uncollectable
Online issue 548
accounts 443
Case study: Integrated case application-
Summary 445 Pinnacle Manufacturing: Part IV 548
Questions and problems 446
Online issue 456 CHAPTER 1 s Audit of transaction cycles
and financial statement
PART 3 THE AUDIT PROCESS: balances I 551
APPLICATION 457 Accounts and classes of transactions in the
acquisition and payment cycle 552
CHAPTER 13 Completing the tests in the Business functions in the cycle and related
sales and collection cycle: documents and records 553
Accounts receivable 459 Methodology for desigrting tests of controls and
Methodology for designing tests of details substantive tests of transactions 556
of balances 460 Methodology for designing tests of details of
Designing tests of details of balances 466 balances for accounts payable 562

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 C ONTENTS IN FU LL I ix
Design and perform analytical procedures Internal controls 653
(phase Ill) 564 Analytical procedures 654
Design and perform tests of details of the Tests of details of balances 654
accounts payable balance (phase Ill) 564 Internal controls 656
Reliability of evidence 568 Audit of issued and paid-up capital 657
Business functions in the cycle and related
Summary 660
documents and records 571 Questions and problems 660
Parts of the audit of inventory 573
Online issues 672
Audit of cost accounting 575
Analytical procedures 578
Physical observation of inventory 579 PART 4 THE AUDIT PROCESS:
Auditing of pricing and compilation 583
COMPLETING THE
Integration of the tests 586
Accounts and transactions in the payroll and
AUDIT 673
personnel cycle 589 CHAPT ER 17 Completing the audit 675
Business functions in the cycle and related
Perform additional tests for presentation
documents and records 590
and disclosure 677
Methodology for designing tests of controls and
Review for contingent liabilities and
substantive tests of transactions 592
commitments 678
Methodology for designing tests of details
Make inquiries regarding litigation and claims 681
of balances 597
Review for subsequent events 683
Perform analytical procedures (phase Ill) 598
Final evidence accumulation 686
Design and perform tests of details of balances
Evaluate results 688
for liability and expense accounts (phase 111) 599
Communicate with the audit committee
Summary 601 and management 694
Questions and problems 602 Subsequent discovery of facts 696
Online issues 619
Summary 697
Case study: Integrated case application-
Questions and problems 697
Pinnacle Manufacturing: Part V 620
Online issue 705
Case study: Integrated case application-
Pinnacle Manufacturing: Part VI 621
C HAPTER 18 Audit reporting 706
CHAPTE R 16 Audit of transaction cycles The audit report 708
and financial statement Standard unmodified audit report 708
balances II 626 Statutory requirements 711
Conditions requiring a departure 716
Types of cash accounts 628
Audit reports other than urtmodified 716
Cash balances and transaction cycles 629
Materiality 717
Audit of the general cash account 631
Examples of reports 720
Fraud-oriented procedures 639
Unmodified audit report with an emphasis
Audit of property, plant and equipment 643
of matter 722
Audit of manufacturing equipment and related
Impact of e-commerce on audit reporting 725
accounts 644
Audit of prepaid expenses 650 Summary 725
Audit of accrued liabilities 650 Questions and problems 726
Capital acquisition and repayment cycle 652 Online issue 734

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 X I C01'TENTS I N FU U.

PART 5 SPECIAL TOPICS 735 Phases in performance auditing 761

The role of internal auditors 763
CHAPTER 19 Other auditing and assurance Relationship between internal and
engagements 737 external auditors 765
Assurance engagements 740 Public sector audits in Australia 766
Audit reports on special purpose Auditing of Australian Commonwealth
financial reports 742 Government agencies 767
Assurance services pertaining to specific financial Auditing standards 770
information 742 Features peculiar to the public sector 771
Assurance reports on internal controls 743 Australia's Clean Energy Scheme 772
Review engagements 750 Assurance issues 775
Audits of prospective financial information 752 External auditor expertise and qualifications 777
Differences between performance auditing and Guidelines and standards for conducting
financial auditing 755 external assurance engagements and
Effectiveness versus efficiency 756 preparing reports 778
Relationship between performance auditing Questions and problems 780
and internal controls 757 Online issue 790
Types of performance audits 757
Who undertakes performance audits? 758 Index 791
Independence and competence of performance Rouge Clothing Company Ltd case study
auditors 759
Criteria for evaluating efficiency and
effectiveness 760

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 Preface

Objectives
The tenth edition of Auditing, Asmrance Services and Ethics in Australia: An Integrated Approach is based
on the fifteenth US edition of Auditing and Assurance Services: An Integrated Approach. It contains
numerou s changes and revisions, but the principal objectives and emphasis remain unchanged from the
previous edition . It represents a conscious effort to focus on the Australian auditing environment in
terms of the current practices and standards issued by the Auditing and Assurance Standards Board
(AUASB).
The book is a n introduction to auditing for students who have not had significant experience in the
field a nd is intended for either a full-year or one- sem ester course at the undergraduate or graduate
level. The book is also appropriate for introductory professional development courses for public
accounting firms, internal auditors and governm ent auditor s.
The primary emphasis in this textbook is on the auditor's decision-making process. We believe that
the m ost fundamental concep ts in auditing relate to determining the nature and amount of evidence
the a ud itor should accumulate after con sidering the unique circumstances of each engagem ent. If
students of auditing understand the object ives to be accompl ished in a given a udit area, the
circumstan ces of the engagem ent and the decisions to be made, they should be able to determine the
appropriate evidence to gather and h ow to evaluate the evidence obtained.
Thus, as the title of the book reflects, our purpose is to integrate the most important concepts of
auditing with certain practical aspects in a logical manner to assist students in understanding audit
decision making and evidence accumulation. For example, internal control is integrated into each of
the chapters dealing with a particular functional area and is related to tests of transactions. Tests
of transact ions ore, in turn, related to the tests of details o f financial statement balances of the
accounts for the area; and audit sampling is applied to the accumulation of audit evidence rather
than treated as a separate topic. Technology, e-commerce and fraud issues are also integrated
throughout the chapters.

Features of the tenth edition

Auditing regulations
The tenth edition incorporates recently issued auditing standards (ASAs, ASREs and ASAEs),
Accounting Professional and Ethical Statements (APESs), the Framework for Assurance Engagements,
the Explanatory Guide to AUASB Standards Applicable to Review Engagements, and guidance
statements (AGSs a nd GSs). It inclu des up-to-date referencing of relevant legislation (including the
Corporations Act 2001) and common law.

Chapter 9 on fraud auditing and expanded fraud coverage

This chapter on fraud auditing examin es the auditor's responsibility for assessing the risk of fraud and
detecting m aterial misstatements due to fraud. The chapter includes coverage of corporate governance
a nd o ther factors that reduce fraud risk. Specific fraud risk areas and procedures to detect fraud are
also discussed. Additional refer en ces to fraud risks have been integrated into oth er chapters. The results
from the KPMG A Survey of Fraud, Bribery and Corruption in Australia & New Zealand 2012 are
incorporated w ithin the chapter.

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 Xii PREFAC E

Increased emphasis on audit quality

There is an emphasis on audit quality, in the context of the role of auditing in corporate governance.
The major changes in relevant regulation, including the changes to the Corporations Act 2001, are
integrated into relevant chapters.

Running case-Rouge Clothing annual report

Extracts from the annual report for the running case of the fictitious Rouge Clothing Company are
included as a full-colour insert at the back of the textbook. Financial statements and other information
included in the annual report are used in examples throughout the book to illustrate chapter con cepts.
When Rouge Clothing is referred to in the text, a shopping bag icon is shown in the margin.

Running case-Pinnacle Manufacturing integrated case study

The Pinnacle Manufacturing integrated case represents a larger, multi-division company, and appears
in six parts in Chapters 6, 7, 8, 14 a nd 15. Each part of the case is included at the end of the chapter to
which the part relates. The parts of the case are connected so that students will gain a better
understanding of how the parts of the audit are interrelated and integrated by the audit process.

Online issues
Each chapter includes Internet-based cases that require students to research relevant auditing issues
online.

ACL Education edition student software supplement

Students are exposed to ACL audit software in the opening vign ettes for Chapters 9 and 10. Chapter 10
illustrates the application of audit software u sing an ACL demonstration showing screenshots.
ACL provides a wide range of opportunities for incorporating computer-assisted audit techniques
(CAATs) in the auditing curriculum. Instructors may use this supplement in conjunction with Chapter
10, The Impact oflnformation Technology on the Audit Process, which introduces the study ofCAATs.
The objectives of this supplement are twofold:

1 developing students' understanding of CAATs-audit software exercises explore how CAATs can
assist the auditor in testing audit objectives

2 developing students' proficiency in global, market-leading audit software-the marketability of

accounting graduates seeking audit-related employment is significantly enhanced through
exposure to ACL.

ACL is genera lised a udit software u sed by auditors to extract and analyse data on client's
computerised systems. Generalised audit software is discussed on pages 352-358 of the textbook.
ACL is a personal-computer implementation of the English-like Audit Command Language. It has
been designed primarily as a powerful auditing tool for easy access to and analysis of data. ACL has a
number of key features.
ACL is installed on the auditor's personal computer and provides universal access to client data.
The client's data tables are downloaded to the auditor's computer and defined to the system so that
data analysis is feasible.
Commands are issu ed through selections from menus and submenu s. Error messages notify the u ser
if the required data for a command have not been entered correctly. Context-sensitive help is available,
along with a full Windows-style help system. Commands can also be executed interactively through the
command log window. ACL permits both sequential and direct access to data tables. Sequential access
involves a complete pass through the consecutive records in a data table and suits most applications; for
example, locating all records meeting specified criteria. Direct access permits the location of the first
record meeting a criterion or containing a specified key field value (e.g. product number).

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 PREFACE I xiii

ACL possesses powerful expression evaluation capabilities, thereby allowing the creat ion of
computed fields-that is, those calculated from other fields, with formulae and function s. Commands
may be batched and executed on request. Groups of commands may be executed con currently to permit
m ore efficient processing. All commands and results are a u tomatically saved in the command log. This
provides the auditor with the basis for review of work, a set of working papers and the potential
development of future batch applications. ACL can also extract data to create working audit tables for
further processing, and export data to other applications, such as MS Word. An in-depth study of its use
is beyond the scope of most first auditing courses.
To access the educational ACL software go to https:1/accounts.aclgrc.com/promo a nd enter the
p romotional code in the front of the book. Further in formation about the ACL software can be located
at http:l/www.acl.com/about-us.

Auditing and assurance implications of carbon trading

Chapter 19 has been revised for the Australian developments pertaining to carbon emissions reporting
and assurance requirements.

Acknowledgments
We wish to thank the Au diting and Assurance Standards Board (AUASB) and the Au stralian
Accounting Standards Board (AASB) for permission to quote their standards, statements and o ther
pronouncem ents. Material from these Standards Boards is © Commonwealth of Australia. E very
attempt has been made to ensure that the material used is current.
The authors and publisher would also like to thank ACL Services Ltd for permission to package the
ACL student version with this textbook.
The dedicated contribution s of many individuals helped make refinements and improvements in this
edition. An impressive cast of reviewers p rovided m a ny helpful suggestions and enthusiasm for the
organisation and content of the book. The authors and publisher are grateful to each one of them.
These include:
Mrs Prerana Agrawal, University of Western Australia
Dr Tehmina Khan, RMIT
Associate Professor Conor O'Leary, Griffith University.
Dr Grace H su, The University of Queensland
P. J. Best
G. E. P. Shail er
B. A. Fiedler

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Visual preface

For students

How do I use this book?

Learning objectives
These are listed at the beginning of each chapter and explain the 'i Audit responsibilities
j and objectives

___
key concepts that you should understand ofter stu dy in g t h e

...._____
chap ter. T h ey are then signposted t hroug hout th e ch apter, which
steps y ou through each objective by l isting th e objective to which __....,...... ..__..._____ _
each section corresponds. -·--·-
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_____ ____
.......=.---...-----
=.:...-==-...::::=.::=-~=..-..

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Professional statements referred to in this chapter
These provide y ou with a list of relevant auditin g and accounting .
.="==:!=---.. -... _

______...,_
.,...

=::=. ::.=..:.==
legislation that is explained t hroughout the chapter.

-------- --·- _.___ . . . . .

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-_
=..:..~""=:::"' ....:::.:-.::;: Chapter opening vignette
-------
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__ _____
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.==__
-=:=:- Both real and fictitious companies and situation s
.___________ . ______
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introduce you to the con cep ts covered in the
chapter via a practical 'real-life' exam ple.
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Auditing FYI
___....______
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·-
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Som e chapters conta in boxed features with
:=:-..:::-..=-.:.-::.
additional information, exa mples and/or
s:=--=-~--------_
___
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_______ __ _
- -- 1-
samples of audit documents to get you
thinking.
.__..__________
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--·--··--·--- - ---·------·-- Auditing in the real world
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..__ _.._.... __
.. ... ..----· -
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-- ·---------
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various chapters to show real-life examples of auditing in action .

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.,

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 VISU AL PREFACE I xv

____ ... ___,. ____

_______
---1--- ___ -- _ .

Running glossary in the margin == ------------

-- ------------ ~~="-==-~-!:!.'":!:.-

Bolded key terminology and concepts are explained as th ey occur in the text . -- ---------
::.":""
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Integrated case study-
Pinnacle Manufacturing -~-==..~-====
=- - ..------··- - -..--

___ ____ ____

~=-:. =-:_-=:=1~~=::-:
.---------·---
T his running case appears in Ch apters 6, 7, 8, 14
a n d 15. Wh en all parts of the case are completed
'

_______
., ,..

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·----·-"'
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-~-:.-i:.:-:·-;__70. you will have a very sound understan ding of
each stage of the audit and h ow it relates to the --
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-------------
_ _ _ _> ...._ _ _ _ _ _..

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Cue ~udy

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All the material covered m each chapter is
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encapsu lated in a few paragraphs; a g r eat ::.::::.:::.··~.:===-= ==-·:.:::.:.=..::::--
revision tool.

__
OuesdOC'IS and orobte:rns

End-of-chapter questions and problems

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Review questions, multiple choice questions, discussion question s and problems, case
studies and Internet problems help reinforce your understanding of ch apter content.
.....

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...

---------------. -·
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A ll questions are keyed to the lear ning objective to which they correspond so you can
=---------.
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p ick a nd choose the areas you want to work on . J

~
--·-----------·
.. ...
. . ==--==--=..-----.. -.. - - . .
- -- 1· Appendices
~
__________
O,ro.W o;inl schfdulfc et le:.uling csu:
..
Where appropria te, som e ch apters will have an appen dix to

__
_ .,, a,di!ors' h19at liability ir1 Aust~,a
afh.ding extend a n d explicate chapter con tent.
=-==---. . -·:::::::::=
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---
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Extra features
Rouge C lothing - Extracts from the annual
- =::=-:_"""E===--===
..--...- ........ .,..,_. . .....
:::::::::::::" rep ort for the running case of the fictitiou s
---------
__
---·- - ......_,__ ...--_
====--::..-:::::::.:.-:=.:..--:.:=::
_________ ..---------..
-·__.._......__ _..___
_______ .. ___________
:.::--.=--... Rouge C lothing Company a re included as a
--··--·--------- four - colour insert at the end of the book.
_____________
=----·
....
....
__________ _
______.-.. ::::-.. .:;;:.......·.-~·.....= This case illustrates chapter concepts in a
,..
..... -----~ 'r eal- world' business context. W h en Rouge
C lot hing is referred to in the text, a shopping
bag icon is sh own in the margin.
ACL software will help develop your proficiency in a global, market-leading audit
software, and g ive you more marketability as an accounting graduate seeking
a u dit-related e mployment.

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 xvi VISUAL PREFACE

What else can I use with this book?

For instructors
The following is available for download from the Pearson catalogue site. Contact your sales
representative for passwords to access this material.

Solutions manual
The solutions manual provides educators with detailed, accuracy-verified solutions to all of the end-of-
chapter problems in the book.

PowerPoint slides
A comprehensive set of PowerPoint slides can be used by educators for class presentations or by students
for lecture preview or review. They include key figures and tables, as well as a summary of key concepts
and examples from the text.

Test bank
The test bank provides a wealth of accuracy-verified testing material. Updated for the new edition,
each chapter offers a wide variety of true/false, short- answer and multiple-choice questions, arranged
by learning objective and tagged by AACSB standards.

ACL software
Educators may use this software in conjunction with Chapter IO ' The impact of information technology
on the audit process', which introduces the study ofCAATs.

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 About the authors

Peter Best (BCom, MEngSci, PhD, FCPA) is Professor and Head of Discipline,
Accounting at Griffith University's Business School. He was previously the Head of the
School of Accounting, Economics and Finance at the University of Southern Queensland.
He bas taught accounting at the University of Queensland, University of Newcastle,
University of Adelaide, Flinders University, Queensland University of Technology and
University of Southern Queensland. Peter is a Fellow of CPA Australia and an Associate
of the !CAA. He has acted as consultant to a variety of accounting firms a n d government
departments, both in Australia and overseas. His specialist teaching areas include
accounting information systems, auditing, information systems auditing, SAP enterprise
systems and business forensics. Peter is co- a u thor of Auditing Computer Based Systems,
many editions of both Horngren's Accounting and Financial Accounting and the previous
editions of Auditing and Assurance Services in Australia: An lmegraied Approach.

Greg Shailer (BCom, MCom, PhD, FCPA) is Director of the Australian National
Centre for Audit and Assurance Research in the Research School of Accounting at
The Australian National University. He has taught at prominent universities in Australia,
the United Kingdom and the United States. His specialist teaching areas are corporate
governance and auditing. Greg's research focuses on corporate governance, auditing and
regulation. He is a Fellow of CPA Australia and has prior experience with both small and
large public accounting firms, and as a consultant to private sector firms and government
agencies. Greg is author ofAn Imroduciion to Corporaie Governance in Australia and co-author
of the previous editions of Auditing and Assurance Services in Australia: An lnregrared Approach.

Brenton Fiedler ( BA Ace, MBus, FCA) is the Academic Lead on the Online MBA
program in the Business School at Flinders University. Brenton is a Fellow of CAANZ
and is a former senior manager in the Adelaide audit division of KPMG. His specialist
teaching areas inclu de auditing, financial accounting, and corporate strategy , and he
has taught both locally and overseas.

Siva Nathan Kanapathy (FCA, ACMA, MIA, Dip Fin Planning) wrote the Rouge
C lothing Case Study and the related audit letters. He qualified as a Chartered Accountant
with the Institute of Chartered Accountants in England and Wales. He bas practised in the
United Kingdom, Malaysia and Au stralia, and has worked with small, medium and
the Big Four public accounting firms, specialising in banking and mining companies. He
has lectured in accounting, auditing and corporate finance both at private colleges and
in-house at accounting firms, and is the author of several submissions to governments, both
locally and overseas, regarding the finance and banking sector, the self-assessment tax
system and goods and services tax.

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This page Intentionally left blank.
 ~ The Auditing Profession
-l

CHAPTER 1 Demand for audit and assurance services

CHAPTER 2 Auditors' legal environment
CHAPTER 3 Audit quality and ethics
CHAPTER 4 Audit responsibilities and objectives

CHAPTER 5 Audit evidence

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 The FIRST FIVE CHAPTERS of Auditing, Assurance Services and Ethics in Australia
10th edition describe the auditing profession and integral auditing concepts. The
book begins with a description of the nature of auditing and auditing firms, the
professional bodies and ASIC (Australian Securities and Investments Commission).

C HAPTERS 2 AND 3 reflect the changed auditing environment since 2002, including
the implications of the United States Sarbanes- Oxley Act. The legal environment and
regulatory issues are presented in CHAPTER 2 . Ethics has been incorporated into an
expanded discussion of audit quality in CHAPTER 3.

CHAPTERS 4 AND 5 explore auditors' and management's responsibilities, audit

objectives, and general concepts of evidence accumulation.

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 n
Demand for audit
. and :c
)>
-u
assurance services -I
m
:;o

LEARNING OBJECTIVES
After studying this chapter you should be able to:
1 Describe assurance services, and distinguish audit services from other assurance and
non-assurance services provided by public accountants.
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.
S Distinguish between auditing and accounting.
6 Differentiate the three main types of audits.
7 Identify the primary types of auditors.
8 Describe the nature of public accounting -firms, what they do and their structure.
9 Describe the key functions performed by the professional accounting bodies.
10 Use auditing standards as a basis for further study.
11 Identify quality control standards and practices within the accounting profession.
12 Summarise the role of the Corporations Act 2001 in accounting and auditing.
13 Describe the impact of e-commerce on public accountants.

AUDITING STANDARDS
Referred to in this chapter
ASA 101 Preamble to Australian Auditing Standards
ASA 200 Overall Objectives of the Independent Auditor and the Conduct of an Audit in
Accordance with Australian Auditing Standards
ASA 220 Quality Control for an Audit of a Financial Report and Other Historical
Financial Information
ASA 300 Planning an Audit of a Financial Report
ASA 315 Identifying and Assessing the Risks of Material Misstatement through Understanding
the Entity and Its Environment
ASA 320 Materiality in Planning and Performing an Audit
ASA 500 Audit Evidence
ASA 700 Forming an Opinion and Reporting on a Financial Report

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 ASA 705 Modifications to the Opi nion i n the Independent Auditor's Report
ASQC l Quality Control for Firms that Perform Aud its and Reviews of Fi nancial Reports and Other
Fi nancial Information, Other Assurance Engagements and Related Services Engagements

PROFESSIONAL STATEMENTS
Referred to in this chapter
APES 320 Q uality Control for Firms

Good auditing includes good client service

' It's been a good week,' thought Melissa Wilson , as
she drove out of the parking area of Solberg Paints on
Friday afternoon. Just a year earlier, she had graduated
from university and had since commenced her CPA studies.
Still, Melissa d idn't think h er transition to profession al life
had been a ll that smoo th, and sh e was surprised at how
much th ere still was to learn. H owever, she had made great
progress on the Solberg en gagement.
John Harris was the a u dit senior on the Solberg Paints
audit, and he h ad a reputation as a patient supervisor and
mentor. Melissa wasn't disappointed. At the start of t he
engagement, John told her, 'Don't be afraid to ask q uestion s. «> AXL/Shutterstock

If you see a n ything t h at seems unusual, let's discu ss it. And

most importantly, if you have a ny ideas that will help the client, br ing them up. The client expects us to deliver m ore
than an audit report.'
'I'd say I delivered,' thought Melissa. Sh e had found a weakness in the compa ny 's computer u ser profiles that
may have exposed Solberg to accounts payable fraud. But h er biggest contribution almost didn 't happen. Melissa
read as much as she could about security in the Systems, Applications a n d P rodu cts in D ata Processing (SAP)
system u sed by the com pan y. She was afraid to bring it up, thinking that she couldn't possibly know anything
that the client d idn't a lready know, bu t John encou raged her to discu ss it with the client. The result was that
the client wanted to meet fur ther with M elissa's firm to better understand how they could improve their fraud
prevention m easu res.
Friday was the last day of fieldwork on the a udit, and the partner, Roger Marlow, was at the client's office to
complete his review of the audit files. Melissa was surprised to hear him say to h er, 'What a r e y ou doin g on the 15th?
We're going to meet w ith the client to discuss our audit findings. You've made a real contribution on this audit, and
I'd like you to be there.' Melissa tried n ot to show her excitement too much, bu t she couldn't hide the smile on her
face. 'Yes, it's been a good week.'

Each chapter's opening vignette illustrates important auditing principles based on realistic situations. Some of
these stories are based on public information about the audits of real companies, whereas others are fictitious.
A ny resemblance in the latter stories to those of real firms, companies or individuals is unintended and purely
coincidental.

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 CHAPTER 1 Demond for audit and assurance: sc:nice,

As the opening story illustrates, public accountants provide assurances on financial

statements and also help busin esses to be more successful. As businesses become more
complex and need more reliable information, public accountants play a vital role, both in
providing assurance on information other than financial reports and in providing business
advisory and tax services. For example, businesses and consumers who use information
technology and electronic communication networks, such as the Internet, to conduct business
and make decisions need independent assurances about the reliability and security of that
electronic information. Auditors are valued for their technical knowledge and independence in
providing assurances, as well as for their competence and experience in assisting companies to
improve operations. Auditors often make and help implement recommendations that improve
profitability by enhancing or reducing costs, including the reduction of errors and fraud, and by
improving operational controls.

Assurance services A
O BJECTIVE 1
Assurance services are independent professional ser vices that improve the quality of information for Describe assurance
services. and
decision makers. Individuals who are responsible for making business decisions seek assurance services
distinguish audit
to help improve the reliability and relevance of the information they base their decisions on. Assurance services from other
services are valued because the assurance provider is independent and perceived as being unbiased with assurance and
non-assurance
respect to the information examined .
services provided by
Assurance services can be performed by public accountants or by a variety of other professionals. public accountants.
Assurances p rovided by firms other than public accountants include television ratings and radio ratings,
and several non-profit organisations, such as Choice, which test a wide variety of products and report assurance services
independent
their evaluations of the quality in 'consumer reports'. The information provided in these reports is
professional services
intended to help consumers make intelligent decisions about the products they buy, and many consum ers that improve the
consider thls information m ore reliable than a ny that is provided by the product manufacturers because quality of information
it com es from an independent source. for decision makers

The need for assurance isn't new. Public accountants have provided many assurance services for
y ears, particularly assurances about hlstorical financial statem ent inform ation . Public accounting attestation service
firms also p er form assurance ser vices for lotteries a nd contests, to confirm that winner s were determined a type of assurance
fairly a nd in accordance with contest rules. More recently, public accountants have been expanding service in which the
public accounting
the range of assurance ser vices they perform to include engagements that provide assurance about
firm issues a written
other types of information, such as compan y financial forecasts and website controls. The demand for communication that
assurance services continues to grow as the demand for for ward- looking information increases a nd as expresses a
conclusion about the
m ore real-time information becomes available onlin e.
reliability of a wrinen
assertion of another
pany
Attestation services audit of historical
One category of assurance ser vices that public accountants provide is a ttestation services. An financial statements
a form of attestation
attestation service is a type of assurance service in which the public accounting firm issues a written
service in which the
communication that expresses a conclusion about the reliability of a written assertion of another party. auditor issues a
There are three categories of attestation services: audit of historical financial statements, r eview of written report
expressing an opinion
historical financial statements, and other attestation ser vices.
about whether the
6nandaJ statements
Audit of historical financial statements
are in material
An audit of historical financial statements is a form of attestation service in which the auditor issues conformity ,vith
a written report expressing an opinion about whether the financial statements are in material conformity accounting standards

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 PART I The a uditing profession

with accounting standards. Audits are the predominant form of assurance performed by public
accounting firms.
In financial statements, the client makes various assertjons about their financial condition and
results of operations. External users who rely on those financial statements to make business decisions
use the auditor's report as an indication of the statements' reliability. They value the auditor's
assurance because the auditor is independent of the client and has knowledge of financial statement
reporting matters.
Publicly traded companies in Australia are required to have audits under the Corporations Act
2001. Auditor reports can be found in any public company's annual financial report, and most
companies' audited financial statements can be accessed over the Internet by visiting the company's
website. Even without legislative requirements, many public companies would voluntarily contract for
audits to provide assurance to investors and to facilitate access to capital. Many privately held
companies also have annual financial statement audits to obtain financing from banks and other
financial institutions. Government and not-for-profit entities often have audits to meet the requirements
of lenders or funding sources.

Review of historical financial statements

review of historical A review of historical financial statements is another type of attestation service performed by public
financial statements accountants. Many entjties want to provide assurance on their financial statements, without incurring
a form of an estation
in a written repon. the cost of an audfr. Whereas an audit proyjdes a high level of assurance, a reyjew service requires less
issued by a public evidence and provides a moderate amount of assurance on the financial statements. A review is often
accounting firm. that adequate to meet users' needs and can be provided by the public accounting firm at a much lower fee
provides less
assurance than an
than an audit. Public companies are required by the Corporations Act to have their half-year financial
audit as to whether statements either audited or reviewed by the entity's auditor.
the financial
statements are in Other attestation services
material conformity Pub)jc accountants provide a range of other attestation services. Many of these services are a natural
with accounting
extension of the audit of historical financial statements, as users seek independent assurances about
standards
other types of information. However, to qualify as an attestation seryjce, the engagement must involve
written assertions on some accountability matter. For example, banks often require debtors to engage
public accountants to provide assurance about the debtor's compliance with certain financial covenant
provisions stated in the loan agreement. Public accountants can also attest to the information in an
entity's forecast financial statements, which are often used to obtain financing.

Other assurance services

Most of the other assurance services that public accountants provide don't meet the formal definition of
attestation services. They are similar to attestation services in that the public accountant must be
independent and must provide a ssurance about information used by decision makers, but differ in that
the public accountant may not be required to issue a written report, and the assurance doesn't have to
be about the reliability of another party's written assertion about compliance with specified criteria.
Rather, in these other assurance services engagements, the assurance is about the reliability and
relevance of information, which may or may not have been asserted by another party. The common
feature of all assurance services, including audits and attestation services, is the focus on improving the
quality of information used by decision makers.
Public accountants have many opportunities to perform other assurance services engagements.
The demand for assurance on other types of information is expected to grow substantially with the
changing risks faced by businesses and increases in the number of available information sources.
However, one important difference between attestation services and other assurance services
is the potential competition that public accounting firms face when performing other assurance

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Another random document with
no related content on Scribd:
The Project Gutenberg eBook of Left hand, right
hand
This ebook is for the use of anyone anywhere in the United States
and most other parts of the world at no cost and with almost no
restrictions whatsoever. You may copy it, give it away or re-use it
under the terms of the Project Gutenberg License included with this
ebook or online at www.gutenberg.org. If you are not located in the
United States, you will have to check the laws of the country where
you are located before using this eBook.

Title: Left hand, right hand

Author: James H. Schmitz

Illustrator: George Schelling

Release date: November 30, 2023 [eBook #72272]

Language: English

Original publication: New York, NY: Ziff-Davis Publishing Company,

1962

Credits: Greg Weeks, Mary Meehan and the Online Distributed

Proofreading Team at http://www.pgdp.net

*** START OF THE PROJECT GUTENBERG EBOOK LEFT HAND,

RIGHT HAND ***
LEFT HAND, RIGHT HAND

By JAMES H. SCHMITZ

Illustrated by SCHELLING

Men were tortured ... men were killed ... and the Earth
Scientists chatted pleasantly with the Tareeg. Were
they traitors or were they waiting for The Ice Men?

[Transcriber's Note: This etext was produced from

Amazing Stories November 1962.
Extensive research did not uncover any evidence that
the U.S. copyright on this publication was renewed.]
Jerry Newland was sitting up on the side of his bunk, frowning at the
floor, when Troy Gordon came quietly into the room and stopped at
the entrance to watch him. Not too good, Troy thought after a
moment, studying Newland's loose mouth, the slow blinking of the
eyes and the slumped immobility of position. Not too bad either—not
for a man who, in most practical respects, had been dead for the
better part of three years and come awake again only the day
before.
But the question was whether Newland was going to recover quickly
enough now to be of any use as an ally.
Troy moved forward a few steps into the room, stopped again as
Newland raised his head in a sluggish motion to stare at him. For a
few seconds, the man's face remained blank. Then he grinned. A
strained, unpleasant-looking grin, but a grin.
Troy waited. Newland cleared his throat, said, "I ... I recognized you
almost immediately this time! And ... I remembered that this same
thing had happened before."
Troy grinned, too, guardedly. "My coming into the room this way?"
Newland nodded.
"It happened yesterday," Troy said. "What's my name?"
"Troy Gordon."
"And yours?"
"Jerry Franklin Newland."
"What do you do?"
"Do?... Oh!" Newland drew a deep breath. "I'm courier pilot for the ...
for the...." He stopped, looking first surprised, then dismayed. Then
his face wrinkled up slowly, like that of a child about to cry.
"That part's gone again, eh?" Troy asked, watching him.
"Yes. There's some ... there's...."
"You are—or you were—courier pilot for the Cassa Expedition," Troy
said. He thumped his heel on the floor. "That's Cassa One,
underneath us. We've been away from Earth for three years and
eight months." He paused. "Does that help?"
Newland reflected, frowned. "Not much. I ... it seems to be true when
you say it." He hesitated. "We're prisoners, aren't we?"
"Uh-huh," he answered, flatly.
"I had that feeling. And you're hiding me here?"
"That's right," Troy agreed.
"Why?"
"Because nobody else knows you're still alive. It's better if they don't,
right now."
Newland shook his head, indicated a sign fastened to the ceiling
above the bunk in such a way that a man lying in the bunk on his
back would catch sight of it as soon as he opened his eyes. "That,"
he said, "made sense as soon as I saw it just now! I remembered
having read it before and what it meant. But otherwise everything's
still badly blurred."

Troy glanced up at the sign. It read:

RELAX AND TAKE IT EASY, JERRY! YOU WERE IN A BAD
SMASH-UP, AND YOU'VE JUST FINISHED A LONG STRETCH IN
THE EMERGENCY TANK OF YOUR SHIP. EVERYTHING'S
BOUND TO SEEM A LITTLE FOGGY, BUT YOU'RE GOING TO BE
OKAY. DON'T TRY TO LEAVE THE ROOM. IT HAS TO BE KEPT
LOCKED, BUT SOMEONE WILL BE ALONG TO SEE YOU IN TWO
OR THREE HOURS AT THE MOST.
Troy said, "Your memory will start coming back fast enough. You've
made a good start." He sat down, took his cigarette case from his
pocket. "I'll go over some of the things that have happened with you.
That tends to bring them ... and other things ... back to mind. Care to
smoke?"
"Yes, I'd like to smoke."
Troy tossed the cigarette case over to the bunk, watched the pilot
reach for and miss it, then bend forward awkwardly to fumble for it
on the floor. Reflexes still very bad, he thought. But when Newland
had the case in his hand, he flicked it open without hesitation, took
out a cigarette and closed the case, then turned it over and pressed
the button which snapped on the concealed light. The day before, he
had stared at the case helplessly until Troy showed him what to do.
So his body had begun to recall more of its learned motion patterns.
Troy said, "I told you the main parts twice yesterday. Don't let that
worry you ... you've retained more than most would be likely to do
after a quarter of the time you spent in the tank. You weren't in very
good shape after the smash-up, Jerry!"
Newland said wryly, "I can imagine that." He drew on the cigarette,
coughed, then tossed the case back to Troy who caught it and put it
in his pocket.
"Have you got back any recollection at all of what the aliens that
caught us are like?" Troy asked.
Newland shook his head.
"Well," Troy said, "they're downright cute, in a way. More like big
penguins than anything else. Short little legs. The heads aren't so
cute ... a hammerhead shark would be the closest thing there, which
is why we call them Hammerheads—though not when we think some
of them might be listening.
"They don't belong here any more than we do. They came from
another system which is a lot closer than Sol but still a long way off.
Now, we aren't the first Earth people to get to Cassa. There was an
Earth survey ship poking around the system about twenty years ago,
and it seems that the Hammerheads also had an expedition here at
the time. They spotted our survey ship but weren't spotted
themselves, and the survey ship eventually went back to Earth short
two of its men. Those two were supposed to have got lost in the
deserts on Cassa. Actually, the Hammerheads picked them up ...
Jerry?"
The pilot's head was beginning to nod. He straightened now and
took a puff on the cigarette, grinning embarrassedly. "S'all right,
Troy!" he muttered. "Seemed to get ... sort of absent-minded there
for a moment."
Which was, Troy knew, one of the symptoms of the re-awakening
period. Newland's mind had been shut away from reality for a long
time, wrapped in soothing, vaguely pleasant dreams while the
emergency tank went about the business of repairing his broken
body. The habit of unconscious retreat from his surroundings could
not be immediately discarded, and particularly not when the
surroundings were as undesirable as those in which Newland now
found himself. It would be better, Troy thought, to skip some of the
uglier details ... and yet he had to tell the man enough to make him
willing to cooperate in what would be, at the very least, a desperately
dangerous undertaking.

He said, "You're still only three-quarters awake, Jerry. We have to

expect that. But the closer you listen and the more information you
can absorb, the faster you'll shake off the cobwebs. And that's
important. These Hammerheads are a tough breed, and we're in a
bad spot."
Newland nodded. "I understand that much. Go ahead."
"Well," Troy said, "whatever that first Earth survey ship had to report
about the Cassa system looked good enough so that the
administration put Cassa down for a major expedition some day.
Twenty years later, we got here again—the interstellar exploration
carrier Atlas with eight hundred men on board. I'm one of her
engineers. And we found the Tareegs—that's what the
Hammerheads call themselves—waiting for us. Not another bunch of
scientists and assistants but a war-party. They'd learned enough
from the two survey ship men they'd caught to figure out we'd be
coming back and how to handle us when we got here.
"Now get straight on a few things about the Hammerheads, Jerry.
Their weapons systems are as good or better than ours. In other
ways, they're behind us. They've got a fair interstellar drive but can't
make the same use of it we do, because they've still a lot to learn
about inertial shielding. They have a couple of robot-directed
interstellar drones standing in a hangar a few hundred yards from
here which can hit half the speed of your courier, but no
Hammerhead or human being could ride 'em up and live. The two
big carriers that brought them to Cassa One are dead-slow boats
compared to the Atlas. And that's about the best they have at
present.
"Just the same, they're out to get us. War is the best part of living as
far as they're concerned, and they're plenty good at it. So far they've
only been fighting among themselves but they're itching for a chance
at another race, and now we're it. Capturing an Earth expedition in
the Cassa System was only part of the plan to take Earth by
surprise."
Newland blinked, said slowly, "How's that? You'd think that might tip
their hand. We'll be missed, won't we?"
"Sure we'll be missed," Troy said. "But when? We were to stay here
eight years ... don't remember that either, eh? The Hammerheads
will have all the time they need to be set for whoever comes looking
for us eventually."
"But would they know that?"
Troy said bitterly, "They know everything about Earth that our top
brass scientists of the Cassa Expedition were able to tell them.
Pearson and Andrews—those names mean anything? They were
the Expedition Chiefs when we were captured. One of the first things
the Hammerheads did was to have the science staff and other
department heads look on while they tortured those two men to
death. As a result, they've had all the cooperation they could ask for
—more than any decent human being would think of giving them—
from our present leadership, the senior scientists Dr. Chris Dexter
and Dr. Victor Clingman. They're a couple of lousy traitors, Jerry, and
I'm not sure they're even capable of realizing it. Clingman's in charge
here at the ground base, and he acts as if he doesn't see anything
wrong in helping the Hammerheads."
"Helping the...." Vacancy showed for a moment in the pilot's
expression; he frowned uncertainly.

"Try to stay awake, Jerry! There're just a few other things you should
try to get nailed down in your memory this time. The Hammerheads
are water animals. They can waddle around on land as long as they
keep themselves moist, but they don't like it. They've got a religion
based on a universal struggle between water and land. Cassa One's
nothing but hot desert and rock and big salt beds, so it's no good to
them. And the other two planets in the system have no oxygen to
speak of.
"Now here's the thing that's hard to swallow. There's a huge lumped-
up asteroid swarm in the system. The Atlas stopped for a few days
on the way in to look around in it. Dexter and Clingman, after we'd
been captured, volunteered the information to the Hammerheads
that a lot of that stuff was solid H2O and that if they wanted Cassa
One fixed up the way they'd like it—wet—the Atlas could ferry
enough asteroid ice over here in billion-ton loads to turn most of the
surface of the planet into a sea.
"You understand it wasn't the Hammerheads who had the idea. They
don't have anything resembling the ship power and equipment to
handle such a job; it hadn't even occurred to them that it could be
possible. But you can bet they bought it when it was handed to them.
It will give them a base a third of the way between their own system
and Sol. That's what's been going on since we landed and were
grabbed off ... almost three years ago now.
"And these last weeks there've been, for the first time since we got
here, a few clouds in the sky. It means the boys on the Atlas have as
many of those mountains of ice riding on orbit as are needed, and
they've started shoving them down into the atmosphere to break up
and melt. So we ... Jerry, wake up!"

Troy Gordon paused, watching Newland, then shrugged, stood up

and went over to take the butt of the cigarette from the pilot's slack
fingers. Newland had slid back into catatonic immobility; he offered
no resistance as Troy swung his legs up on the bunk and
straightened him out on his back.
How much would he remember the next time he awoke? Troy didn't
know; he had no medical experience and was working on the basis
of remembered scraps of information about the treatment given men
recovering from an experience such as Newland's. There were
people on the ground station who could have told him what to do, but
he hadn't dared ask questions.
It was chiefly a matter of time now. Or of lack of time. What would
happen when the giant hauling operation was concluded, when the
water which had been carried in from space came creeping across
the vast desert plateaus about the station, was something he didn't
know. But it was almost certain that if his own plans hadn't been
carried out by that time, they never would be.

"Jerry," he addressed the sleeping pilot softly, "if you've wondered

why I'm risking my neck to bring you back to life and keep you
hidden away from the Hammerheads and Clingman, it's because
you're the one man I still can trust in this lousy expeditionary group.
It's because you tried to do something about the situation on your
own. You don't remember it yet, but when the Hammerheads took
over the Atlas you made a break for it in the courier boat. You tried to
get away and warn Earth. They shot you down before you could
clear atmosphere; but then they couldn't find the wreck. They
thought it was down in one of the salt beds and gave up looking for
it.
"But I found it in the desert a couple of months later. You'd dropped
through into the emergency tank and you were still more or less
alive. I smuggled the tank into the station here as soon as I'd rigged
up a place where I could keep it. I can use some help, and you'll be
the best possible man for the job...."
He stopped, surprised to see that Newland's mouth had begun to
work awkwardly as if he were trying to speak. Then a few words
came, slow and slurred, but indicating that the pilot's mind had not
sunk nearly as far from full wakefulness as during his previous
relapses.
"Wha ... want me ... do?"
Troy didn't answer. Not yet, he thought. Not until Newland was no
longer helpless. Because, in spite of all precautions, he might be
discovered here at any hour; and if that should happen, Troy's secret
must still be his own. He could act without Newland's help if
necessary.
He waited a few seconds longer, while the pilot's face slowly
smoothed out again into comatose blankness. Then Troy turned
around quietly and left the room.

Troy Gordon's personal living quarters were on the lowest of the

station's three underground levels, behind the central power plant
and utilities section. Considerable privacy was their only attraction;
and since the arrangement kept Troy, during his off-duty hours, close
to his responsibilities as the station's maintenance engineer, neither
Dr. Clingman nor the Hammerheads had objected to it. He was a
useful man; and to the useful, minor privileges could be extended.
Troy had been able to take advantage of that circumstance. The
room in which Newland was hidden lay behind his own quarters,
forming an extension to them. The entrance to it was concealed, and
while a careful search should have disclosed it, Troy—so far as he
knew—had as yet given no one a reason to initiate such a search.
The back room was not part of the station's original design; he had
cut it secretly out of the rock. With the equipment at his disposal, it
had been a relatively minor job.
But it involved a very ugly risk. Discovery would have meant death,
and no easy one. With the exception of the cooperating chief
scientists, the Hammerheads' attitude towards their captives was
largely one of watchful indifference, so long as no one got out of line.
But they had taken one measure which insured that, after a short
time, there was very little inclination left among the prisoners to get
out of line knowingly. At intervals of about a month, whether or not
an overt offense had been committed, one more member of Earth's
Cassa Expedition was methodically tortured to death by the aliens;
and a group of his fellows, selected apparently at random, was
obliged to witness the matter while fastened to a device which
allowed them to experience the victim's sensations in modified form.
Troy had been included twice in the observing group. He hadn't
known whether it implied a personal warning or not. In the
Hammerheads' eyes, he was a useful servant; it might be that he
was also a suspected one. Nevertheless, it had been necessary to
construct the back room. One day, he was returning through the
desert from one of the outlying automatic stations under his care
when he caught the momentary whisper of a distress signal in his
groundcar's receiver. The slight sound had put his hair on end. It was
an Earth signal, on an Earth band; and with the Atlas off-planet it
could have only one possible source. In seconds, it wavered out and
was lost, but Troy already had established the direction.

A week passed before he had the opportunity to obtain a second fix;

then, hours later, he was standing beside the wreck of the courier
ship. It had plunged into a deep cleft in the rocks and was now half
covered by sand; it began to seem less of a miracle that the
Hammerhead fliers had not found it. Troy shut off the quavering
signal projector, discovered next that the emergency tank had a
living occupant, but left Newland where he was while he hurriedly
examined the rest of the ship. The courier was hopelessly damaged,
but before Troy concluded the examination, his plan against the
Hammerheads had been born, at least as a possibility. It took more
than two and a half years then to convert the possibility into an
operation which seemed at last to have something better than a
fighting chance to succeed. For, of course, Troy had told no one of
the discovery. A few words might have gained him eager helpers, but
might also have reached a man paralyzed by the fear of torture to
the extent that he would reveal everything to safeguard himself.
Troy left his rooms, locking the outer door behind him. Moving thirty
feet down the narrow steel-floored passage behind the power plant,
he entered one of the tool rooms, again closing and locking the door
as he went through. It had been a much more difficult and lengthy
undertaking to drill a tunnel from the station's lowest level up to the
force-screened Hammerhead hangar outside than to carve an
additional room out of the rock, but it had been completed months
before. The tunnel's hidden station entrance was beneath the tool
room floor, the other opening out of the polished rock base of the
hangar twenty feet from one of the interstellar drones. The most
careful human scrutiny would hardly have read any significance
there into the hairline crack which formed an irregular oval on the
rock; and since Troy hadn't been found out, he could assume that
the Hammerheads' powers of observation were no more acute.
It had been night in the surrounding desert for some hours by now,
but the hangar was brightly lit—a very unusual occurrence at such a
time. Troy paused, momentarily disconcerted, studying the scene in
the hangar through the vision screen installed in the tunnel just
below the exit. If the Hammerheads—there were only Hammerheads
—present—were initiating some major new activity in the next day or
two, his plans might be, if not ruined, at least very dangerously
delayed. He counted over a hundred of the creatures, mostly
assembled near the far end of the hangar in three orderly groups. A
few officers stood together, somewhat closer to him.
Troy chewed his lip anxiously, the moisture-conserving suits they
wore for outside duty on Cassa One, which concealed the two sets
of swim flippers along their sides and left the top pair of upper limbs
... short, sturdy brown arms with hands larger than human hands,
quite as capable and rather unpleasantly human in appearance ...
free for use. The transparent, inverted-triangle helmets were
clamped down. As he looked on, one of their big atmospheric
personnel carriers came gliding into sight behind the immobile ranks.
There were commands, and the Tareegs turned and filed into the
vehicle, moving with the rapid, awkward little waddle which was their
method of progress on land. A minute or two later, the loaded carrier
moved out of the hangar, and the lights in the vast structure slowly
faded away.

Where were they going? They were carrying the usual weapons, but
this was not some dryland drill. Troy could not remember seeing so
large a group leave the station before. The uneasy conviction
returned that the move must be connected with the fact that clouds
had begun to show in Cassa One's skies, that the mile-thick
boulders of ice which had been brought across space already were
falling through the atmosphere of the desiccated world.
One or two more undisturbed days, Troy thought. In that time it
would become clear whether Newland was going to recover
sufficiently to be able to play a part in his plans. Only two sections of
the shattered courier ship, the inertial shielding and the autonav, had
been needed to transform the Hammerheads' interstellar drone
twenty feet from the tunnel exit into a spaceship which men could
ride and direct. Both those sections had been repairable, and
everything else Troy had been able to steal or build in the station.
Month after month passed as he brought it all together in the tunnel,
familiarized himself with every necessary detail of the drones'
mechanisms and fitted in the new installations ... first in theory, then
in actual fact. A part of almost every night was spent in the darkened
hangar, assembling, checking and testing one section or another,
then disassembling everything and taking it back down into the
tunnel before the moment came when the Tareeg watch-beams
would sweep again through the hangar.
The beam-search was repeated each three hours and twenty-seven
minutes throughout the night. Within that period of time, Troy would
have to carry out a final complete assembly, let the drone roar into
life and send it flashing up through the force-screen and into space.
By now, he knew he could do it. And if he had calculated the drone's
capacity correctly, he would then be less than six months from Earth.
The Hammerheads had nothing they could send after him.
But once in space, he needed Newland's experience. Everything
else would be on board to get them to Earth, but without a trained
pilot the probability of arriving only on autonav was something Troy
couldn't calculate. With a great deal of luck, he thought, it still should
be possible. Newland's skills, on the other hand, would give them
something considerably better than an even chance.
But Newland would have to be recovered first. He was still under the
ministrations of the emergency tank, embedded now in the wall of
the back room beyond the bunk. The tank had to stay there; no
amount of planning had shown a way it could be fitted into the drone
besides everything else; there simply was no room left for it. And
what Troy had learned made it clear that if he lifted into space with
Newland before the pilot's behavior was very nearly normal, he
would have a half-dead zombie on his hands before the trip was well
begun.
That had been his reason for waiting. But the question was now
whether he mightn't already have waited a little too long....

Troy checked his watch. Take a chance and begin the final
installation at once? It would be an hour before the search-beams
came back. The interior of the ships was inspected at irregular
periods; he hadn't been able to establish any pattern for that. But to
leave his equipment in place in the drone for one day, or two at the
most, might not be stretching his luck too far. Then, if Newland
shaped up, there would be that much less delay in leaving, that
much less time to spend in the Tareeg hangar finishing the job at the
end. And no one could tell what new developments the next few
days might bring, or how much time they would find that they had
left....
He twisted the direction dials on the vision screen, swinging it slowly
once more about the darkened hangar. Then he unlocked and
shifted the exit switch, and the irregularly carved section of rock
above him moved on its lifting rods out of the hangar floor. Troy
swung up and out behind it, got to his feet and started over to the
drone.
There was a thin, burring noise close to his ear.
Troy stopped in mid-stride, his face tight and wary. The noise meant
that his room communicator was being called. Probably some minor
technical emergency on the station, but.... He counted off twenty
seconds, then turned on the relay mike under his coat collar. Trying
to make his voice thick with drowsiness, he said, "Gordon speaking.
Who's it?"
"Reese," a carefully uninflected voice told him from the speaker. "Dr.
Clingman wants you to come up to his office immediately, Gordon."
Troy felt a sudden sharp prickling of fear.
"At this time of night?" he demanded petulantly. "It's the middle of my
sleep period! What's gone wrong now?"
"I wouldn't know," Reese said. "Our senior scientist"—he made the
two words sound like a worn, habitual curse—"didn't go into details."

Dr. Victor Clingman was a large, untidy man inclined to plumpness,

with stringy blond hair and protuberant pale eyes. His office adjoined
that of the Tareeg station commandant—a Low Dsala, in
Hammerhead terms—and it was permeated from there with a slightly
salty, vaguely perfumed moistness. Rank had its privileges; only the
Low Dsala enjoyed the luxury of keeping his station work quarters
damp enough to make the wearing of a suit unnecessary. The other
Hammerheads waddled about the cold, dry halls completely
covered, breathing through humidifiers, and were only occasionally
permitted, and then after much ceremony, to enter an area in their
section called the Water Room and linger there for several hours.
Troy came into Clingman's office with his tool kit through the double
doors designed to prevent moisture from escaping, shivering slightly