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ARENS ELDER BEASLEY
HOGAN JONES
ALVIN A. ARENS RANDAL J. ELDER MARK S. BEASLEY CHRIS E. HOGAN JOANNE C. JONES
Auditing
Auditing
F O URTEENTH C AN A D I A N E D I T I O N
THE ART AND SCIENCE OF ASSURANCE ENGAGEMENTS
THE ART AND SCIENCE OF ASSURANCE ENGAGEMENTS

FOURTEENTH CANADIAN EDITION
www.pearson.com 90000
ISBN 978-0-13-461311-6
9 780134 613116
Persuasiveness of Evidence 128 Summary 235
Specific Types of Audit Procedures 131 Review Questions 235
Design Analytical Procedures 140 Multiple Choice Questions and Task-Based Simulations 236
Documentation 146 Discussion Questions and Problems 238
Preparation of Working Papers 149 Professional Judgment Problems and Cases 242
Effect of Technology on Audit Evidence and
Audit Documentation 151
8 Internal Control and COSO
Professional Skepticism, Evidence, and
Documentation 152 Framework 246
APPENDIX 5A: Common Financial Ratios 154 LEARNING OBJECTIVES 246
Summary 156 Internal Control Objectives 247
Review Questions 156 The Responsibilities of Management and
the Auditor 248
Multiple Choice Questions and Task-Based Simulations 157
COSO Components of Internal Control 250
Discussion Questions and Problems 159
Understanding Controls of Small Businesses 271
Professional Judgment Problems and Cases 162
Summary 271
Review Questions 272
6 Client Acceptance, Planning, and
Materiality 165
LEARNING OBJECTIVES 165 Professional Judgment Problems and Cases 277
The Importance of Audit Planning 166
Client Acceptance and Continuance 168
Understand the Nature of Client’s Business and
9 Assessing Control Risk and Designing
Environment 174 Tests of Controls 279
Perform Preliminary Analytical Review 179 LEARNING OBJECTIVES 279
Develop Overall Audit Strategy 182 Obtain and Document Understanding of Internal
Materiality 184 Control 280
Determine Overall Materiality 185 Assess Control Risk 285
Determine Performance Materiality 191 Tests of Controls 292
Determine Specific Materiality 192 Understanding and Assessing Controls of Outsourced
Applying Materiality—Evaluating Results and Systems 297
Completing the Audit 193 Evaluate Results, Decide on Planned Detection Risk,
Summary 194 and Design Substantive Tests 298
Review Questions 196 Impact of IT Environment on Control Risk
Assessment and Testing 299
Auditor Reporting on Internal Control 302
Reporting on Internal Controls for Some Public
Professional Judgment Problems and Cases 204 Companies 303
Summary 304
7 Assessing the Risk of Material Review Questions 305
Misstatement 207 Multiple Choice Questions and Task-Based Simulations 305
LEARNING OBJECTIVES 207 Discussion Questions and Problems 308
Audit Risk 209 Professional Judgment Problems and Cases 310
Risk Assessment Procedures 211
Identification of Significant Risks 214
10 Develop Risk Response: Audit Strategy
Considering Fraud Risk 215
Conditions for Fraud 218
and Audit Program 312
Responding to Risks of Material Misstatements LEARNING OBJECTIVES 312
Due to Fraud 221 Audit Strategy 313
The Audit Risk Model 223 Types of Tests 320
Assessing Acceptable Audit Risk 226 Selecting Which Types of Tests to Perform 323
Assessing Inherent Risk 228 Evidence Mix and Audit Strategy 326
Relationship of Risks to Evidence and Factors Design of the Audit Programs 330
Influencing Risks 231 Summary of Audit Process 335
vi CONTENTS
A01_AREN3116_14_SE_FM.indd 6 2/23/18 1:22 PM

Summary 337 Substantive Tests of Details for Accounts Receivable:
Review Questions 337 External Confirmations 423
Multiple Choice Questions and Task-Based Simulations 338 Design and Perform Fraud-Related Substantive
Discussion Questions and Problems 340 Procedures 430
Professional Judgment Problems and Cases 343 Summary 431
11 Audit Sampling Concepts 347 Multiple Choice Questions and Task-Based Simulations 432
LEARNING OBJECTIVES 347
What Is Audit Sampling? 348 Professional Judgment Problems and Cases 437
Representative Sampling and Its Risks 348
Statistical versus Nonstatistical Sampling 350 13 Audit of the Acquisition and
Sample Selection Methods 351 Payment Cycle 444
The Audit Sampling Process for Tests of Controls LEARNING OBJECTIVES 444
and Substantive Tests of Details 355 An Overview of the Acquisition and
Using Sampling for Tests of Controls 357 Payment Cycle 445
Nonstatistical Sampling Approach to Testing The Four Business Functions and Their
Controls 368 Documents and Records 446
Using Sampling for Substantive Tests Identify Significant Risks and Assess Risk of Material
of Details 368 Misstatement 450
Nonstatistical Sampling for Substantive Tests of Understand Internal Control and Assess Control
Details 369 Risk 453
Statistical Sampling for Substantive Determine Audit Approach (Strategy) for
Tests of Details 377 Acquisition and Payment Cycle 455
Adequate Documentation and Professional Design and Perform Tests of Controls for
Judgment 379 Acquisition and Payment Cycle 456
Summary 381 Design and Perform Substantive Analytical
Review Questions 381 Procedures for Accounts Payable and
Multiple Choice Questions and Task-Based Simulations 382 Related Accounts 458
Discussion Questions and Problems 384 Design and Perform Tests of Details of Accounts
Payable and Accrued Liabilities 459
Reliability of Audit Evidence 463
Examining Other Accounts and Related Party
Part 3 Application of the Audit Transactions 464
Summary 471
Process 389 Review Questions 471
12 Audit of the Revenue Cycle 390 Discussion Questions and Problems 474
LEARNING OBJECTIVES 390 Professional Judgment Problems and Cases 477
Overview of the Revenue Cycle 391
Business Functions in the Cycle, and Related 14 Audit of the Inventory and
Documents and Records 392 Distribution Cycle 480
An Overview of the Audit Process for the Revenue
Cycle 396
Overview of the Inventory and
Identify Significant Risks and Assess Risk of Material
Distribution Cycle 481
Misstatement 398
Inventory Cycle Business Functions, Documents,
Identify Key Controls and Assess Effectiveness of
and Records 482
Controls 405
Identify Significant Risks 484
Determine Audit Approach (Strategy) for Revenue
Understanding and Assessing Control Risk 486
Cycle 408
Key Controls 488
Design and Perform Substantive Analytical
Procedures 415 Develop an Audit Approach (Strategy)
for Inventory 490
Substantive Tests of Details for Revenue 417
Design and Perform Tests of Controls 491
Substantive Tests for Accounts Receivable 421
CONTENTS vii

Perform Substantive Analytical Procedures 492 17 Audit of Cash Balances 544
Substantive Tests of Details for Inventory LEARNING OBJECTIVES 544
Balances 493
Types of Cash Accounts 545
Designing Fraud Substantive Procedures for
The Relationship Between Cash in the Bank
Inventory 497
and Transaction Cycles 546
Summary 497 Identify Significant Risks and Assess Risk of Material
Review Questions 497 Misstatement in Cash 547
Multiple Choice Questions and Task-Based Simulations 498 Understand Internal Control and Assess Control
Discussion Questions and Problems 500 Risk 548
Professional Judgment Problems and Cases 502 Design and Perform Substantive Tests for Cash 550
Fraud-Oriented Procedures 554
15 Audit of the Human Resources and Summary 557
Payroll Cycle 506 Review Questions 557
An Overview of the Human Resources and Discussion Questions and Problems 559
Payroll Cycle 507 Professional Judgment Problems and Cases 561
Functions in the Cycle, and Related Documents
and Records 508
The Audit Process for Human Resource and Part 4 Completing the Audit,
Payroll Cycle 509 Reporting, and Other
Identify Significant Risks and Assess Risk of
Material Misstatement 510 Assurance Engagements 563
Understanding Internal Control and Assessing
Control Risk 511 18 Completing the Audit 564
Develop an Audit Approach for Human
Resources and Payroll 514
Complete Final Evidence Gathering 566
Design and Perform Tests of Controls 515
Accumulate Final Evidence 576
Design and Perform Substantive Analytical
Procedures 516 Evaluate Results 580
Design and Perform Substantive Tests 517 Communicate With the Audit Committee and
Management 588
Summary 520
Summary 591
Multiple Choice Questions 592
16 Audit of the Capital Acquisition

19 Audit Reports on Financial
and Repayment Cycle 527
Statements 600
An Overview of the Capital Acquisition and
Repayment Cycle 528 The Audit Opinion and the Auditors’ Reporting
Responsibilities 602
Notes Payable 529
The Unmodified Audit Opinion 603
Understanding Internal Control and Assessing
Control Risk 531 Elements of the Auditor’s Report 603
Develop Audit Approach (Strategy) for Reporting Material Uncertainty for
Notes Payable and Related Accounts 532 Going Concern 610
Audit of Owners’ Equity 535 Identify and Disclose Key Audit Matters 610
Determine Whether Emphasis of Matter or
Summary 538
Other Matter Paragraphs are Necessary 612
Decide Whether Modifications to the Audit
Multiple Choice Questions and Task-Based Simulations 539 Opinion Are Necessary 614
Discussion Questions and Problems 540 Qualified Audit Opinions 616
Professional Judgment Problems and Cases 542 Adverse Audit Opinion 620
viii CONTENTS

Disclaimer of Opinion 621 Assurance Engagements for Nonfinancial
How the Audit Report Adds Value 623 Information 643
Summary 624 Assurance Over Compliance With Agreements and
Review Questions 624 Regulations 649
Related Service Engagements 650
Multiple Choice Questions 625
Specified Procedures Engagements 650
Reports on Supplemental Matters Arising
From an Audit or Review Engagement 652
The Future of Assurance Services 652
20 Other Assurance and Nonassurance Summary 653
Services 631 Review Questions 654
LEARNING OBJECTIVES 631 Multiple Choice Questions 654
Overview of Other Canadian Standards 632 Discussion Questions and Problems 655
Reviews and Compilations of Financial Statements 633 Professional Judgment Problems and Cases 656
The Review Engagement Process 635
Compilation Engagements 640 Appendix: Hillsburg Hardware Limited 660
Review of Interim Financial Statements 642 Index 669
CONTENTS ix

Preface
Auditing: The Art and Science of Assurance Engage- What’s New to This Edition?
ments is an introduction to auditing and assurance ser-
vices. It is intended for use in an introductory auditing Despite its practical nature, many students often view
course, for one-semester or two-semester instruction auditing as an abstract subject. To address this, we con-
at the undergraduate or graduate level. The book’s tinue to work on revising the book so that the material
primary emphasis is on the auditor’s decision-making is more accessible and understandable to students. We
process in a financial statement audit and, to a lesser highlight the more substantive changes below.
degree, other types of assurance engagements. As the
title of the book reflects, auditing is an art, as it requires
considerable use of professional judgment and skepti- Current Coverage of Auditing
cism, but it is also a science, resting upon a solid frame Standards
of technical skills and knowledge of multiple disciplines
associated with auditing, such as accounting, tax, and New auditing standards are released without regard
information systems. to textbook revision cycles. As auditing instructors, we
One of the most fundamental concepts in audit- appreciate how critical it is to have the most current
ing concerns the nature and amount of evidence the content available. This edition includes coverage of
auditor should gather after considering the unique cir- the most recent standards released (the most significant
cumstances of each engagement. If students of auditing being the changes to the auditor’s report) and high-
understand the risks to be addressed in a given audit lights impending changes that have been announced
area, the circumstances of the engagement, and the by Canada’s Auditing and Assurance Board. As with the
decisions to be made, they should be able to determine previous edition, we continue to revise the book so that
the appropriate evidence to gather and how to evalu- the concepts and terminology are closely aligned with
ate the evidence obtained. In order to help students Canadian Audit Standards.
develop these skills, we provide a professional judg- In addition to ensuring current coverage, we provide
ment framework to help students reflect upon common several vignettes to illustrate that, despite the constrain-
judgment traps and to develop their own judgment and ing effect of standards, there is considerable variation in
professional skepticism. audit practices within the profession. Unlike accounting
Our objective is to provide up-to-date coverage of standards, which define how to consistently measure
globally recognized auditing concepts with practical and report economic events, audit standards outline the
examples of the implementation of those concepts in process of verifying the accounting. This means that
real-life settings. We integrate the most important con- there is no one “right” answer and there may be many
cepts in auditing in a logical manner to assist students acceptable ways in which to reach the goal of provid-
in understanding decision-making and evidence accu- ing reasonable assurance that the information is fairly
mulation in today’s complex auditing environment. presented.
Throughout the book, we emphasize international
and Canadian developments affecting auditing in a
global and economically volatile context. Key concepts
New Audit Reporting Standards
related to professional judgment and risk assessment The new and revised audit reporting standards are per-
are integrated into all the planning chapters, as well as haps one of the most significant changes in audit stan-
each chapter dealing with particular transaction cycles dards in the last 40 years. We introduce the new audit
and related accounts. We provide numerous real-life report in Chapter 4, providing a sample audit report of
vignettes and examples from actual audit planning a private company. Throughout the textbook, we pro-
documents to enhance students’ understanding of the vide excerpts from audit reports from jurisdictions that
concepts. We also provide numerous diagrams, deci- have already adopted the new international standards
sion frameworks, and visual depictions to help clarify to illustrate key audit matters. We revisit the new and
concepts such as independence, control activities, revised audit reporting standards in Chapter 19 and use
materiality, and the various substantive tests in the key a consolidated public company to illustrate the differ-
transaction cycles. ent elements of the audit report. Given the significant

changes, Chapter 19 has been significantly revised, understand the underlying logic of the audit process.
with new vignettes and homework problems. To assist with these goals, we start with simplifying the
visualization of the audit process, which is first intro-
duced in Chapter 4. To further reinforce this, we start
Professional Ethics and the CPA each relevant chapter with the audit process diagram
Code of Professional Conduct and highlight which objectives and activities are cov-
ered in that chapter.
We introduce new material in Chapter 3 to help clarify We start our examination of the audit process with
the role of the professional in society and to define profes- Chapter 5, on audit evidence. Given that evidence is
sional ethics. We also include some simple tests that pro- the foundation of the audit, in this edition we have
fessionals use to decide the “right” thing to do. Chapter 3 placed the chapter on audit evidence earlier in the
has also been revised to provide an overview of the key book. The chapter has been revised to help clarify con-
elements of the CPA Code of Professional Conduct and cepts and focuses on how to determine whether the
to include a decision tree to assess independence threats. audit evidence is persuasive. To help students develop
We introduce several new vignettes to illustrate the high this important skill, we have developed several task-
cost of an auditor’s lack of independence. based simulations and professional judgment questions.
We have also reorganized Chapters 6 to 10 to follow
the logical sequence of the audit process. We have
New Coverage of Auditor’s expanded our coverage of the auditor’s performance
Responsibilities of risk assessment procedures, including identification
of significant risks, and have clarified the distinction
To reflect recent changes in auditing standards, Chap- between pervasive risks and risks that are specific to par-
ter 4 has been revised to include the auditor’s responsi- ticular accounts and assertions. Chapter 6 covers client
bilities to assess going concern. We revisit this important acceptance and continuance, planning, and materiality.
responsibility in Chapter 18, on completing the audit, Chapter 7 highlights audit risk and the risk of material
and again in Chapter 19, which discusses audit reports. misstatement. Chapters 8 and 9 emphasize the impor-
Chapter 18 also discusses the revised standards concern- tance of internal control as part of the risk assessment
ing the auditors’ responsibility for other information. process, and Chapter 10 brings the discussion together
in its focus on audit strategy. Subsequent chapters that
address the transaction cycles include extensive cover-
Emphasis on Professional age of fraud risk, inherent risk, and internal control risk.
Judgment and Skepticism We continue to provide up-to-date, real-life examples
drawn from actual audit plans and audit reports to illus-
The essence of being a competent auditor is the abil- trate the different types of audit strategies employed in
ity to exercise professional judgment and to apply the the various transaction cycles.
appropriate level of professional skepticism. While an
understanding of the appropriate level of skepticism is
achieved through experience, we believe that introduc- Expanded Coverage of Control
ing this concept early in students’ professional journey
will assist in their development. We discuss the impor-
Risk and the Role of Information
tance of a questioning mindset and the need to critically Technology
evaluate audit evidence to strengthen student awareness Our coverage in Chapters 8 and 9 of internal controls
of the elements of effective professional skepticism. We has been restructured to first introduce the COSO’s
have introduced several new vignettes and homework Internal Control—Framework in Chapter 8, followed
problems that help students think further about chal- by the auditor’s assessment of control risk in Chapter 9,
lenges and threats to applying professional skepticism which has been revised to better integrate the auditor’s
in the context of an audit. consideration of entity-level controls and transaction
cycle controls. We have also added new material to
help students understand the different types of controls
The Logic of the Audit Process— and how to apply professional judgment in evaluating
Risk Identification and Risk control effectiveness. Building upon the 13th edition,
Response we continue to emphasize IT controls and integrate
them into the audit process. We provide new material
We continue to refine the textbook material to pro- and vignettes to illustrate the challenges of auditing in
mote deeper learning and to enable students to better complex IT environments.
PREFACE xi

Other Assurance Services as well other material using the Internet. While many
of these research problems expose students to the CPA
Our coverage of other assurance services in Chapters 1 Canada Handbook—Assurance, other questions require
and 20 highlights emerging opportunities for public students to examine recently issued financial statements
accountants to provide assurance about corporate social or other corporate filings, or they expose students to best
responsibility and sustainability reports. Chapter 20, practices thought papers as part of the assignment.
which focuses on other services outside of the finan-
cial statement audit provided by public accountants,
covers the new standards for review engagements and Organization
the attestation standards for engagements other than
audits or reviews of historical financial information This text is divided into four parts. The chapters are rel-
(CSAE 3000) and direct reporting engagements (CSAE atively brief and designed to be easily read and compre-
3001). New material has been added to help clarify the hended by students.
difference between an attestation and a direct report-
ing engagement. Sample reports based upon the new Part 1: The Auditing Profession
standards are provided, and new vignettes (including
the recent Oscars™ snafu) and homework questions (Chapters 1–3)
are provided to help students appreciate the various The book begins with an opening vignette that pro-
issues related to providing assurance for non-financial vides as an example the Corporate Sustainability
information. Report issued by United Parcel Services (UPS) to help
students see the increasingly important role of audi-
tors in providing assurance on a broad range of infor-
A New Approach to Hillsburg mation important to key stakeholders. Chapter 1 aims
to answer the question, “Who are the auditors and why
Hardware Limited are they important?” The chapter explains the differ-
Those of you who are familiar with Hillsburg Hardware ent types of auditors and assurance services. Chapter 2
Limited, which has been a feature of this book for a covers the public accounting profession, with a par-
very long time, will note some significant changes. To ticular emphasis on the standard setting responsi-
increase realism and more accurately reflect the Cana- bilities of the International Auditing and Assurance
dian business environment, we have revised the nature Standards Board (IAASB) and the Canadian Auditing
of the organization. We have also reframed the presen- and Assurance Standards Board (AASB). Chapter 2
tation of the financial information and company back- provides an overview of the CPA Canada Handbook—
ground as a simulation, which now includes excerpts Assurance, Canadian auditing standards, and auditors’
of interviews with client personnel. New questions are responsibilities. It also provides a discussion of audit
included in Chapter 10 that require students to con- quality. Chapter 3 starts with a discussion of profes-
sider the changes that have occurred since the prelim- sional ethics, the rules of professional conduct, and
inary planning and the impact of those changes on the the importance of independence and how to assess
current year’s audit. independence threats. The chapter concludes with
an investigation of the expectations gap and auditors’
legal liability, with a discussion of some recent Cana-
New and Revised Problems dian cases.
and Cases
All chapters include multiple choice questions as well
Part 2: The Audit Process (Chapters 4–10)
as research activities that require students to use the Part 2 presents the audit process. The concepts in this
Internet to research relevant auditing issues. All chap- part of the book represent the foundation of the book.
ters include several new and revised professional judg- The first chapter describes the overall objectives of the
ment problems and cases. Many of the problems are audit, auditor and management responsibilities, pro-
based upon actual companies. Additionally, each chap- fessional skepticism, a professional judgment frame-
ter identifies new or revised Discussion Questions and work, audit objectives, and management assertions.
Problems that instructors can use in class to generate The chapter concludes with an overview of the audit
discussion about important topics. These problems are process and introduces Hillsburg Hardware Limited,
highlight by an “in-class” discussion icon in the margin which is used to illustrate planning and development
next to the related question. Each chapter also identifies of an audit strategy as well as many other concepts
questions that may require students to research standards throughout the book.
xii PREFACE

Chapter 5 discusses the general concepts of evi- Part 4: Completing the Audit, Reporting,
dence quality, the development of audit procedures, and Other Assurance Engagements
and audit documentation. Chapter 6 deals with cli-
(Chapters 18–20)
ent acceptance and continuance, and the preliminary
planning of the engagement, including understand- This part begins with two chapters on the final two
ing the client’s business and environment as part of phases of the audit process—completion and report-
the auditor’s risk assessment procedures, using analyt- ing. The first chapter deals with performing additional
ical procedures as an audit tool and making prelimi- tests to address presentation and disclosure objectives,
nary judgments about materiality. Chapter 7 provides summarizing and evaluating the results of audit tests,
expanded coverage of the auditor’s performance of risk reviewing audit documentation, communicating with
assessment procedures used to assess the risk of mate- those charged with governance, and all other aspects
rial misstatement due to fraud or error, and how the of completing an audit. Chapter 19 provides a detailed
auditor responds to risks of significant misstatement discussion of the new and revised audit reporting stan-
with further audit procedures. Chapter 8 outlines the dards. The chapter covers all the potential elements of
key components of an effective system of internal con- the new audit report, which has changed dramatically.
trols over financial reporting consistent with the 2013 The chapter emphasizes conditions affecting the type
revision of COSO’s Internal Control—Integrated of report the auditor must issue and the type of audit
Framework. Because most internal control systems are report applicable to each condition under varying lev-
heavily dependent on information technologies, this els of materiality. The last chapter, on other assurance
chapter integrates coverage of IT general controls and services, deals with various types of engagements and
application controls. Chapter 9 shows how effective reports, other than the audit of financial statements.
internal controls can reduce planned audit evidence Topics covered include review and compilation ser-
in the audit of financial statements, and it outlines vices, agreed-upon procedures engagements, and
procedures auditors perform as tests of those controls assurance engagements dealing with nonfinancial
to support a low or moderate control risk assessment. information. We conclude by discussing the future of
Chapter 10 provides an overall strategic risk-based assurance services and the continued evolution of assur-
audit strategy, linking planning to assertion-based ance standards in the face of changing assurance needs.
audit programs.
MyLab Accounting
Part 3: Application of the Audit Process
(Chapters 11–17) MyLab Accounting delivers proven results in help-
ing individual students succeed. It provides engaging
These chapters apply the concepts from Part 2 to plan- experiences that personalize, stimulate, and measure
ning a sample and to the specific transaction cycles. We learning for each student, including a personalized
begin in Chapter 11 with a general discussion of audit study plan.
sampling for tests of controls, substantive tests of trans- MyLab Accounting for the Fourteenth Canadian
actions, and tests of details of balances. The chapter, Edition of Auditing: The Art and Science of Assurance
which uses the revenue cycle as the basis for its exam- Engagements includes many valuable assessments and
ples, covers both nonstatistical and statistical sampling. study tools to help students practise and understand
The remaining chapters deal with a specific transaction key concepts from the text. Students can practise an
cycle or part of a transaction cycle. We start with the expanded number of select end-of-chapter questions,
most significant cycle for most organizations—revenue. review key terms with glossary flashcards, and explore
We provide an overview of the cycle and then consider integrated case content.
the inherent and fraud risks associated with revenue, MyLab Accounting can be used by itself or linked
and discuss how to design and conduct internal control to any learning management system. To learn more
and substantive tests in response to the significant risks, about how MyLab Accounting combines proven
as well as specific fraud procedures. We conclude the learning applications with powerful assessment, visit
chapter by providing an illustration of applying profes- www.pearson.com/mylab
sional judgment in the development of the audit strat-
egy for the revenue cycle of two actual organizations.
Throughout the chapter, we provide numerous real- Instructional Support Materials
life examples to illustrate key concepts. The remaining
chapters follow a similar format. Cash is studied late in INSTRUCTOR’S RESOURCE MANUAL The Instruc-
the text to demonstrate how the audit of cash is related tor’s Resource Manual assists the instructor in teach-
to most other audit areas. ing the course more efficiently. The features include
PREFACE xiii

instructions for assignments, practical examples to help opinions and best practices, and helped to make this
the students understand the material, and helpful sug- book representative not only of sound theory but of
gestions on how to teach each chapter effectively. It the actual work done in the field of audit and assur-
also includes a sample course outline and mapping the ance:
chapters’ topics to the CPA Competency Map.
Bailey Church
Telfer School of Management, University of
INSTRUCTOR’S SOLUTIONS MANUAL This comprehen-
Ottawa
sive resource provides detailed solutions to all the end-
Tammy Crowell
of-chapter review questions, multiple-choice questions,
Rowe School of Business, Dalhousie University
problems, and cases.
Craig Emby
Beedie School of Business, Simon Fraser University
COMPUTERIZED TESTBANK Pearson’s computerized
Camillo Lento
test banks allow instructors to filter and select questions
Lakehead University
to create quizzes, tests, or homework. Instructors can
Wendy Popowich
revise questions or add their own, and may be able to
JR Shaw School of Business, Northern Alberta
choose print or online options. These questions are also
Institute of Technology
available in Microsoft Word format.
Larry Yarmolinsky
York University
POWERPOINT SLIDES Electronic colour slides are avail-
able in Microsoft PowerPoint. The slides illuminate In addition, I thank all the editorial and production
and build on key concepts in the text. staff at Pearson Canada for putting together a high-
quality product, including Megan Farrell and Keara
IMAGE LIBRARY The Image Library is an impressive Emmett (Acquisitions Editors), Emily Dill and Nicole
resource that helps instructors create vibrant lecture Mellow (Content Managers), Anita Smale (Develop-
presentations. Almost all figures and tables in the text mental Editor), Sarah Gallagher (Project Manager),
are included and organized by chapter for convenience. Spencer Snell (Marketing Manager), and Jyotsna
These images can easily be imported into Microsoft Ojha (Senior Project Manager at Cenveo Publisher
PowerPoint to create new presentations or to add to Services).
existing ones. Joanne C. Jones
PEARSON eTEXT Pearson eText gives students access to We thank our families, who encourage and support us
their textbook anytime, anywhere. In addition to note through the many hours of writing, researching, and
taking, highlighting, and bookmarking, the Pearson rewriting; our students, who push us to think “out of
eText offers interactive and sharing features. Instructors the box”; our colleagues, particularly Sandra Iacobelli,
can share their comments or highlights, and students Peter Rumyee, and Larry Yarmolinsky; and the numer-
can add their own, creating a tight community of learn- ous practitioners who continue to keep us up to date
ers within the class. with the ever-changing audit environment.
Joanne C. Jones
LEARNING SOLUTIONS MANAGERS Pearson’s learn- Bartosz Amerski
ing solutions managers work with faculty and campus
course designers to ensure that Pearson technology
products, assessment tools, and online course materi- About the New
als are tailored to meet your specific needs. This highly
qualified team is dedicated to helping schools take full Canadian Authors
advantage of a wide range of educational resources, Joanne C. Jones, PhD, CPA, CA
by assisting in the integration of a variety of instruc-
tional materials and media formats. Your local Pearson This is the second Canadian edition to be authored by
Canada sales representative can provide you with more Joanne C. Jones, who is an associate professor of audit-
details on this service program. ing at York University. Joanne teaches auditing and
her research focuses on issues such as professionalism
and ethics in accounting, the impact of regulation on
audit practice, and the globalization of the account-
Acknowledgments ing profession. She also investigates academic ethics
I would like to thank the following individuals who and accounting education, and has published several
contributed their time and energy in sharing their instructional audit cases in academic peer-reviewed
xiv PREFACE

journals. Joanne is an active reviewer for several aca- Bartosz teaches auditing and accounting at York
demic journals and currently serves as the associate University, where he has received recognition and
editor at Accounting Perspectives. Prior to earning her awards for his excellence in teaching and creating a
PhD, she worked for several years as an external auditor positive learning environment for his students. Bartosz
with KPMG and as the associate director of education also teaches in the new CPA Ontario’s Professional
with the Institute of Chartered Accountants of Ontario Educational Program (PEP) and the Prerequisite Edu-
(now CPA Ontario). cational Program (PREP). He has completed a Masters
of Laws (LL.M.) at Osgoode Hall Law School and is an
Bartosz Amerski, CPA, CA audit director with the office of the Auditor General of
We are again pleased to have Bartosz Amerski as con- Ontario. Prior to that, Bartosz worked at Ernst & Young
tributing author for the Fourteenth Canadian Edition. as an external auditor.
PREFACE xv

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A01_LO5943_03_SE_FM.indd iv 04/12/15 4:22 PM

PA R T
The Auditing 1
Profession
Who are auditors, and why are they important? These first three chapters provide
background for performing financial statement audits, which is our primary
focus. This background will help you understand why auditors perform audits
the way they do.
Our book begins with a who’s who of assurance services and describes
the role of accountants, public accounting firms, and other organizations in
doing audits. The chapters in Part 1 emphasize the regulation and control of
public accounting through auditing and ethical standards, and discuss the legal
responsibilities of auditors.
M01A_AREN3116_14_SE_P01.indd 1 2/15/18 3:34 PM

CHAPTER
THE DEMAND FOR AUDIT c. Based upon the case facts, do you agree with the audi-
1
tors’ statement regarding their inability to detect frauds
involving collusion between client management and
AND OTHER ASSURANCE outsider parties?
SERVICES
LEARNING OBJECTIVES
After studying this chapter, you should be able to:
1 Describe auditing and its purpose.
2 Distinguish between auditing and accounting.
3 Explain how auditing reduces information risk.
4 Determine the causes of information risk.
5 Explain how information risk can be reduced.
6 Identify major types of audits and auditors.
7 Explain the general characteristics of an assurance engagement.
8 Describe assurance and nonassurance services provided by public accountants and
distinguish the audit of financial statements from other assurance services.
Brown Goes Green

United Parcel Service (UPS) is one of the largest shipment and logistics companies
in the world, delivering more than 15 million packages a day in more than 220 coun-
tries. At the peak of the holiday season, UPS delivers 34 million packages daily.
That’s a lot of packages moved by planes and delivery trucks, and it obviously comes
with a large carbon footprint. The UPS company nickname is “Brown” because of
the company’s brown delivery trucks and uniforms, but that does not capture the
company’s commitment to sustainability.
Recently, the company reduced its annual carbon emissions by 1.5 percent, even though deliv-
ery volume increased by 3.9 percent. One way the company reduces carbon emissions is through
its proprietary On-Road Integrated Optimization and Navigation (ORION) IT system, which uses an
advanced algorithm and customized map data to provide optimal route advice to drivers. The system
reduced fuel usage by 5.7 million litres in 2014, resulting in a reduction in annual CO2 emissions of
14 000 metric tons. ORION is not only good for the environment, but it helps the bottom line. UPS
estimates that a reduction of 1.6 kilometers driven per delivery driver per day will save the company
up to $50 million per year.
The UPS Corporate Sustainability Report is prepared in accordance with the G4 framework estab-
lished by the Global Reporting Initiative (GRI). The company received the “Materiality Matters” check
from the GRI, indicating that it had fulfilled the necessary general standards of disclosures. The
increase in sustainability reporting by companies such as UPS has also resulted in increased inter-
est in the accuracy of the reported information, and the GRI recommends external assurance by
accountants or other qualified experts to provide users with increased confidence in the accuracy of
the information. The UPS Corporate Sustainability Report includes a limited assurance report along
continued >
2
M01B_AREN3116_14_SE_C01.indd 2 2/15/18 3:35 PM

with a reasonable assurance report on the company’s global statement of greenhouse gas emis-
sions from a Big 4 public accounting firm. Many predict this form of assurance will be a frequent
service performed by tomorrow’s Chartered Professional Accountants (CPAs).
Sources: UPS, The Road Ahead: UPS 2016 Corporate Sustainability Report, accessed June 27, 2017, at https://sustainability.
ups.com/media/ups-pdf-interactive-2016/index.html. Global Reporting Initiative, The External Assurance of Sustainability
Reporting, Amsterdam, 2013, accessed June 27, 2017, at https://www.globalreporting.org/resourcelibrary/GRI-Assurance.pdf.
This opening vignette involving the UPS Corporate Sustainability Report illustrates
the increasingly important role of auditors in providing assurance on sustainability
and other information of interest to a broad range of stakeholders. Of course, report-
ing on financial statements of public companies, as well as private companies, govern-
ment agencies, and non-profit entities, remains the primary role of auditors in public
accounting.
This chapter introduces the purpose of auditing and other assurance services, as
well as the auditor’s role in society. The chapter also explains why there is a demand
for auditing and other assurance services, the many different kinds of auditors, and the
variety of skills needed to be a good auditor.
NATURE AND RELEVANCE OF AUDITING LO 1 Describe auditing and

its purpose.
Auditing is both an art and a science. It takes a combination of the auditor’s profes-
sional judgment and skepticism (the art) and knowledge of the relevant subject mat-
ter, rules, and procedures (the science) to perform a high-quality audit. We will now
examine auditing more specifically using the following definition.
Auditing is the accumulation and evaluation of evidence regarding assertions about Auditing—the accumulation and
information to determine the degree of correspondence between the assertions and evaluation of evidence regarding
established criteria and to report the results to interested users. Auditing should be done assertions about information
by a competent, independent person. to determine and report on
the degree of correspondence
The definition includes several key words and phrases. For ease of understanding, between the assertions and
established criteria.
we’ll discuss the terms in different order than they occur in the description.
Assertions, Information, and Established Criteria

The objective of an audit is to provide a conclusion (or assurance) by assessing the
assertions made and the information provided by the preparer. This is performed by
considering the established criteria, gathering evidence, and reaching conclusions on
the fair presentation of the information. In order to do this, the information must be
in a verifiable form.
Information can and does take many forms. Auditors routinely perform audits of
quantifiable information, including companies’ financial statements and individuals’
federal income tax returns. Auditors also perform audits of more subjective informa-
tion, such as the effectiveness of computer systems and the efficiency of manufactur-
ing operations. The focus of this text is the financial statement audit.
The criteria used to evaluate the assertions made and the information provided
varies depending on the information being audited. For example, in the audit of his-
torical financial statements conducted by public accounting firms, the criteria is the
relevant accounting framework such as International Financial Reporting Standards
(IFRS), Accounting Standards for Private Enterprises (ASPE), or Accounting Stan-
dards for Not-for-Profit Organizations (ASNPO). This means in the case of Canadian
Tire, for instance, that management asserts that the financial statements are prepared
CHAPTER 1 I THE DEMAND FOR AUDIT AND OTHER ASSURANCE SERVICES 3

in accordance with the IFRS accounting standards. It is the job of the auditors to
determine whether the financial statements have been prepared in accordance with
IFRS and to provide reasonable assurance to the users that the financial statements
accurately reflect the management’s assertions.
In our opening vignette, the management of UPS asserted that the Corporate
Sustainability Report (the information) was prepared in accordance to the G4 frame-
work (the criteria) established by the Global Reporting Initiative (GRI) (the standard
setter). In this case, the auditors evaluated this assertion by considering the criteria
and gathering evidence, and then reporting their conclusion on the fair presentation
of the information.
For more subjective information, or when there are no generally accepted
standards, it is more difficult to establish criteria. Typically, auditors and the enti-
ties being audited agree on the criteria well before the audit starts. For example,
in an audit of the effectiveness of specific aspects of computer operations, the cri-
teria might include the allowable level of input or output errors as defined by the
organization.
Accumulation and Evaluation of Evidence

Evidence—any information used Evidence is any information used by the auditor to assess whether the information
by the auditor to assess whether being audited is stated in accordance with the established criteria. Evidence takes
the information being audited
many different forms, including:
is stated in accordance with
established criteria. • Electronic and documentary evidence about transactions
• Written and electronic communication from outsiders
• Observations by the auditor
• Oral testimony of the auditee (client)
To satisfy the purpose of the audit, auditors must obtain sufficient quality and
quantity of evidence. In order to determine what types and amount of evidence is
necessary, auditors must assess the risk of material misstatement. Based upon the
evidence gathered, the auditor will then determine the degree of correspondence
between the information and established criteria. Deciding what evidence to gather
and evaluating the evidence are critical aspects of every audit and the primary focus
of this text.
Competent, Independent Person

The auditor must be qualified to understand the engagement risks and the criteria
used, and be competent to know the types and amount of evidence to accumulate
in order to reach the proper conclusion after examining the evidence. While having
Professional judgment— the appropriate technical knowledge and skills are key to being competent, in order
analytical, systematic, and
to reach the proper conclusion (which means exercising professional judgment), an
objective judgment carried out
with integrity and recognition of auditor must act with integrity and with professional skepticism, be independent,
responsibility to those affected by and recognize responsibility to the users of the audit report.
its consequences. Professional skepticism underlies auditors’ professional judgment. It is an atti-
Integrity—the quality of being
tude that includes a questioning mind, a critical assessment of audit evidence, and
honest and courageous. a willingness to challenge the auditee’s assertions. Sound professional judgment
requires the auditor to exercise objectivity (be free of biases, conflicts of inter-
Professional skepticism—an
est, or undue influence). This is referred to as having independence in mind.
attitude that includes a
questioning mind, a critical The competence of the individual performing the audit is of little value if he or
assessment of audit evidence, she is biased in the accumulation and evaluation of evidence. It is likely that a
and the willingness to challenge biased auditor will not use the appropriate level of professional skepticism, which
the auditee’s assertions. can result in inadequate evidence and insufficiently critical evaluation of the
Independence in mind—the
evidence.
auditor’s ability to exercise Auditors strive to maintain a high level of independence in order to keep the
objectivity. confidence of users relying on their reports. Auditors reporting on company financial
4 PART 1 I THE AUDITING PROFESSION

statements are independent auditors. Even though such auditors are paid a fee by a Independent auditors—public
company, they are normally sufficiently independent to conduct audits that can be accountants or accounting
firms that perform audits of
relied on by users. Even internal auditors—those employed by the companies they commercial and noncommercial
audit—usually report directly to top management and the board of directors, keeping entities.
auditors independent of the operating units they audit.
Internal auditors—auditors
employed by a company to
Report audit for the company’s board of
directors and management.
The final stage in the audit process is preparing the independent auditor’s report,
which communicates the outcome of the auditors’ evaluation to interested users. Independent auditor’s
report—the communication of
Reports differ in nature, but all inform readers of the degree of confidence that the
audit findings to users.
auditor has that the assertions made and the information provided by management
corresponds to the established criteria. Reports also differ in form and can follow a
standardized format, as in the case of the financial statements auditor’s report, or can
be highly customized report, as in the case of an audit of effectiveness of computer
systems or an audit of the efficiency of manufacturing operations.
An Illustration of the Definition of Auditing

The key parts in the description of auditing are illustrated in Figure 1-1 using
the audit of a large corporate tax return by a team of Canada Revenue Agency
auditors.
The audit team would likely include auditors who are competent in auditing and
corporate taxes, as well as knowledgeable about the particular industry and the related
complex tax issues. The auditors first perform a risk assessment based upon several factors,
such as past tax audit history, industry sector issues, unusual or complex transactions,
corporate structure, participation in aggressive tax planning, and openness and trans-
parency. The auditors next accumulate and examine the relevant evidence, such as
the organization’s financial statements, books, and records, as well as information
from third parties that do business with the organization. The procedures selected
would depend upon the auditors’ professional judgment. After completing the audit,
the audit team will issue an audit report that provides their conclusion, based upon
evidence gathered and their interpretation of tax law, as to whether the tax return is in
compliance with the Income Tax Act. The taxpayer receives a notice of reassessment
that reflects the audit report’s findings.
Figure 1-1 Audit of a Corporate Tax Return
Information
Tax returns
Competent, filed
independent by taxpayer
person Accumulates and
evaluates evidence Reports on results
Canada
Examines financial
Revenue Conducts risk Determines correspondence
statements and other Audit report
Agency assessment
supporting records
auditor
Established criteria
Income Tax
Act and
all interpretations

LO 2 Distinguish between
auditing and accounting.
DISTINCTION BETWEEN AUDITING
AND ACCOUNTING
Many financial statement users and members of the general public confuse audit-
ing and accounting. The confusion occurs because most auditing is concerned with
accounting information, and many auditors have considerable expertise in account-
ing matters. The confusion is increased by giving the title “public accountant” to indi-
viduals who are qualified to provide assurance on the financial statements. However,
financial statement auditors do not account for anything.
Accounting—the recording, Accounting is the recording, classifying, and summarizing of economic events in
classifying, and summarizing a logical manner for the purpose of providing financial information for decision mak-
of economic events in a logical ing. The function of accounting is to provide certain types of quantitative and qual-
manner for the purpose of
providing financial information for
itative (notes to the financial statements) information that management and others
decision making. can use to make decisions. Accountants must have a thorough understanding of the
principles and rules that provide the basis for preparing the accounting information.
Accountants also help to develop the systems used to record an entity’s economic
events in a timely way and at a reasonable cost.
As we are all aware, financial statements are prepared using many judgmental
evaluations or estimates. Therefore, it is not possible to produce financial statements
that are absolutely precise. For instance, when management provides an allowance
for doubtful accounts, it represents management’s best estimate of the likelihood of
collectability. When auditing accounting data, the concern lies in evaluating whether
recorded information reasonably reflects the economic events that occurred during the
Materiality—amount of accounting period within specified dollar ranges (called materiality). Misstatements
misstatements, individually or in or omissions are considered to be material if, individually or in the aggregate, they
the aggregate, that would likely would likely influence the economic decisions of users who rely upon the financial
influence the economic decisions
of users.
statements. In simple terms, if the users would have reached a different opinion of the
financial statements if they had received a set of financial statements with the corrected
misstatement or omission, then that misstatement or omission is material. As one can
imagine, establishing materiality requires considerable professional judgment.
Since accounting standards are the criteria for evaluating whether the accounting
information is properly recorded, auditors must understand the relevant accounting
standards. These standards are constantly evolving as business practices and standards
change—there are different accounting standards for public companies, private enter-
prises, not-for-profit organizations, and public sector entities.
In addition to understanding accounting, the auditor must also possess expertise in
internal controls, risk assessment processes, and the accumulation and interpretation of
audit evidence. It is this expertise that distinguishes financial statement auditors from
accountants. Determining the proper audit procedures that mitigate risks, deciding on
the number and types of items to test, and evaluating the results are tasks that are unique
to the auditor.
LO 3 Explain how auditing

reduces information risk.
ECONOMIC DEMAND FOR AUDITING
Businesses, governments, and not-for-profit organizations use auditing services exten-
sively. Publicly accountable organizations, such as businesses listed on securities
exchanges or large not-for-profit organizations, are legally required to have an annual
financial statement audit.
A look at the economic reasons for auditing highlights why auditing is valuable.
Consider a bank manager’s decision to make a loan to a business. The decision will be
based on such factors as previous financial relations with the business and the financial
condition of the business as reflected by its financial statements. Assuming the bank
makes the loan, it will charge a rate of interest determined primarily by three factors:
1. Risk-free interest rate. This is approximately the rate the bank could earn by invest-
ing in Canada Treasury bills for the same length of time as the business loan.
6 PART 1 I THE AUDITING PROFESSION

2. Business risk for the customer. This risk reflects the possibility that the business
will not be able to repay its loan because of economic or business conditions
such as a recession, poor management decisions, or unexpected competition in
the industry.
3. Information risk. Information risk reflects the possibility that the information Information risk—the risk
upon which the decision to make the loan was made was inaccurate. A likely that information upon which a
cause of the information risk is inaccurate financial statements. business decision is made is
inaccurate.
Auditing has no effect on either the risk-free interest rate or business risk, but it can
have a significant effect on information risk. If the bank manager is satisfied that there
is minimal information risk because a borrower’s financial statements are audited,
the bank’s risk is substantially reduced and the overall interest rate to the borrower
can be reduced. For example, assume that a large company has total interest-bearing
debt of approximately $1 billion. If the interest rate on that debt is reduced by only
1 percent, the annual savings in interest is $10 million. Many lenders such as banks
require annual audits for companies with large bank loans outstanding.
CAUSES OF INFORMATION RISK LO 4 Determine the causes of

information risk.
As society becomes more complex, there is an increased likelihood that unreliable
information will be provided to decision makers. There are several reasons for this,
including the remoteness of information, bias and motives of the provider, volumi-
nous data, and complex exchange transactions.
Remoteness of Information
In a global economy, it is nearly impossible for a decision maker to have much first-
hand knowledge about the organization with which it does business. Information pro-
vided by others must be relied upon. When information is obtained from others, its
likelihood of being intentionally or unintentionally misstated increases.
Biases and Motives of the Provider

If information is provided by someone whose goals are inconsistent with those of the
decision maker, the information may be biased in favour of the provider. The reason
can be honest optimism about future events or an intentional omission or emphasis
designed to influence users. In either case, the result is a misstatement of informa-
tion. For example, when a borrower provides financial statements to a lender, there
is considerable likelihood that the borrower will bias the statements to increase the
chance of obtaining a loan. The misstatement could be incorrect dollar amounts or
inadequate or incomplete disclosures of information.
Voluminous Data
As organizations become larger, so does the volume of their exchange transactions.
This increases the likelihood that improperly recorded information is included in
the records—perhaps buried in a large amount of other information. For example, if
a large government agency overpays a vendor’s invoice by $2000, the overpayment is
unlikely to be uncovered unless the agency has instituted reasonably complex proce-
dures to find this type of misstatement. If many minor misstatements remain undis-
covered, the combined total can be significant or even material.
Complex Exchange Transactions

In the past few decades, exchange transactions between organizations have become
increasingly complex and therefore more difficult to record properly. The increasing com-
plexity in transactions has also resulted in increasingly complex accounting standards.

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its purpose is simply to kill, quickly and efficiently, and go on at once
to another victim. Having exhausted the store of victims—a short
process, obviously, even in an area of planetary dimensions—it dies
of something like starvation within days.
"That, of course, was as practical a limitation to those employing it as
the one that it attacks only Tareegs. They did not want to be barred
indefinitely from an area which had been cleansed of their enemies,
and neither did they want food animals in that area to be destroyed.
They...."
His voice trailed off, and Troy stirred restlessly. Dr. Clingman was
slumped farther down in his chair now, and the pale, protruding eyes
had begun to blink drowsily. He seemed about to go to sleep. Troy
said, "If the thing killed the Tareegs on Cassa One inside an hour
after they'd gone into the sea, then they couldn't have had the time
to start the interstellar drones back towards the twin worlds."
Clingman's head turned to him again. "No," Clingman said. "Of
course not."
"And even," Troy went on, "if they had been able to ship a couple of
loads of infected water back, it would have been harmless long
before it reached their worlds."
Clingman nodded. "Quite harmless. As harmless as the new ocean

on Cassa One would be by this time to Tareegs who entered it." He
paused. "We'd thought, Gordon ... as you might be thinking now ... of
sending the drones back instead with a load of asteroid ice
containing the inert agent. That, of course, would not have reduced
its effectiveness. Nevertheless, the scheme wouldn't have worked."
"Why not?" Troy asked.
"Because the drones, in the Tareeg view, were sacred messengers.
They could be used only to announce in a certain prescribed manner
that the Tareeg interstellar expeditionary force had discovered a
water planet and taken possession of it, again with the required
ceremony, for the twin worlds. The transmission of lumps of
interplanetary ice would never have fitted that picture, would, in fact,
have been an immediate warning that something very much out of
order had occurred.
"That Tareeg insistence on exact ritualistic procedure—essentially a
defensive measure in their dealings with one another—also
happened to delay our own plans here very badly. Except for it, we
would have been ready at least a year ago to flood Cassa One and
entrap our captors."
Troy repeated, stunned, "You would have been ready...."
"Yes, but consider what might have resulted from that over-hasty
action. The Cassa system is much more readily accessible from the
twin worlds than it is from Earth, and if we made some mistake with
the drones, or if the Tareegs began to suspect for any other reason
that their expeditionary force had met with disaster, they would be
certain to establish themselves at once in a very strong manner
here, leaving Earth confronted with a dangerously talented and
implacable new enemy. No, we had to retain the appearance of
helplessness until we had acquired an exact understanding of the
manner in which the water-message must be prepared, and had
discovered some substitute for the freezing effect on the lethal
agent. That took an extra year."
Troy said carefully, "And during that year, as you knew would
happen, another dozen or so men died very slow and painful deaths
on the Tareeg execution benches. Any one of those men might have
been you or I...."
"That is quite true," Clingman said. "But it was something that could
not be avoided. In that time, we did learn the necessary ritual and we
did find a numbing catalyst which will hold the protein agent inert
until it loses its effect by being sufficiently diluted again. So now the
drones have been dispatched. Long before this ship reaches Earth
again, the agent will have been introduced to the twin worlds, and
except for the specimens we carry on board, the Tareeg species will
be extinct. It may not be a pleasant thing to have a pair of ghost
worlds forever a little on our conscience—but one does not have to
fight uncertain wars with ghosts."
Troy studied him in silence for some seconds.
"And I thought you were soft," he said at last. "I thought you were
weak and soft...."
THE END
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Original PDF Auditing The Art and Science of Assurance Engagements 14th Canadian Edition PDF

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(Original PDF) Auditing The Art and

Science of Assurance Engagements

THE ART AND SCIENCE OF ASSURANCE ENGAGEMENTS

THE ART AND SCIENCE OF ASSURANCE ENGAGEMENTS

A01_AREN3116_14_SE_FM.indd 6 2/23/18 1:22 PM

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16 Audit of the Capital Acquisition

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A01_AREN3116_14_SE_FM.indd 10 2/23/18 1:22 PM

A01_AREN3116_14_SE_FM.indd 11 2/23/18 1:22 PM

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A01_LO5943_03_SE_FM.indd iv 04/12/15 4:22 PM

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AND OTHER ASSURANCE outsider parties?

Brown Goes Green

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NATURE AND RELEVANCE OF AUDITING LO 1 Describe auditing and

Assertions, Information, and Established Criteria

CHAPTER 1 I THE DEMAND FOR AUDIT AND OTHER ASSURANCE SERVICES 3

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Accumulation and Evaluation of Evidence

Competent, Independent Person

4 PART 1 I THE AUDITING PROFESSION

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An Illustration of the Definition of Auditing

Figure 1-1 Audit of a Corporate Tax Return

CHAPTER 1 I THE DEMAND FOR AUDIT AND OTHER ASSURANCE SERVICES 5

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LO 3 Explain how auditing

M01B_AREN3116_14_SE_C01.indd 6 2/15/18 3:35 PM

CAUSES OF INFORMATION RISK LO 4 Determine the causes of

Biases and Motives of the Provider

Complex Exchange Transactions

M01B_AREN3116_14_SE_C01.indd 7 2/15/18 3:35 PM

Clingman nodded. "Quite harmless. As harmless as the new ocean

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