Auditing

Now in its twelfth edition, Auditing continues to live up to its reputation for being comprehensive, yet accessible. It has been thoroughly updated to reflect recent changes in international standards, audit reporting and governance. With engaging real-world examples and a new chapter on public auditing, this edition is a must-have for anyone studying auditing at undergraduate or postgraduate level and for those preparing for professional examinations set by accounting bodies such as ACCA and CIMA. Cover Brief Contents Contents Preface-Aims of the Book Acknowledgements Chapter 1: Introduction to Auditing - The Why of Auditing Introduction Agency Theory Why Is There a Need for an Audit? The Audit Process International Pressures and Globalization Objectives of Auditing Directors' Responsibilities Auditor Responsibilities Types of Assignment Advantages and Disadvantages of an Audit Auditing Theory, Postulates and Concepts The Expectation Gap Chapter 2: Corporate Governance Introduction What Is Corporate Governance? Principles of Corporate Governance 'Comply or Explain' - Framework versus Legislative Approaches UK Corporate Governance Code Private and Unlisted Companies The Wates Principles Value of Good Corporate Governance Substance over form Companies Act 2006 Audit Committees Sarbanes-Oxley (2002) Chapter 3: The Statutory Framework for Auditing Introduction The Companies Act 2006 Requirement to Have Auditors Who Can Be an Auditor? The Rights and Duties of an Auditor under the Companies Act 2006 Appointment of Auditors Remuneration of Auditors The Removal of an Auditor Resignation of Auditors Auditor's Duties Auditor's Rights The Auditor's Report Auditor's Rights to Attend Meetings Powers of an Auditor Recognized Supervisory Bodies Recognized Qualifying Bodies Professional Body Rules Chapter 4: Accounting Requirements of the Companies Act 2006 Introduction Accounting and Accounting Records Statutory Books Accounting Requirements Accounting Principles Content - Disclosure Requirements True and Fair Override Procedure on Completion of the Financial Statements Period Allowed for Filing Accounts Abridged or Filleted Accounts Publication of Accounts Dormant Companies Chapter 5: Auditing and Accounting Standards and Guidelines Introduction Role of the Financial Reporting Council ('FRC') International Standards on Auditing ('ISAs') Practice Notes Accounting Standards The Relevance of Accounting Standards to Auditing Chapter 6: Ethical Standards and Rules of Professional Conduct Introduction Principles-Based or Rules-Based Approach? Fundamental Ethical Principles Ethics - General Rules General Ethical Threats Threats to Independence Provision of Non-Audit Services Commissions and Fees Conflicts of Interest Advertising and Publicity Ethics and Quality Issues Ethical Standards - Smaller Companies Insider Dealing Money Laundering Whistleblowing Chapter 7: Quality Control in Audit Firms Introduction Audit Firm Organization Planning, Controlling and Recording Individual Audits Reviews of Audit Firms' Procedures in General and of Particular Audits Chapter 8: Accepting Appointment as Auditors Introduction Client Screening Other Considerations Preconditions for an Audit Professional Etiquette Letters of Engagement Chapter 9: Accounting Systems and Internal Controls Introduction Internal Control Limitations of Internal Controls Internal Control Systems Control Procedures Control Activities in Specific Areas of a Business Chapter 10: Audit Planning, Audit Risk and Materiality Introduction Objectives Meeting Audit Objectives Required Procedures Influences on an Audit Planning the Audit Internal Control System Review Audit Strategies Planning the Audit Work Analytical Review Procedures The Timing of Audit Work Chapter 11: Audit Evidence and Using the Work of an Expert Introduction Professional Scepticism Assertions Reliability of Audit Evidence Basic Techniques for Collecting Evidence Using the Work of an Auditor's Expert Chapter 12: Audit Testing, Sampling and Analytical Review Procedures Introduction Relationship to Audit Risk and Materiality Forms of Audit Testing Audit Sampling Sampling Approaches Sampling Methods Analytical Review Procedures Chapter 13: Systems-Based Auditing Introduction Testing System Components The Purchases and Expenses System The Revenues (Sales) System The Payroll System Significant Deficiencies The Audit of Small Entities Chapter 14: Risk-Based Auditing Introduction External Risks Internal Risks The Client's Approach to Risk Evaluating the Organization's Risk Assessment Process Why Use a Business Risk Approach to Auditing? Understanding the Business Risk Approach The Implications of the Business Risk Approach for the Audit Chapter 15: The Audit of Assets Introduction Aspects to Be Verified Verification of Non-Current Assets Current Assets Inventory and Work in Progress Cut-off Receivables Accounting Estimates Bank Balances Loans Cash Chapter 16: The Audit of Liabilities Introduction Verification Procedures Trade Payables Cut-off Accruals Provisions Finance Lease Liabilities Bank Overdrafts and Short-Term Loans Amounts Due to Group and Related Companies Long-Term Liabilities Share Capital and Reserves Unrecorded Liabilities Contingent Liabilities Auditing Accounting Estimates Chapter 17: Auditing and Computers Introduction Auditors and Management Information Systems Audit Risk and IT Systems The Control Environment The Audit Approach to Computerized Systems Chapter 18: Audit Working Papers Introduction Purposes Evidence of Work Carried Out Nature and Content of Working Papers Departure from Basic Principles Content of Working Papers Sample Working Papers Professional Judgement The Audit Programme Standardization of Working Papers Finalization Smaller Audits Ownership of Books and Papers Accountant's Lien Retention of Working Papers Chapter 19: Internal Audit Introduction Role of Internal Audit Differences between Internal and External Audit Public Sector External Auditors and Internal Audit Outsourcing Internal Audit Services Chapter 20: Errors, Fraud and Unlawful Acts Introduction Errors and Misstatements Fraud and Other Irregularities Bribery and Corruption Responsibility for Prevention and Detection of Fraud and Error The Audit Approach Audit Tests and Fraud Reporting and Disclosure Small Companies Unlawful Acts of Clients and Their Staff Audit Issues Arising from Non-Compliance Chapter 21: Related Parties Introduction Disclosure The Auditor's Duties to Related Parties Detailed Audit Procedures Unusual Transactions Outside the Normal Course of Business Control of the Entity Smaller Organizations Modified Audit Reports Chapter 22: Use of Service Organizations Introduction Why Do Firms Outsource? Audit Planning Issues Accounting Records Audit Evidence Reports by Service Organization's Auditors Ethical Threats Chapter 23: Subsequent Events and Going Concern Introduction Subsequent Events Adjusting and Non-Adjusting Events Audit Tests for a Subsequent Events Review Going Concern Consequences of Going Concern Directors' Duties The Auditor's Procedures Specific Audit Procedures If Events Are Identified Effect on Audit Reports Specific Considerations about Going Concern and Small Organizations Chapter 24: Management Representations Introduction Contents of a Letter Reliance on Letter of Representation Auditor Responsibilities Example of a Management Representation Letter Refusal to Co-operate Chapter 25: The Final Review Stage of the Audit Introduction Opening Balances and Comparative Figures The Auditor's Interest Uncorrected Errors or Misstatements Final Accounts Review Procedures Auditors' Duties in Respect of Compliance with the Uk Corporate Governance Code Directors' Remuneration Disclosure Chapter 26: Auditor's Reports to Shareholders Introduction Report on the Directors' Responsibilities for the Financial Statements Auditor's Responsibilities Bannerman Wording The Auditor's Opinion Going Concern Key Audit Matters Basis of Opinion When Is an Unmodified Report Appropriate? Contents of an Auditor's Report Additional Reporting for Listed Companies Modified Audit Reports Sample Wording of Modified Audit Reports Listed Companies - Special Provisions Emphasis of Matter Reports Audit Reporting - Special Circumstances Auditor's Liability in Respect of Audit Reports Chapter 27: Auditor's Reports to Directors and Management Introduction Communication with Those Charged with Governance Significant Deficiencies in Internal Control Reporting Where Part of the Audit Is Carried Out by Another Firm Listed Companies and Others Applying the UK Code of Corporate Governance Reporting to the Audit Committee of PIEs The Management Letter Response by Management The Report and Third Parties Example of a Management Letter Chapter 28: Group Accounts Introduction Audit Considerations Planning Issues Component Auditors Communication Auditing Investments in Subsidiaries and Other Undertakings Auditing the Consolidation Modified Auditor's Reports Overseas Subsidiaries Joint Audits Support Letters to Subsidiaries Transnational Audits Chapter 29: Auditor's Liability Introduction Criminal Law Civil Liability under the Common Law Duty of Care Liability for Negligence Minimizing Risk to Audit Firms Limited Liability Partnerships (LLPs) Limiting Auditor's Liability The Future Chapter 30: Review Engagements and Non-Audit Assurance ­Assignments Introduction Review Engagements Direct Reporting Engagements Negative Assurance Prospective Financial Information Forensic Auditing Assurance Engagements Levels of Assurance Chapter 31: Public Sector Audit and Value for Money Auditing Introduction Supreme Audit Institutions (SAI) Public Sector Auditing - UK Uk Government Departments Local Public Bodies England Scotland Wales Northern Ireland Auditing Issues Internal Audit Value for Money Chapter 32: Performance Evaluation, Environmental Reporting and Corporate Social Responsibility Reporting Assignments Introduction Performance Evaluations Environmental Reporting Corporate Social Responsibility Reporting Chapter 33: Current Issues Introduction The Future of Regulation The Future Structure of Audit Firms Dominance of the 'Big 4' The Role of the Auditor The Future of Audit Reporting The Future of Internal Control Reporting Risk Disclosure Audit Challenges Cryptocurrencies and Blockchains New Opportunities, New Problems Appendix 1: International Standards on Auditing (UK and Ireland) Current Standards Appendix 2: Auditing Practice Notes Issued by the Financial Reporting Council Appendix 3: Key Accounting Ratios for Analytical Review Glossary Index