To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Instructor’s Resource Manual Auditing and Assurance Services Fourteenth Edition Alvin A Arens Randal J Elder Mark S Beasley Prentice Hall Boston Columbus Indianapolis New York San Francisco Upper Saddle River Amsterdam Cape Town Dubai London Madrid Milan Munich Paris Montreal Toronto Delhi Mexico City Sao Paulo Sydney Hong Kong Seoul Singapore Taipei Tokyo To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com This work is protected by United States copyright laws and is provided solely for the use of instructors in teaching their courses and assessing student learning Dissemination or sale of any part of this work (including on the World Wide Web) will destroy the integrity of the work and is not permitted The work and materials from it should never be made available to students except by instructors using the accompanying text in their classes All recipients of this work are expected to abide by these restrictions and to honor the intended pedagogical purposes and the needs of other instructors who rely on these materials VP, Editorial Director: Sally Yagan Executive Editor: Stephanie Wall Editorial Project Manager: Christina Rumbaugh Production Project Manager: Carol O’Rourke Senior Operations Specialist: Diane Peirano Printer/Binder: Offset Paperback Manufacturers Copyright © 2012, 2010, 2008, 2006, 2005 Pearson Education, Inc., publishing as Prentice Hall, One Lake Street, Upper Saddle River, New Jersey 07458 All rights reserved Manufactured in the United States of America This publication is protected by Copyright, and permission should be obtained from the publisher prior to any prohibited reproduction, storage in a retrieval system, or transmission in any form or by any means, electronic, mechanical, photocopying, recording, or likewise To obtain permission(s) to use material from this work, please submit a written request to Pearson Education, Inc., Permissions Department, One Lake Street, Upper Saddle River, New Jersey 07458 Many of the designations by manufacturers and seller to distinguish their products are claimed as trademarks Where those designations appear in this book, and the publisher was aware of a trademark claim, the designations have been printed in initial caps or all caps 10 ISBN-13: 978-0-13-257611-6 ISBN-10: 0-13-257611-2 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com CONTENTS Page Course Approach Suggestions One-Quarter Schedule One-Semester Schedule One-Quarter Assignment Schedule One-Semester Assignment Schedule Assignment of Computer-Related Problems Companion Website Chapter Opening Vignettes — Lessons from Practice Use of ACL Software Use of Systems Understanding Aid Use of Integrated Audit Practice Case Use of Auditing Cases Suggested Term Projects Summary of Additional, Changed, and Deleted Problem Material v vi vii viii x xii xii xiii xiii xiii xiv xiv xiv xxiii CHAPTERS I THE AUDITING PROFESSION II The Demand for Audit and Other Assurance Services The CPA Profession Audit Reports Professional Ethics Legal Liability 1-1 2-1 3-1 4-1 5-1 THE AUDIT PROCESS 10 11 12 13 Audit Responsibilities and Objectives Audit Evidence Audit Planning and Analytical Procedures Materiality and Risk Section 404 Audits of Internal Control and Control Risk Fraud Auditing The Impact of Information Technology on the Audit Process Overall Audit Plan and Audit Program 6-1 7-1 8-1 9-1 10-1 11-1 12-1 13-1 III APPLICATION OF THE AUDIT PROCESS TO THE SALES AND COLLECTION CYCLE 14 15 16 17 Audit of the Sales and Collection Cycle: Tests of Controls and Substantive Tests of Transactions Auditing Sampling for Tests of Controls and Substantive Tests of Transactions Completing the Tests in the Sales and Collection Cycle: Accounts Receivable Audit Sampling for Tests of Details of Balances 14-1 15-1 16-1 17-1 IV APPLICATION OF THE AUDIT PROCESS TO OTHER CYCLES 18 19 20 21 22 23 V Audit of the Acquisition and Payment Cycle: Tests of Controls, Substantive Tests of Transactions, and Accounts Payable Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts Audit of the Payroll and Personnel Cycle Audit of the Inventory and Warehousing Cycle Audit of the Capital Acquisition and Repayment Cycle Audit of Cash Balances 18-1 19-1 20-1 21-1 22-1 23-1 COMPLETING THE AUDIT 24 Completing the Audit 24-1 VI OTHER ASSURANCE AND NONASSURANCE SERVICES 25 26 Other Assurance Services Internal and Governmental Financial Auditing and Operational Auditing iii 25-1 26-1 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Course Approach Suggestions The purpose of the Instructor's Resource Manual is to help you teach auditing and other assurance services courses more efficiently Naturally, we not want to interfere with your present approach or imply that our suggestions are the only good alternatives This resource manual has several parts: Illustrative schedules for one-quarter and one-semester courses Term projects we have successfully used Chapter-by-chapter suggestions for teaching the content in each chapter The suggestions for each chapter include the following: Ideas we find useful in teaching introductory auditing Homework problems we use most often A matrix illustrating how learning objectives correlate with chapter problem material The matrix for each chapter is designed to provide a one-page summary of this information in order to assist you in assigning problem material Transparency masters containing ideas we like to emphasize in class These are labeled with a "T" in the teaching notes for each chapter The transparency masters are located in the back of this book and can also be downloaded from the Companion Website (www.pearsonhighered.com/arens) Note that the Electronic Art Log on the Companion Website contains every table, graph, and piece of art from the textbook You can use the items in the art log to create PowerPoint presentations or overhead transparencies of key figures, tables, and other art from the textbook The chapters are designed so that their arrangement and selection provides maximum flexibility in course design Suggested Syllabi In this section, we provide a possible schedule for use in a one-quarter course and in a one-semester course We also provide suggested problem assignments that could easily be presented in your syllabus Following these sample syllabi, we briefly overview other teaching materials that you might find helpful as you develop your plan for coverage of the course content v To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com One-Quarter Schedule (assumes two seventy-five minute sessions per week) WEEK NO CONTENTS CORRESPONDING CHAPTER IN TEXT Introduction The demand for audit and other assurance services The CPA profession and global standards-setting Overview of reporting Chapter Chapter Chapter Audit responsibilities and objectives Audit evidence Chapter Chapter Audit planning and analytical procedures Materiality and risk Chapter Chapter Sec 404 audits of internal control and control risk Fraud auditing Chapter 10 Chapter 11 The impact of information technology on the audit process Midterm examination Chapter 12 Midterm Overall audit plan and audit program Audit of the sales and collection cycle: tests of controls and substantive tests of transactions Chapter 13 Accounts receivable: tests of details of balances Audit sampling for tests of controls and substantive tests of transactions Chapter 16 Chapter 14 Chapter 15 Audit sampling for tests of controls and substantive tests of transactions (cont.) Completing the audit Chapter 15 Chapter 24 Audit reporting—other assurance reports Professional ethics Chapter 25 Chapter 10 Legal liability Internal and governmental financial auditing and operational auditing Chapter vi Chapter 26 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com One-Semester Schedule (assumes two seventy-five minute sessions per week) WEEK NO CONTENTS CORRESPONDING CHAPTER IN TEXT Introduction The demand for audit and other assurance services The CPA profession and global standards-setting Overview of reporting Chapter Chapter Chapter Professional ethics Legal liability Chapter Chapter Audit responsibilities and objectives Audit evidence Chapter Chapter Audit planning and analytical procedures Materiality and risk Chapter Chapter Materiality and risk (cont.) Midterm examination #1 Chapter Midterm #1 Sec 404 audits of internal control and control risk Fraud auditing Chapter 10 Chapter 11 The impact of information technology on the audit process Overall audit plan and audit program Chapter 12 Chapter 13 Audit of the sales and collection cycle: tests of controls and substantive tests of transactions Accounts receivable: tests of details of balances Chapter 14 Chapter 16 Audit sampling for tests of controls and substantive tests of transactions Audit sampling for tests of details of balances Chapter 15 Chapter 17 Audit sampling for tests of details of balances (cont.) Midterm examination #2 Chapter 17 Midterm #2 10 11 Audit of the acquisition and payment cycle Chapter 18 Chapter 19 12 Audit of cash balances Completing the audit Chapter 23 Chapter 24 13 Audit reporting-completion and other assurance services reports Chapter Chapter 25 14 Internal and governmental financial auditing and operational auditing Chapter 26 vii To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com One-Quarter Assignment Schedule SESSION READING ASSIGNMENT (CHAPTER) SUBJECT PROBLEM ASSIGNMENT and 1-17, 1-18, 2-22, Internet 2-1 Overview of reporting 3-29, 3-30, 3-33 Audit responsibilities and objectives 6-22, 6-24, 6-27, 6-30 Audit evidence 7-27, 7-28, 7-33, 7-40 Audit planning and analytical procedures 8-26, 8-32, 8-37, 8-39, 8-40, 8-41 Materiality and risk 9-25, 9-31, 9-34, 9-26, 9-36, 9-37 Sec 404 audits of Internal control and control risk 10 10-36, 10-40, 10-43 Fraud auditing 11 11-23, 11-24, 11-28, 11-34 The impact of information technology on the audit process 12 12-21, 12-24, 12-29, 12-30, 12-31 Introduction, audit and assurance services, and the CPA profession 10 Midterm Midterm 11 Overall audit plan and audit program 13 13-26, 13-30, 13-31, 13-32, 13-36 12 Audit of the sales and collection cycle: tests of controls and substantive tests of transactions 14 14-25, 14-32, 14-34, 14-35 13 Accounts receivable: tests of details of balances 16 16-23, 16-26, 16-27, 16-29, 16-35, 16-36 14 Audit sampling for tests of controls and substantive tests of transactions 15 15-28, 15-29, 15-34 15 Audit sampling for tests of controls and substantive tests of transactions (cont.) 15 15-35 16 Completing the audit 24 24-27, 24-28, 24-33 17 Audit reporting-completion 25 25-25, 25-26, 25-28 18 Professional ethics 4-21, 4-25, 4-26, 4-28 19 Legal liability 5-20, 5-24, 5-28 20 Internal and governmental financial auditing and operational auditing 26 26-23, 26-26 viii To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com One-Semester Assignment Schedule SESSION READING ASSIGNMENT (CHAPTER) SUBJECT PROBLEM ASSIGNMENT and 1-17, 1-18, 2-22, Internet 2-1 Overview of reporting 3-29, 3-30, 3-33 Professional ethics 4-21, 4-25, 4-26, 4-28 Legal liability 5-20, 5-24, 5-28 Audit responsibilities and objectives 6-22, 6-24, 6-27, 6-30 Audit evidence 7-27, 7-28, 7-33, 7-40 Audit planning and analytical procedures 8-26, 8-32, 8-37, 8-39, 8-40, 8-41 Materiality and risk 9-25, 9-31, 9-34 Materiality and risk (cont.) 9-26, 9-36, 9-37 10 Midterm #1 11 Sec 404 audits of internal control and control risk 10 10-36, 10-40, 10-43 12 Fraud auditing 11 11-23, 11-24, 11-28, 11-34 13 The impact of information technology on the audit process 12 12-21, 12-24, 12-29, 12-30, 12-31 14 Overall audit plan and audit program 13 13-26, 13-30, 13-31, 13-32, 13-36 15 Audit of the sales and collection cycle: tests of controls and substantive tests of transactions 14 14-25, 14-32, 14-34, 14-35 16 Accounts receivable: tests of details of balances 16 16-23, 16-26, 16-27, 16-29, 16-35, 16-36 17 Audit sampling for tests of controls and substantive tests of transactions 15 15-28, 15-29, 15-34, 15-35 18 Audit sampling for tests of details of balances 17 17-28, 17-29, 17-30 19 Audit sampling for tests of details of balances (cont.) 17 17-31, 17-33 20 Midterm #2 Introduction, audit and assurance services, and the CPA profession Midterm #1 Midterm #2 ix To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com One-Semester Assignment Schedule (continued) READING ASSIGNMENT (CHAPTER) PROBLEM ASSIGNMENT SESSION SUBJECT 21 Audit of the acquisition and payment cycle: tests of controls, substantive tests of transactions and accounts payable 18 18-23, 18-25, 18-30, 18-32 22 Completing the tests in the acquisition and payment cycle: verification of selected accounts 19 19-21, 19-23, 19-28, 19-30 23 Audit of cash balances 23 23-18, 23-21, 23-25 24 Completing the audit 24 24-27, 24-28, 24-33 25* Overview of reporting (continued) 26 Audit reporting—completion 25 25-25, 25-26, 25-28 27 Internal and governmental financial auditing and operational auditing 26 26-23, 26-26 28 Internal and governmental financial auditing and operational auditing (cont.) 26 26-27 *Can be used as a catch-up session or as a review of audit reporting before covering Chapter 25 in the next session Chapter Opening Vignettes – Lessons from Practice Each chapter begins with a short vignette that is based on a realistic situation that auditors might expect to face in practice In addition, each chapter contains several mid-chapter vignettes that highlight other real-world issues that relate to the chapter content, including recent events, news articles, fraud cases, or related thought papers and articles Many of these opening and mid-chapter vignettes summarize actual company issues, while others highlight realistic judgments faced by auditors in practice We have used these vignettes in our own classrooms over the years We have also shared them with others One of our colleagues has used them as a "Lesson for the Day" for students Each vignette illustrates the point implied by its title Thus, they can be used by the instructor as pre-reading for discussion of a particular point or as short cases on a stand-alone basis In any event, we believe they are interesting and add a flavor that does not otherwise exist in the traditional academic study of auditing, unless significant time is spent on longer case studies We suggest you review all 26 opening vignettes plus the shaded mid-chapter vignettes at the beginning of the course and decide which ones to use and how they can be used in your auditing class A brief discussion of many of the vignettes appears in each chapter’s material in this resource guide Several of them emphasize international issues x ... 24 -25 a 24 -25 c 24 -29 24 -34 24 - 32 24 -28 24 -30 24 -35 24 -31 24 -36 Internet Problem 24 -1 CHAPTER 25 25 -14 25 -15 25 -18d 25 -19b 25 -22 25 -23 25 -24 Internet Problem 25 -1 CHAPTER 26 26 -20 c 26 -21 a 26 -23 a 26 -23 b... 21 -26 21 -26 Internet Problem 21 -1 Internet Problem 21 -1 CHAPTER 22 22 -20 c 22 -20 c 22 -20 d 22 -21 c 22 -21 c 22 -21 d 22 -24 22 -24 Internet Problem 22 -1 Internet Problem 22 -1 Comments Modified for 14/e... 14/e 15 -22 a and 15 -22 b 15 -22 a and 15 -22 b Modified for 14/e 15 -22 c and 15 -22 d 15 -22 c and 15 -22 d Replaced for 14/e 15 -23 a 15 -23 a Modified for 14/e 15 -23 b 15 -23 b Replaced for 14/e 15 -25 15 -25 Modified