Preface xi Professional Responsibilities 1 Financial Statements, an Audit, and Audited Financial Statements 1 Code of Professional Conduct 5 Conceptual Frameworks 8 Independence Rule 11 Integrity and Objectivity--Members in Business 19 Responsibilities to Clients 20 Other Responsibilities and Practices 21 Quality Control 22 Tax Preparer 23 Standards for Consulting Services 24 GAO--GAGAS Ethical Principles 25 Department of Labor Independence Requirements for Employee Benefit Plans 26 Assessing Risk and Developing a Planned Response 27 Financial Statement Assertions 27 Audit Risk (AR) 28 Materiality 32 Evaluation of Misstatements 34 Consideration of Fraud in a Financial Statement Audit 35 Fraud Risk Factors Overall 37 Assessing Risk of Fraud 43 Effects of Fraud Assessment 44 Fraud-Related Documentation 45 Actions Resulting from Evidence of Fraud 46 Laws and Regulations--Responsibility to Detect and Report Illegal Acts 47 Summary of Assurance Provided by Auditor 49 Audit Planning: Communication with Predecessor Auditor 50 Audit Planning: Engagement Letter 51 Planning Considerations 53 Communication of Certain Information to Those Charged with Governance 58 Understanding Internal Control and Assessing Control Risk 60 Consideration of Internal Control 60 Components of Internal Control 61 Obtaining an Understanding of Internal Control during Risk Assessment 67 Relationship of Control Risk to Tests of Controls, Detection Risk, and Substantive Procedures 75 Further Reducing the Assessed Level of Control Risk 76 Documentation of Internal Control 77 Accounting Cycles 79 Other Considerations 88 Performing Further Procedures and Obtaining Evidence 93 Sufficient Appropriate Audit Evidence 93 Basic Types of Audit Procedures 97 Issues Related to Substantive Testing 107 Audit Documentation 121 Auditing Specific Accounts 125 Using Management Assertions to Develop Audit Programs 125 Test of Balances Approach versus Test of Transactions Approach 126 Auditing Accounts 129 Audit Sampling 155 Sampling Risk 155 Types of Statistical Sampling 159 Attribute Sampling 160 Variables Sampling 164 Probability Proportional to Size (PPS) Sampling 167 Auditing with Technology 171 Responsibilities in an Information Technology Environment 171 Controls in an IT Environment 172 Auditing through the Computer 173 Testing General Control Activities 174 Testing Application Control Activities 176 Auditing with the Computer 178 Audit Reports 179 Audit Reports 179 Standard Report 180 Group Financial Statement Audit Reports 187 Unmodified Opinion with Emphasis-of-Matter Paragraphs 192 Unmodified Opinions with Other-Matter Paragraphs 203 Modified Opinions--Two Circumstances 211 Financial Statements Prepared Using Another Country''s Framework 217 Summary Financial Statements 218 Reviews of Quarterly (Interim) Information 219 Other Types of Reports 220 Reports on Application of Framework Requirements 220 Financial Statements with Special Purpose Frameworks 221 Audits of Single Financial Statements and Specific Elements, Accounts, or Items 223 Reporting on Compliance 224 Service Organization Control (SOC) Reports 225 Governmental Auditing and Compliance Audits 227 Accounting and Review Services 237 Financial Statement Preparation 238 Compilations 241 Reviews 245 Other Compilation and Review Considerations 253 Other Professional Services 257 Reporting on Internal Control in an Integrated Audit 257 PCAOB Reporting on Whether Material Weaknesses Still Exist 265 Employee Benefit Plans 266 Attestation Engagements--General 267 Attestation Standards 268 Financial Forecasts and Projections 270 Pro Forma Financial Information 273 Management Discussion and Analysis 273 Compliance Attestation Engagements 274 Index 275.