Table Of Content

CONTENTS Preface About the Authors About the Contributor Introduction Chapter 1: Beginning Your CPA Review Program General Comments on the Examination Attributes of Examination Success Purpose and Organization of this review textbook Self-Study Program Planning for the Examination Chapter 2: Examination Grading Chapter 3: The Solutions Approach Chapter 4: Taking the Examination Examination Strategies CPA Exam Checklist Chapter 5: Exam Content Overview AICPA Content and Skills Specifications Researching AICPA Professional Standards Overview of the Attest Function Professional Standards Gaas Structure for CPA Exam Until June 30, 2013 Gaas Structure for CPA Exam’s After June 30, 2013 Appendix Auditing and Attestation Module 1: Professional Responsibilities Module 2: Engagement Planning, Obtaining an Understanding of the Client and Assessing Risks Module 3: Understanding Internal Control and Assessing Control Risk Module 4: Responding to Risk Assessment: Evidence Accumulation and Evaluation Module 5—Version 1: Reporting (For students taking the exam before June 30, 2013) Module 5—Version 2: Reporting (For students taking the exam after June 30, 2013) Module 6: Accounting and Review Services Module 7: Audit Sampling Module 8: Auditing with Technology Outlines of Professional Standards Information Technology Supplement Appendices Appendix A: Auditing and Attestation Sample Examination Appendix B: Sample Auditing and Attestation Testlet Released by AICPA Appendix C: 2012 Released AICPA Questions for Auditing and Attestation Index The following items, copyright © by the American Institute of Certified Public Accountants, Inc., are reprinted with permission: 1. Material from Uniform CPA Examination Questions and Answers, 1978 through 2000. 2. Example audit reports from Statements on Auditing Standards and Statements on Standards for Accounting and Review Services. 3. Information for Uniform CPA Examination Candidates, Board of Examiners, 2000. 4. Material from AU 319 (SAS 55 and SAS 78) and an AICPA Audit Guide, both titled Consideration of Internal Control in a Financial Statement Audit. 5. Material from AICPA Auditing Procedures Studies: Consideration of the Internal Control Structure in a Computer Environment: A Case Study; Auditing with Computers; Auditing in Common Computer Environments; Audit Implications of EDI. 6. Material from the Certified Internal Auditor Examination, Copyright © 1994 through 1997 by the Institute of Internal Auditors, Inc., are reprinted and/or adapted with permission. 7. Material from the Certified Management Accountant Examinations, Copyright © 1993 through 1997 by the Institute of Certified Management Accountants, are reprinted and/or adapted with permission. Material adapted, with permission, from Writing for Accountants, Aletha Hendrickson, South-Western Publishing Co., 1993. Copyright © 2013 by John Wiley & Sons, Inc. All rights reserved. Published by John Wiley & Sons, Inc., Hoboken, New Jersey. Published simultaneously in Canada. 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Wiley also publishes its books in a variety of electronic formats. Some content that appears in print may not be available in electronic books. For more information about Wiley products, visit our Web site at www.wiley.com ISBN 1-118-27720-1 (paperback); 978-1-118-41963-2 (ebk); 978-1-118-42136-9 (ebk); 978-1-118-56229-1 (ebk) PREFACE Passing the CPA exam upon your first attempt is possible! The Wiley CPA Examination Review preparation materials provide you with the necessary materials (visit our website at www.wiley.com/cpa for more information). It’s up to you to add the hard work and commitment. Together we can beat the pass rate on each section of about 45%. All Wiley CPA products are continuously updated to provide you with the most comprehensive and complete knowledge base. Choose your products from the Wiley preparation materials and you can proceed confidently. You can select support materials that are exam-based and user-friendly. You can select products that will help you pass! Remaining current is one of the keys to examination success. Here is a list of what’s new in this edition of the Wiley CPA Examination Review Auditing and Attestation text. The AICPA Content Specification Outlines on Auditing and Attestation for the Computerized CPA Examination beginning in 2012 AICPA questions released in 2012 The new task-based simulations Coverage of new audit and attestation standards, especially Latest AICPA auditing, ethics, and quality control standards, including the new clarity standards Latest Public Company Accounting Oversight Board auditing standards International auditing standards Don’t forget to visit our Web site at www.wiley.com/cpa for supplements and updates. The objective of this work is to provide you with the knowledge to pass the Auditing and Attestation portion of the Uniform Certified Public Accounting (CPA) Exam. The text is divided up into eight areas of study called modules. Each module contains written text with discussion, examples, and demonstrations of the key exam concepts. Following each text area, actual American Institute of Certified Public Accountants (AICPA) unofficial questions and answers are presented to test your knowledge. We are indebted to the AICPA for permission to reproduce and adapt examination materials from past examinations. Author constructed questions and simulations are provided for new areas or areas that require updating. All author constructed questions and simulations are modeled after AICPA question formats. The multiple-choice questions are grouped into topical areas, giving candidates a chance to assess their areas of strength and weakness. Selection and inclusion of topical content is based upon current AICPA Content Specification Outlines. Only testable topics are presented. If the CPA exam does not test it, this text does not present it. The CPA exam is one of the toughest exams you will ever take. It will not be easy. But if you follow our guidelines and focus on your goal, you will be thrilled with what you can accomplish. Ray Whittington November 2012 ABOUT THE AUTHORS Ray Whittington, PhD, CPA, CMA, CIA, is the dean of the Driehaus College of Business at DePaul University. Prior to joining the faculty at DePaul, Professor Whittington was the Director of Accountancy at San Diego State University. From 1989 through 1991, he was the Director of Auditing Research for the American Institute of Certified Public Accountants (AICPA), and he previously was on the audit staff of KPMG. He previously served as a member of the Auditing Standards Board of the AICPA and as a member of the Accounting and Review Services Committee and the Board of Regents of the Institute of Internal Auditors. Professor Whittington has published numerous textbooks, articles, monographs, and continuing education courses. Patrick R. Delaney, deceased, was the dedicated author and editor of the Wiley CPA Exam Review books for twenty years. He was the Arthur Andersen LLP Alumni Professor of Accountancy and Department Chair at Northern Illinois University. He received his PhD in Accountancy from the University of Illinois. He had public accounting experience with Arthur Andersen LLP and was coauthor of GAAP: Interpretation and Application, also published by John Wiley & Sons, Inc. He served as Vice President and a member of the Illinois CPA Society’s Board of Directors, and was Chairman of its Accounting Principles Committee; was a past president of the Rockford Chapter, Institute of Management Accountants; and had served on numerous other professional committees. He was a member of the American Accounting Association, American Institute of Certified Public Accountants, and Institute of Management Accountants. Professor Delaney was published in The Accounting Review and was a recipient of the Illinois CPA Society’s Outstanding Educator Award, NIU’s Excellence in Teaching Award, and Lewis University’s Distinguished Alumnus Award. He was involved in NIU’s CPA Review Course as director and instructor. ABOUT THE CONTRIBUTOR Kurt Pany, PhD, CPA, is a Professor of Accounting at Arizona State University. His basic and advanced auditing courses provided the basis on which he received the Arizona Society of CPAs’ Excellence in Teaching Award and an Arizona CPA Foundation Award for Innovation in the Classroom for the integration of computer and professional ethics applications. His professional experience includes serving for four years on the AICPA’s Auditing Standards Board, serving as an academic fellow in the Auditing Division of the AICPA, and, prior to entering academe, working as a staff auditor for Deloitte and Touche. Introduction To maximize the efficiency of your review program, begin by studying (not merely reading) this chapter and the next three chapters of this volume. They have been carefully organized and written to provide you with important information to assist you in successfully completing the Auditing and Attestation section of the CPA exam. Beyond providing a comprehensive outline to help you organize the material tested on the Auditing and Attestation exam, Chapter 1 will assist you in organizing a study program to prepare for the exam. Self-discipline is essential. Chapter 1: Beginning Your CPA Review Program Chapter 2: Examination Grading Chapter 3: The Solutions Approach Chapter 4: Taking the Examination Chapter 5: Exam Content Overview