Key Features
ALL CHAPTERS

• Chapter 5 has been extensively updated with more emphasis on additional internal control auditing and reporting requirements of PCAOB Auditing Standard No. 2 (AS 2).
• Comprehensive case studies on HealthSouth, Parmalat, KPMG and Arthur Andersen that integrate coverage from multiple chapters.
• Kaplan CPA audit simulations that allow students to go online and complete simulations similar to those in the new online CPA examination.
• Over 100 new multiple choice questions and 100 new end-of-chapter cases.
• New text discussion of companies with which students are familiar, including Merck, Martha Stewart Living Omnimedia, Bristol-Myers Squibb, BMC Software, Fannie Mae, and many others.
• Coverage of all of the major pronouncements issued by the AICPA and PCAOB through Summer 2005. Of most significance from the previous edition, full discussion of Auditing Standard No. 2.
• Numerous examples of findings from the first battery of Sarbanes-Oxley Section 404 audits and reports.

Part I: The Contemporary Auditing Environment

CHAPTER 1: Auditing and Assurance Services

• Updated coverage of recent PCAOB guidance for tax consulting.
• A new Auditing Insight covers the tax troubles at KPMG.
• Added additional exercises and multiple choice questions.

CHAPTER 2: Professional Standards

• Expanded coverage of new audit reports.
• A new Kaplan CPA Simulation for Generally Accepted Auditing Standards helps students understand how to plan audit fieldwork.

CHAPTER 3: Management Fraud and Audit Risk

• Updated and more detailed coverage of recent fraud scandals, including legal consequences for top executives charged with fraud.
• Expanded discussion of the consideration of fraud in a financial statement audit (SAS 99).
• Seven new Kaplan CPA Exam Simulations cover fraud, risk, and financial statement assurance.

Part II: The Financial Statement Audit

CHAPTER 4: Engagement Planning

• Additional Auditing Insights pulled from recent headlines.
• More discussion of business risk auditing, including COSO's new Enterprise Risk Management model.

CHAPTER 5: Internal Control Evaluation

• Extensive updates on internal controls include auditor and management responsibilities under Sarbanes-Oxley Section 404, updated terminology regarding information technology controls, and application of each control element to small and midsize entities.
• New sample management and auditors reports on internal controls with material weaknesses.
• Expanded discussion of importance of spreadsheet controls.
• A new Auditing Insight discusses companies with significant spreadsheet errors.
• New coverage of AS 2 includes the procedures used for auditing internal controls, types of reports issued, documentation requirements, and new test bank/end-of-chapter questions.
• A new Auditing Insight covers trends in internal control disclosures under AS 2.

CHAPTER 6: Employee Fraud and the audit of Cash

• Updated for new check clearing procedures used by banks.
• More cases in end-of-chapter material.

CHAPTER 7: Revenue and Collection Cycle

• Updated the summary of revenue related restatements.
• Added descriptions of recent large revenue related restatements, including Brisol Myers, Computer Associates, and Quest Communications.
• New discussion of revenue recognition at Priceline.com.
• A new Auditing Insight covers revenue recognition for Grand Theft Auto .
• A new Auditing Insight covers Delphi Corporation's failure to disclose factored receivables.

CHAPTER 8: Acquisition and Expenditure Cycle

• Updated summary of acquisition and expenditure related restatements.
• Description of recent large revenue related restatements, including MCI, Waste Mangement and Adelphia.
• New fraud case that covers hiring a fictitious consulting firm.

CHAPTER 9: Production Cycle

• Extensive use of Phar-Mor fraud case example helps illustrate the problems encountered when accounting for inventory.
• Detailed discussion of accounting for inventory includes GAAP, pricing and compilation testing, and inventory observation procedures.
• A new Auditing Insight covers effects of distorting gross margins.
• A new Auditing Insight covers effects of cut-off errors.

CHAPTER 10: Finance and Investment Cycle

• Discussion of recent restatements due to improper lease accounting and the finance and investment cycle.
• Detailed discussion and new end-of-chapter problems related to loan covenants.
• Extensive discussion of accounting estimates (SAS 57), derivative instruments (SAS 92), and auditing fair value measurements (SAS 101).
• A new Auditing Insight covers Time Warner's write off of goodwill impairment.
• A new Auditing Insight discusses footnote disclosure vs. financial statement adjustment.

CHAPTER 11: Completing the Audit

• Updated guidance provided by Auditing Standard 2 for information that should be obtained in management representations.
• Revised to include examples of litigation disclosures provided by Merck, Martha Stewart Living Omnimedia, Time Warner, and Wal-Mart and how these disclosures may be the subject of attorney letters.
• Revised to include anecdotal evidence on effect of Sarbanes-Oxley on willingness of companies to accept financial statement adjustments proposed by auditors.

CHAPTER 12: Reports on Audited Financial Statements

• Revised to include discussion of reports issued by auditors on internal control over financial reporting as well as management's assessment of internal control over financial reporting.
• Revised to include new versions of actual audit reports, including the March 9, 2005 audit report of Time Warner that includes explanatory paragraphs to address changes in accounting principles, emphasizing the restatement of Time Warner's financial statements, and reference to the report on Time Warner's internal control over financial reporting.

Comprehensive Cases

• Included four comprehensive cases on Arthur Andersen, KPMG, HealthSouth Corporation, and Parmalat that require students to integrate material from various chapters throughout the text.

Part III: Other Topics

MODULE A: Assurance and Other Public Accounting Services

• Revised to include new requirements for reviews and compilations.

MODULE B: Professional Ethics

• No updates for this edition.  

MODULE C: Legal Liability

• Revised to include updates for the Class Action Fairness Act of 2005.

MODULE D: Internal, Governmental, and Fraud Audits

• Revised to include additional fraud audit procedures.

MODULE E: Overview of Sampling

• Revised to include section addressing appropriate documentation related to a sampling plan.
• Revised to include example of application of sampling in 2004 Presidential election.

MODULE F: Attribute Sampling

• Revised to include section addressing appropriate documentation related to an attribute sampling plan.

MODULE G: Variables Sampling

• Revised to include section addressing appropriate documentation related to a variables sampling plan.

MODULE H: Information Systems Auditing

• Revised to include examples of recent computer frauds.
• Expanded coverage of Information Technology Application Controls.