Major Revisions included in the 16th Edition of Principles of Auditing & Other Assurance Services by Whittington and Pany

• ACL Software and related material now included with the text.

• CPA simulations
• Four CPA simulations follow chapters 10, 11, 12, and 14.
• Three additional interrelated simulations are on the text's website. Two of the simulations are available to students, and all three to instructors. Because they are Excel based, they do not require the extensive computer downloads necessary for the AICPA simulation.
• Simulations are included after chapters 6, 12, 13, and 15 on the text website.
• More multiple choice questions: The importance of multiple choice questions on the Uniform Certified Public Accountant Exam has led us to double the number of multiple choice questions at the end of each chapter.
• Kaplan Schweser simulations on the text website.

• Chapter 7 updated to included concise, summarized coverage of integrated audit internal control reporting based on PCAOB Standard No. 5

• Enhanced coverage of auditing assets at fair values.

• Chapter 18 updated to include coverage of integrated audit internal control reporting based on PCAOB Standard No. 5

• Updated coverage of audits in accordance with government auditing standards due to the 2007 revision of the Yellow Book.

• The text’s end-of-chapter questions, problems and case materials are keyed to each chapter’s learning objectives.

The most significant overall enhancements of the text include:

1. Detailed incorporation of the AICPA’s Statements on Auditing Standards No. 104-111, the “risk assessment standards.” The new risk assessment standards provide an approach in which auditors assess the risks of material misstatement (whether caused by fraud or error) and design audit procedures to address the assessed risks. As compared to previous standard, the risk assessment standards require:

• A more in-depth understanding of the audited company and its environment, including internal control.
• A more rigorous assessment of the risks of where and how the financial statements could be materially misstated.
• An improved linkage between the auditors’ assessed risks and the nature, timing and extent of audit procedures performed in response to those risks.

In using the above approach, auditors carefully plan the audit to include risk assessment procedures aimed at identifying likely areas of misstatement. Detailed audit procedures, tests of controls and substantive procedures (now in combination referred to as “further audit procedures”) follow this assessment. Chapters 5 through 7 describe the risk assessment approach in detail, while chapters 10 through 16 implement the approach to various controls and accounts.

In addition, all chapters in the text have been revised. Among the most significant revisions are:

Chapter 2—Professional Standards

• Includes the new wording and requirements of the ten generally accepted auditing standards.
• Clarifies the new Public Company Accounting Oversight Board and Auditing Standards Board (ASB) guidance on the responsibility of auditors for following particular guidance ranging from an unconditional requirement that it be followed, to situations in which an auditor may use professional judgment in deciding whether to follow the guidance.

Chapter 3—Professional Ethics

• Includes updated requirements of both of the PCAOB and the AICPA.
• AICPA independence standards are now structured about t he Conceptual Framework for Independence Standards, a framework that provides a risk based approach for considering threats and safeguards related to independence.

Chapter 5—Audit Evidence and Documentation

• Presents a discussion structured consistently with Statement on Auditing Standard No. 106, Audit Evidence as well as, where relevant, the other risk assessment standards.
• Distinguishes the nature of audit planning, risk assessment procedures, and further audit procedures (tests of controls and substantive procedures) as presented in the risk assessment standards.

Chapter 6—Audit Planning, Understanding the Client, Assessing Risks, and Responding

• Presents material that is structured consistently with the set of risk assessment standards. The overall approach is one of describing in detail the nature of audit planning and risk assessment procedures auditors use to obtain an understanding of the client and its environment, as well as the manner in which an audit is affected by the auditors’ assessment of audit risk and materiality.
• Modifies the audit process described in previous editions of this chapter to align it with the risk assessment standards. Figure 6.1 summarizes in detail with examples of procedures the audit process.
• Presents guidance on the performance of risk assessment procedures and further audit procedures. Significant risks requiring special audit consideration are discussed.
• Carefully distinguishes between an overall assessment of the risk of material misstatement and separate assessments of inherent risk and control risk.
• Presents the new audit documentation standards.

Chapter 7—Internal Control

• Presents the risk assessment standards’ approach to internal control consideration is thoroughly integrated.
• Extends the Chapter 5 discussion of the audit process by providing guidance on the manner in which internal control is considered.
• Integrates in detail risk assessment procedures related to internal control with the overall risk assessment standards.
• Emphasizes the process of revising the risk of material misstatement based on the results of test of controls.
• Requirements relating to communication of control related matters is updated in accordance with the most recent pronouncement, Statement on Auditing Standard No. 112. This standard serves to better align AICPA and PCAOB requirements.
• Presents new documentation requirements relating to internal control.
• Concise coverage of integrated audit internal control reporting based on PCAOB Standard No. 5.

Chapter 10 through 16—the procedural chapters on various controls and accounts

• These “procedural chapters” are aligned with the risk assessment approach presented in the new standards. Accordingly suggested audit approach and procedures flow smoothly from the approach suggested in earlier chapters of the text.

Chapter 18—Integrated Audits of Public Companies

• Is updated to include the recent PCAOB pronouncements. One particularly important addition is discussion of the auditor’s approach when asked to report on whether a previously reported material weakness has been remediated or continues to exist. Concise coverage of integrated audit internal control reporting based on PCAOB Standard No. 5.

Chapter 21 – Internal, Operational, and Compliance Auditing

• Updated coverage of audits in accordance with government auditing standards due to the 2007 revision of the Yellow Book.