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Wiley
The Complete Guide to

Auditing
Standards
and Other

Professional
Standards for
Accountants

2008

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Wiley
The Complete Guide to

Auditing
Standards
and Other

Professional
Standards for
Accountants

2008

Nick A. Dauber

Marc H. Levine

Anique Ahmed Qureshi

Joel G. Siegel

JOHNWILEY&SONS, INC.

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Library of Congress Cataloging-in-Publication Data:
Wiley, the complete guide to auditing standards, and other professional standards for
accountants, 2008 / Nick A. Dauber
p. cm.
Includes index.
ISBN 978-0-470-18397-7 (pbk.)
1. Auditing Standards United States Handbooks, manuals, etc. 2. Accounting
Standards United States Handbooks, manuals, etc. I. Dauber, Nicky A. II. John
Wiley & Sons. III. Title: Complete guide to auditing standards, and other professional
standards for accountants. IV. Title: Guide to auditing standards, and other professional
standards for accountants. V. Title: Auditing standards, and other professional standards
for accountants.
HF5616.U5W559 2008
657.021873dc22
2008002755
Printed in the United States of America
10

DEDICATED TO
KAREN J. DAUBER
Loving wife and dear friend

KATIE AND MICHAEL DAUBER

Precious children

MARGIE, MARC AND SUSAN DAUBER

Loving and wonderful mother, father, and sister

SHAHEEN QURESHI
Loving wife

AQSA N. QURESHI AND YASEEN A. QURESHI

Wonderful children

MOHAMMAD RAFIQUE QURESHI AND ZAKIA QURESHI

Loving parents

CAROL LEVINE
Dedicated wife and friend

REVA, DANIEL AND SORI LEVINE

Loving children

YAAKOV LEVINE
Loving Grandson

TESSIE and SAMUEL LEVINE

Dearly departed Mother and Father

ROBERTA M. SIEGEL
Loving wife, colleague and best friend

CONTENTS
Title

Part 1 Auditing Standards of the PCAOB

Page
No.
1

References in Auditors Reports to the Standards of the Public

Company Accounting Oversight Board ..............................................

Audit Documentation...............................................................................

Reporting on Whether a Previously Reported Material Weakness

Continues to Exist ...............................................................................

An Audit of Internal Control over Financial Reporting That Is

Integrated with an Audit of Financial Statements ...............................

15

Part 2 Auditing

27

110

Responsibilities and Functions of the Independent Auditor ....................

29

120

Defining Professional Requirements in Statements on Auditing

Standards.............................................................................................

31

150

Generally Accepted Auditing Standards..................................................

33

161

The Relationship of Generally Accepted Auditing Standards to

Quality Control Standards...................................................................

35

201

Nature of the General Standards..............................................................

37

210

Training and Proficiency of the Independent Auditor .............................

37

220

Independence ...........................................................................................

37

230

Due Professional Care in the Performance of Work................................

37

310

Appointment of the Independent Auditor ................................................

39

311

Planning and Supervision ........................................................................

41

312

Audit Risk and Materiality ......................................................................

53

315

Communications between Predecessor and Successor Auditors .............

63

316

Consideration of Fraud in a Financial Statement Audit...........................

69

317

Illegal Acts by Clients .............................................................................

79

318

Performing Audit Procedures in Response to Assessed Risks and

Evaluating the Audit Evidence Obtained ............................................

83

319

Consideration of Internal Control in a Financial Statement Audit ..........

91

322

The Auditors Consideration of the Internal Audit Function in an

Audit of Financial Statements.............................................................

109

324

Service Organizations..............................................................................

115

325

Communication of Internal Control Related Matters Noted in an

Audit ...................................................................................................

119

326

Evidential Matter .....................................................................................

125

328

Auditing Fair Value Measurements and Disclosures...............................

131

329

Analytical Procedures..............................................................................

141

330

The Confirmation Process .......................................................................

145

331

Inventories ...............................................................................................

163

332

Auditing Derivative Instruments, Hedging Activities, and

Investments in Securities ....................................................................

171

333

Management Representation ...................................................................

179

334

Related Parties .........................................................................................

187

336

Using the Work of a Specialist ................................................................

197

337

Inquiry of Clients Lawyer Concerning Litigation, Claims, and

Assessments ........................................................................................

207

339

Audit Documentation...............................................................................

211

341

Ability of the Entity to Continue as a Going Concern.............................

215

342

Auditing Accounting Estimates ...............................................................

221

350

Audit Sampling........................................................................................

229

380

Communication with Audit Committees .................................................

233

390

Consideration of Omitted Procedures After the Report Date ..................

247

411

The Meaning of Present Fairly in Conformity with Generally

Accepted Accounting Principles .......................................................

249

420

Consistency of Application of Generally Accepted Accounting

Principles.............................................................................................

253

431

Adequacy of Disclosure in Financial Statements ....................................

257

504

Association with Financial Statements ....................................................

259

508

Reports on Audited Financial Statements................................................

263

530

Dating of the Independent Auditors Report ...........................................

277

532

Restricting the Use of an Auditors Report..............................................

279

534

Reporting on Financial Statements Prepared for Use in Other

Countries .............................................................................................

281

543

Part of Audit Performed by Other Independent Auditors ........................

285

544

Lack of Conformity with Generally Accepted Accounting Principles ....

289

550

Other Information in Documents Containing Audited Financial

Statements ...........................................................................................

291

551

Reporting on Information Accompanying the Basic Financial

Statements in Auditor-Submitted Documents .....................................

293

552

Reporting on Condensed Financial Statements and Selected Financial

Data .....................................................................................................

297

558

Required Supplementary Information......................................................

299

560

Subsequent Events ...................................................................................

303

561

Subsequent Discovery of Facts Existing at the Date of the Auditors

Report..................................................................................................

305

623

Special Reports ........................................................................................

307

625

Reports on the Application of Accounting Principles .............................

319

634

Letters for Underwriters and Certain Other Requesting Parties ..............

323

711

Filings under Federal Securities Statutes.................................................

329

722

Interim Financial Information..................................................................

331

801

Compliance Auditing Considerations in Audits of Governmental

Entities and Recipients of Governmental Financial Assistance ..........

335

Public Warehouses: Controls and Auditing Procedures for Goods Held

339

901

Part 3 Attestation

345

20

Defining Professional Requirements in Statements on Standards for

Attestation Engagements.....................................................................

347

50

SSAE Hierarchy ......................................................................................

349

101

Attestation Engagements .........................................................................

351

201

Agreed-Upon Procedures Engagements ..................................................

359

301

Financial Forecasts and Projections.........................................................

363

401

Reporting on Pro Forma Financial Information.......................................

375

501

Reporting on an Entitys Internal Control over Financial Reporting.......

381

601

Compliance Attestation ...........................................................................

391

701

Managements Discussion and Analysis .................................................

401

Part 4 Accounting and Review Services

409

50

Standards for Accounting and Review Services ......................................

411

100

Compilation and Review of Financial Statements...................................

413

110

Compilations of Specified Elements, Accounts, or Items of a Financial

Statement.............................................................................................

429

120

Compilation of Pro Forma Financial Information ...................................

433

200

Reporting on Comparative Financial Statements.....................................

437

300

Compilation Reports on Financial Statements Included in Certain

Prescribed Forms.................................................................................

443

400

Communications between Predecessor and Successor Accountants .......

445

600

Reporting on Personal Financial Statements Included in Written

Personal Financial Plans .....................................................................

447

Part 5 Consulting Services

100

Consulting Services: Definitions and Standards......................................

449
451

Part 6 Quality Control

453

20

System of Quality Control for a CPA Firms Accounting and Auditing

Practice................................................................................................

455

30

Monitoring a CPA Firms Accounting and Auditing Practice.................

459

40

The Personnel Management Element of a Firms System of Quality

ControlCompetencies Required by a Practitioner in Charge of an
Attest Engagement ..............................................................................

461

Part 7 Tax Services

463

Preface .....................................................................................................

465

100

Tax Return Positions................................................................................

467

200

Answers to Question on Tax Returns ......................................................

469

300

Certain Procedural Aspects of Preparing Returns....................................

471

400

Use of Estimates ......................................................................................

473

500

Departure from a Position Previously Concluded in an Administrative

Proceeding or Court Decision .............................................................

475

600

Knowledge of Error: Return Preparation.................................................

477

700

Knowledge of Error: Administrative Proceeding ....................................

479

800

Form and Content of Advice to Taxpayers..............................................

481

Part 8 Personal Financial Planning

483

Basic Personal Financial Planning Engagement Functions and

Responsibilities ...................................................................................

485

200

Working with Other Advisors..................................................................

489

300

Implementation Engagement Functions and Responsibilities .................

491

400

Monitoring and Updating EngagementsFunctions and

Responsibilities ...................................................................................

493

Developing a Basis for Recommendations ..............................................

495

100

500

Part 9 Statement on Standards for Valuation Services

497

Statement 1 Valuation of a Business, Business Ownership Interest,

Security, or Intangible Assets..............................................................

499

Appendix A: Cross-References to Statements on Auditing Standards................

511

Appendix B: Cross-References to Statements on Standards for Attestation

Engagements ..................................................................................

515

Appendix C: Cross-References to Statements on Standards for Accounting

and Review Services ......................................................................

517

Index...........................................................................................................................

519

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