Current Coverage: New auditing standards are released without regard to textbook revision cycles. As auditing instructors, we appreciate how critical it is to have the most current content available. This edition includes complete coverage of the AICPA Clarity Project, including guidance in the recently issued SAS No. 130 An Audit of Internal Control Over Financial Reporting That Is Integrated With an Audit of Financial Statements and new PCAOB standards including Standard No. 18, Related Parties. We are committed to continually providing you with up-to-date content in this dynamic global auditing environment and will keep you updated with highlights posted on our Web site of major changes in new standards as they are issued. AICPA Clarity Projects: As part of the effort to converge U.S.

auditing standards with international standards, the AICPA Auditing Standards Board (ASB) recently completed its Clarity Project to redraft most of the existing GAAS standards to not only align them with the ISAs, but to also make them easier to read, understand, and apply. Chapter 2 provides an overview of the major implications of the clarified standards, including the new principles that provide the framework to help auditors fulfill the objectives of the audit of financial statements in accordance with AICPA auditing standards and the new Codification of Statements on Auditing Standards. Chapter 3 contains examples of the new standard auditor''s report format updated by the Clarified SASs. All remaining chapters of the textbook reflect the various revisions resulting from the issuance of the Clarity standards. The AICPA''s Accounting and Review Services Committee (ARSC) has largely completed a similar Clarity Project affecting compilation and review standards with the issuance of SSARS No. 21, Statement on Standards for Accounting and Review Services: Clarification and Recodification. In redrafting SSARS, the ARSC used similar redrafting standards as those used by the Auditing Standards Board. Changes resulting from the redrafting of SSARS are addressed in Chapter 25.

Additionally, that chapter also highlights forthcoming changes in Statements on Standards for Attestation Engagements (SSAEs) resulting from the AICPA''s Clarity Project affecting attestation standards, which was recently voted for final issuance by the ASB. Coverage of Revised AICPA Code of Professional Conduct: The AICPA recently restructured its Code of Professional Conduct to align it with international standards. The organization of the Code now presents the Principles as part of the Preface and then includes Rules for members in public practice separately from Rules for members in business and others. Chapter 4 has been substantially revised to provide an overview of the key elements of the revised Code based on this new structure. Expanded Coverage of Professional Skepticism and Auditor Judgement: With the profession''s continued focus on the importance of applying appropriate levels of professional skepticism, we have expanded coverage of this topic in Chapter 6, along with integrated coverage in later chapters, including Chapter 10, which addresses the auditor''s responsibilities for detecting fraud. We discuss the importance of a questioning mindset and the need to critically evaluate audit evidence to strengthen student awareness of the elements of effective professional skepticism. To assist auditors with maintaining an appropriate level of professional skepticism when making professional judgments during an audit, this edition features the Center for Audit Quality''s Professional Judgment Resource, which outlines key elements of a process that auditors apply when making professional judgments. Chapter 6 illustrates an effective decision-making process that guides auditors'' thinking to help them be aware of their own judgment tendencies, traps, and biases.

We have added homework problems that expose students to this judgment framework and a number of the common traps and biases. Expanded Coverage on Risk Assessment Procedures and Understanding Internal Control: The requirements of the Sarbanes-Oxley Act of 2002 and the PCAOB Auditing Standard 5 (AS 5) that impact accelerated filer public companies, and the risk assessment standards issued by the Auditing Standards Board are integrated throughout the text. Chapter 2 emphasizes the importance of understanding the client''s business and its environment, including internal control. Chapter 3 highlights reporting on internal controls over financial reporting for auditors of accelerated filer public companies. We have always emphasized understanding the client''s business and industry in planning. For the 16th edition we reorganized Chapters 8-12 to include expanded coverage of the auditor''s performance of risk assessment procedures, including the identification of significant risks. Chapter 9 addresses the performance of risk assessment procedures to address the risk of material misstatement, followed in Chapter 10 with discussion of assessing and responding to the risk of fraud. Our coverage in Chapters 11 and 12 of internal controls, including coverage of IT general and application controls, has been restructured to reflect key elements of COSO''s 2013 revision of its Internal Control--Integrated Framework and to better integrate the auditor''s consideration of both manual and automated controls.

Chapter 11 introduces students to important elements of effective internal controls, including those related to IT, while Chapter 12 outlines the auditor''s responsibilities to understand the design and operating effectiveness of internal control, and also highlights auditor reports on internal control over financial reporting. Subsequent chapters that focus on the transaction cycles include extensive coverage of internal controls to help students understand how the auditor''s consideration of internal controls is integrated for audits of the financial statements and internal controls over financial reporting. Emphasis on International Issues: Chapter 1 introduces the importance of considering international auditing standards developments, followed by discussion in Chapter 2 about the role of the International Auditing and Assurance Standards Board (IAASB) in the issuance of international standards on auditing (ISAs) and the Auditing Standards Board''s efforts to converge U.S. standards to international standards. Chapter 3 highlights implications for auditor reports on companies reporting under International Financial Reporting Standards (IFRS). Several chapters throughout the book include text or mid-chapter vignette coverage of international issues, and international issues are also addressed in homework problems. Coverage of Financial Instruments: With the increasing volume and complexity of various types of financial instruments and challenges associated with fair value accounting, Chapter 23 addresses issues associated with auditing financial instruments and obtaining sufficient appropriate audit evidence for fair value account estimates.

We believe this guidance will help strengthen student understanding of the challenges associated with auditing financial instruments. Service Organization Controls (SOC) Reports: With more organizations taking advantage of cloud computing options and third party IT service providers, there is a greater need for information about the design and operating effectiveness of internal controls provided by these external service providers. This 16th edition contains expanded coverage of service organization control (SOC) reports issued by service center auditors. Both Chapters 12 and 25 reflect the new guidance for service auditors reporting on internal controls at service organizations, including coverage of the different types of reports provided in SOC 1, SOC 2, and SOC 3 engagements. New Coverage of Preparation Service Engagements: The issuance of SSARS No. 21 introduced a new type of nonattest engagement service that allows nonissuers to engage a CPA to help management prepare monthly, quarterly, or annual financial statements without providing any assurance on the financial statements or issuing a report, even if the financial statements are expected to be used by, or provided to, a third party. Chapter 25 describes this new type of service and distinguishes it from compilation and review engagement requirements. New Concept Checks: A new feature in the 16th edition is the inclusion of Concept Checks periodically within each chapter that highlight short-answer questions to help students recap content covered within different sections of the chapter.

These short in-chapter review questions are intended to help call student attention to key concepts as they read the material in the chapter. Expanded Homework Material: We are excited about the inclusion of a number of changes to the end-of-chapter homework material for all chapters. For the 16th edition, we have partnered with Becker CPA Review to include new multiple choice problems from their CPA exam preparation materials. These problems, which are included in all 26 chapters, are labeled with the Becker logo. Additionally, each chapter identifies new or revised Discussion Questions and Problems that instructors can use in class to generate discussion about important topics addressed in each chapter. These problems are highlighted by an "in-class" discussion icon in the margin next to the related homework problem. Each chapter also identifies homework problems that require students to research standards and other material using the Internet. While many of these research problems expose students to standards, such as those on the PCAOB Web site, other problems requi.