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PREFACEThe Complete Guide to Auditing Standards and Other Professional Standards for Accountants 2008 is written primarily to help auditors and certified public accountants (CPAs)apply and comply with authoritative auditing and other professional standards. It represents acomprehensive, up-to-date compendium of current auditing standards, including therequirements of the Public Company Accounting Oversight Board (PCAOB), establishedunder the Sarbanes-Oxley Act. The PCAOB now requires that the audit report state that theaudit engagement was conducted in accordance with its standards rather than, as previously,with generally accepted auditing standards (GAAS).The book emphasizes practical applications to implement audit and other professionalstandards and requirements.We coverAuditing Standards of the PCAOBStatements on Auditing Standards (SAS)Statements on Standards for Attestation Engagements (SSAE)Statements on Standards for Accounting and Review Services (SSARS)Interpretations of SAS, SSARS, and SSAEStatements on Consulting ServicesStatements on Quality ControlStatements on Standards for Tax Services (SSTS)Statements on Personal Financial PlanningStatement on Standards for Valuation ServicesThe text covers all the topics an auditor must know aboutAudit reports:General standardsFieldwork standardsStandards of reporting:Special reportsInternal controlCompliance auditingApplication of agreed-upon procedures:Letters for underwritersAttestation engagementsAccounting and review servicesFilings under federal securities statutesInterim financial informationStatistical samplingWe intend the book to be a valuable reference for not only accounting and auditing professionals but also for persons who must interact with auditors, such as company managers,bank loan officers, suppliers, current and potential investors, and workers at governmentalaudit agencies such as the Securities and Exchange Commission. The book explains the standards and their requirements fully, in clear language, using technical terminology only wherenecessary. Our goal was to write a practical and effective “how to” guide. So, throughout, wehave tried to make this book quick to read, easy to follow, comprehensive, and useful.

Constant changes in auditing mean that auditors and CPAs, both internal and external,must constantly work to stay current if they are to avoid serious consequences. Mistakes inthe application of authoritative standards can have disastrous effects on investors (stockholders), creditors, regulatory bodies, management, and employees. Corporate failures such asEnron and WorldCom, with their legal problems due to improper auditing techniques, areevidence of the crucial importance of this book. The book brings professionals the most recent developments and emerging issues and helps them understand and apply these new auditstandards.The tools and techniques covered can be adopted outright or modified as needed.Checklists, charts, diagrams, report forms, schedules, tables, exhibits, illustrations, examples,practice aids, and step-by-step instructions add to the practicality of the book. The costs andbenefits of various auditing approaches are discussed and answers to common questions areprovided.Accounting and auditing students and candidates preparing for the CPA exam will alsobenefit from this book. We hope they will keep this book handy for easy reference and dailyuse.Any ambiguous situation or problem may be solved by referring to the comprehensiveindex. Corporate managers, internal auditors, and external auditors who closely adhere to thematerial, suggestions, and recommendations in this book should greatly minimize their legalexposure.

ABOUT THE AUTHORSNick Dauber, MS, CPA, is an accounting practitioner, specializing in auditing andtaxation. Prior to starting his practice almost 25 years, ago, he was an audit and tax managerat a CPA firm.Mr. Dauber is also an instructor of Auditing and Taxation at Queens College of the CityUniversity of New York. He was the president of Person/Wolinsky CPA Review Coursesand has instructed over 100,000 CPA exam candidates during the past 28 years. Mr. Dauberwas the writer of the review course’s auditing and taxation material and served as the editorof the law and financial accounting material.In 1992, Mr. Dauber was named Professor of the Year at Queens College and was therecipient of the Golden Apple Award bestowed by the Golden Key National Honor Society.He has also served as an award-winning lecturer in auditing and taxation for the Foundationfor Accounting Education at the New York State Society of CPAs as well as for theAmerican Institute of Certified Public Accountants.Mr. Dauber has served as a book reviewer for major book publishers, and has publishedarticles in many professional accounting journals including The CPA Journal (New York),Massachusetts CPA, Virginia Accountant Quarterly, and National Public Accountant.Books that Mr. Dauber has authored include The Vest-Pocket CPA (John Wiley & Sons),Corporate Controller’s Handbook of Financial Management (CCH), and Barron’s How toPrepare for the CPA Exam. He has also been a contributor to professional books inaccounting and auditing.Anique Ahmed Qureshi, PhD, CPA, CIA, is professor of accounting and informationsystems at Queens College of the City University of New York and a consultant onaccounting, auditing, and information systems. Dr. Qureshi has written ten books publishedby South-Western, Aspen, Prentice-Hall, Glenlake, and the American ManagementAssociation. His articles have appeared in accounting and information systems journals,including The CPA Journal, Internal Auditing, National Public Accountant, InternationalJournal of Computer Applications in Technology, and the Journal of Business Research.Marc H. Levine, PhD, CPA, is professor of accounting, Queens College of the CityUniversity of New York, and a financial accounting and auditing consultant. He waspreviously associated with Deloitte and Touche, CPAs. He has written seven books,including the WG&L Audit Manual (Warren, Gorham, and Lamont) and GAAP 1994 to2008, Handbook of Policies and Procedures (CCH), and more than 55 articles on auditingand financial accounting topics. His articles have been published in The CPA Journal,Journal of Corporate Accounting and Finance, Practical Accountant, National PublicAccountant, Massachusetts CPA Review, Cost and Management, and ManagementAccountant, among others.Joel G. Siegel, PhD, CPA, is a self-employed certified public accountant and professorof Accounting at Queens College of the City University of New York. He previously workedas an auditor for the Defense Department of the United States, and Price WaterhouseCoopers, LLP. Dr. Siegel has acted as a consultant in accounting and auditing to manyorganizations, including Citicorp, International Telephone and Telegraph, UnitedTechnologies, The American Institute of CPAs, and Person/Wolinsky CPA Review Courses.Dr. Siegel is author of 65 books and 275 articles on accounting and auditing topics. Hisbooks have been published by South-Western, International Publishing, Glenlake, PrenticeHall, Aspen Law and Business, Richard Irwin, McGraw-Hill, Probus, Macmillan, Harper

Collins, John Wiley & Sons, Barron’s American Management Association, and the AmericanInstitute of CPAs.His articles have been published in many accounting, auditing, and financial journalsincluding EDP Auditing, The CPA Journal Practical Accountant, National PublicAccountant, Ohio Public Accountant, Massachusetts CPA Review, Michigan CPA, VirginiaAccountant Quarterly, Today’s CPA (Texas Society of CPAs), Delaware CPA, FinancialExecutive, Financial Analysts Journal, and the Journal of Corporate Accounting andFinance.Dr. Siegel was the recipient of the Outstanding Educator of America Award. He is listedin Who’s Where among Writers and Who’s Who in the World. He has served as chairpersonof the National Oversight Board.

1/2 Title PageWileyThe Complete Guide toAuditingStandardsand OtherProfessionalStandards forAccountants2008

PART 1AUDITING STANDARDSOF THE PCAOB

PCAOB 1 REFERENCES IN AUDITORS’REPORTS TO THESTANDARDS OF THE PUBLICCOMPANY ACCOUNTINGOVERSIGHT BOARDAn audit report on the financial statements of a public company regulated by thePCAOB should (1) be titled “Report of Independent Registered Public Accounting Firm,” (2)refer to “the standards of the Public Company Accounting Oversight Board (United States),”(3) not include any reference to generally accepted auditing standards, and (4) include thecity and state (or country, if a non-US auditor) from which the audit report is issued. Asample standard report follows:Report of Independent Registered Public Accounting FirmWe have audited the accompanying balance sheet of [company name] as of (at) [date] and therelated statements of income, retained earnings, and cash flows for the year then ended. Thesefinancial statements are the responsibility of the Company’s management. Our responsibility is toexpress an opinion on these financial statements based on our audit.We conducted our audit in accordance with the standards of the Public Company AccountingOversight Board (United States). Those standards require that we plan and perform the audit toobtain reasonable assurance about whether the financial statements are free of materialmisstatement. An audit includes examining, on a test basis, evidence supporting the amounts anddisclosures in the financial statements. An audit also includes assessing the accounting principlesused and significant estimates made by management, as well as evaluating the overall financialstatement presentation. We believe that our audit provides a reasonable basis for our opinion.In our opinion, the financial statements referred to above present fairly, in all materialrespects, the financial position of [company name] as of (at) [date], and the results of itsoperations and its cash flows for the year then ended in conformity with accounting principlesgenerally accepted in the United States of America.[Signature][City and State or Country][Date]Guidance for modifying the standard report applicable to financial statements of a publiccompany regulated by the PCAOB may be found in AU Section 508.3

PCAOB 3 AUDIT DOCUMENTATIONINTRODUCTIONAS 3 supersedes SAS 96, Audit Documentation, and provides general guidance fordocumentation that should be prepared and retained for engagements performed according tothe Public Company Accounting Oversight Board (“PCAOB”) standards.Audit documentation is the written record that supports the auditor’s representations andconclusions. Documentation serves as a basis for review and is used to plan and perform theengagement. It includes records of planning and performing the work, as well as a record ofthe procedures performed and evidence obtained. Audit documentation is sometimes referredto as workpapers or working papers.Audit documentation must be prepared for each engagement conducted according to thestandards of the PCAOB. It must be sufficiently detailed and clear. Audit documentationmay be in the form of memoranda, confirmations, correspondence, schedules, auditprograms, and letters of representation. Audit documentation may be kept on paper, inelectronic files, or in other media.Audit documentation should show compliance with the PCAOB standards. For everyrelevant assertion, the documentation should support the basis for the auditor’s conclusions.The documentation should also show that the underlying accounting records have beenreconciled with the financial statements.REQUIREMENTSAudit documentation must provide enough information so that an experienced auditorwith no connection to the engagement is able (AS 3, paragraph 6)1.2.To understand the nature, timing, extent, and results of the procedures performed,evidence obtained, and conclusions reached.To determine who performed the work and the date such work was completed aswell as who reviewed the work and the date of such review.Significant findings or items contradicting the auditor’s final conclusions must bedocumented. For instance, any procedures performed to resolve differences in theprofessional judgment of the engagement team members should be documented.The auditor should consider additional documentation if, after the documentationcompletion date, the auditor has persuasive evidence that due to lack of documentati

The Complete Guide to Auditing Standards and Other Professional Standards for Ac-countants 2008 is written primarily to help auditors and certified public accountants (CPAs) apply and comply with authoritative auditing and other professional standards. It represents a comprehensive, up-to-date compendium of current auditing standards, including the