Integrated Audit Practice Case 4^th Edition

Authors

Kerr, Elder, & Arens
ISBN# 978-0-912503-25-7

Recent changes in the CPA exam require students to be able to solve audit problems by applying knowledge from different sources. Completing the Integrated Audit Practice Case is ideal preparation for students to learn these skills. Students are required to use a wide verity of information to make audit decisions and integrate that information throughout an audit.

CONTENTS:

• Overview of the practice case
  
• Learning Objectives
  
• Student’s role
  
• Work paper preparation guidelines
  
• Work paper fonts used in the practice case
  
• Typical set of audit files
  
• Indexing
  
• Cross–referencing
  
• Use of computers in the Integrated Audit Practice Case
  

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• Objectives of the Integrated Audit Practice Case
• A Supplement to the First Auditing Course
• Designed for Use with Any Auditing Textbook
• Five Sets of Materials are Provided
• Illustrative and Partially-completed Working Papers Provided
• Emphasis on Decision Making in Conducting an Audit
• Students Learn Best By Doing
• Realistic Documents and Working Papers
• Realism and Relevance
• Instructor's Guide and Solutions Manual
• Assignments

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The integrated practice case can be used in one of two ways:

1. Emphasize the concepts you teach as you proceed throughout the course. Students will do assignments shortly after they are discussed in class
   
2. Emphasize the concepts you teach after you have covered the basic auditing concepts. Assignments will be made near the end of the basic auditing course.

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The case project is relevant for use in any auditing course, regardless of the text, if the faculty member wants students to understand such topics as audit risk, inherent risk, audit planning, understanding and testing internal controls, analytical procedures, and substantive tests of account balances.

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Document packages for performing audits are multicolored and stapled to assure realism. Working papers have been prepared and reviewed by a practicing auditor.

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1. Assignments Booklet – Contains the instructions for each of the 10 audit assignments for the Integrated Audit Practice Case.
2. Documents File – Contains copies of the invoices, checks, receiving reports, and other documents used to perform many of the audit tests.
3. Audit Planning, Tests of Controls, and Substantive Tests of Transactions Working Papers – Includes more than sixty working papers, some completed and others for students to complete while doing assignments. Includes financial statements, detailed accounts by division for analytical procedures, engagement letter, planning documentation, risk assessment information, and information about internal controls including flowcharts and questionnaires.
4. Tests of Balances and Completing the Audit Working Papers – Contains almost one hundred working papers for cash, accounts receivable, inventories, accounts payable, summary of possible misstatements, subsequent events, representation letter, and management letter.
5. Working Papers in Excel – Includes working papers that can be conveniently prepared either in Excel or on the paper working papers included in the working paper file.

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A file of working papers is provided to illustrate effective working paper preparation for sales and cash receipts. Students prepare working papers for the acquisition of goods and services, cash disbursements, accounts payable, and other related accounts. Many of the working papers are partially completed.

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Students start by making accept/reject decisions for an audit client, and then proceed through the audit process making key decisions in planning the audit, performing tests, and evaluating results. Background information and detailed instructions are provided to challenge and guide the students.

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Students analyze information, make decisions, perform audit tests, prepare working papers, and reach conclusions in several segments of an audit. Doing the case requires students to integrate information and decisions from earlier assignments into later ones. Education research shows that students learn best by making the decisions and doing the audit work.

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Assignments

1. Review client background information
   • Includes client acceptance decision
   • Includes review of engagement letter
2. Perform preliminary analytical procedures
   • Includes evaluating financial condition
   • Includes identifying potential misstatements
3. Determine materiality and assess acceptable audit risk and inherent risks
4. Assess control risk and plan tests of controls and substantive tests of transactions
5. Perform and evaluate tests of controls and substantive tests of transactions
   • Uses attributes statistical sampling
6. Perform audit of accounts receivable
   • Option A: Non-statistical sampling
   • Option B: Monetary unit sampling, attributes tables
   • Option C: Monetary unit sampling, Poisson distribution
   • Option D: Variables-difference estimation
7. Perform audit of accounts payable
8. Perform audit of cash
9. Perform audit of inventory
10. Completing the audit

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Materials have been reviewed and class tested by professors and practitioners with extensive practice experience. Carol Borsum, CPA, is a practicing auditor with six years of auditing experience who worked on the audit staff of a large CPA firm. She has spent more than five-hundred hours completing the entire case, making recommendations for revisions, and making certain that the materials and related working papers are relevant and realistic. Two other practitioners reviewed the materials in detail.

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The Instructor's Guide has been developed to provide guidance on how to most effectively use the case, options for deleting partial or complete assignments, and grading hints. The Solutions Manual is complete and detailed.

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