Why and How Audits Must Change

Here are the essential steps that accounting firms must taketo improve audit quality. The author provides detailed coverage ofimportant topics such as risk-based auditing techniques, analyticalprocedures, technology, and internal controls. After explaining whyfrequently used audit approaches are inadequate for detectingmaterial fraud, the author:* Provides specific and practical guidance to help auditorsconduct higher quality audits* Offers guidance to financial executives on ways to evaluatetheir independent audits* Describes the steps that accounting firms must take toimplement these much-needed changesOrder your copy today!

Preface vii1. A WAKE-UP CALL FOR ALL AUDITORS 1"Please, Don't Compare Us to Andersen!" 4Fundamental Change Is Still Needed 7Purpose of This Book 92. RISK-BASED AUDITING: SAVIOR OR VILLAIN? 13Why Many Firms Resist Risk-Based Auditing 16Progress Must Be Made 193. THE RISK OF "COOKING THE BOOKS" 21General Methods of Cooking the Books 24Why Companies Cook the Books 27How Auditors Should Assess the Risk that a ClientHas Cooked the Books 35Tailoring Audit Programs 474. OTHER RISKS AND CONSIDERATIONS 53Ask "Anticipation" Questions 56Perform Proactive Research about the Client's Business57Perform a Diligent Preliminary Analytical Review 62Risk Assessments During Fieldwork 635. THE MANY BENEFITS OF ANALYTICAL PROCEDURES 67Quality 71Efficiency 74Client Service 76Staff Morale 786. COMMON PITFALLS OF ANALYTICAL PROCEDURES 81Uncorroborated Client Explanations 84Imprecise Explanations 89Lack of Informed Expectations 93Setting Scopes for Variance Analyses 1017. AN EASY APPROACH TO IMPLEMENTING ANALYTICAL PROCEDURES103Step One: Think Analytical First 105Step Two: Determine the Proper Strength 119Step Three: Test and Evaluate Results 123Lousy Internal Controls 129Closing Thoughts 1328. INTERNAL CONTROL:THE MISUNDERSTOOD CHILD 135Types of Controls 139Minimum Audit Requirements 1469. TO TEST OR NOT TO TEST 155A Four-Step Approach to Testing Controls 159Step One: Evaluate Cost-Benefits 159Step Two: Identify Specific Controls to Test 164Step Three: Select and Perform Control Tests 169Step Four: Arrive at Conclusions 173Conclusion 17510. TALKIN' TO THE CLIENT 177Who Should Ask the Questions? 180How Reliable Is the Evidence Source? 181Do You Hear What I Hear? 18211. DATA EXTRACTION SOFTWARE 187Purpose of This Chapter 190Benefits of Data Extraction Software 191Case Study 196How to Proceed 19912. ACTION STEPS 207Thinkers and Robots 209Three Essential Steps for Transforming Your Firm 211Closing Thoughts 227Index 229