Auditing and Assurance Services Information Center: Book Preface

Why a South African Edition?

As you know, this decade has brought possibly the most far-reaching changes in the history of modern financial markets and the international financial statement auditing environment. In the face of the challenges presented during this unprecedented period, we are committed to providing to you and your students the most complete and up-to-date materials possible.

Although the auditing environment has become even more complex and demanding, at the same time it is increasingly important that students gain a deep understanding and working knowledge of fundamental auditing concepts and how they are applied. We have worked hard to make this book the most 'student-friendly' auditing book on the South African market. In this new South African edition we have focused on making the book clearer, easier to understand and providing a South African perspective on the world of auditing and on encouraging your students (and ours) to think more clearly and deeply about what they are studying. This was accomplished primarily by:

1 Introducing 'stop and think' and 'pause to test your intuition' phrases at key places throughout the chapters to encourage students to more fully internalise key concepts in a South African environment

2 Clarifying explanations and adding easy-to-understand South African examples throughout the book

3 Making several chapters more concise and enhancing the focus on key concepts by deleting non-central detail

4 Improving end-of-chapter and supplementary materials throughout the book and on the website by clarifying or replacing existing questions and problems.

This South African edition does not only contain important updates to reflect the recent landmark changes in the international professional standards, but also the landmark changes in the South African legal and corporate governance environment. The International Federation of Accountants (IFAC) and its boards are established as the global leader in professional standards. The international professional standards are the basis for the conduct of audits all over the world. In 2009 the International Auditing and Assurance Standards Board (IAASB) completed its comprehensive program to update and enhance the clarity of the set of International Standards on Auditing (ISAs). The 36 updated and clarified ISAs include substantive new requirements and will introduce significant changes to audits. The implementation and appropriate application of the clarified ISAs will be critical for the success of the auditing profession in the coming years. Education and professional training of auditors worldwide will need to take action at the earliest opportunity to deal with the new set of clarified ISAs and a clarified International Standard on Quality Control. The new ISAs are integrated into the text throughout all the chapters in this book. Because of their increasing complexity and importance to the audit process, this second international edition also includes extended discussions of auditing of accounting estimates, including fair value accounting estimates; and auditing of group financial statements. Additionally, in 2009 the International Ethics Standards Board for Accountants (IESBA) issued a revised and stringent Code of Ethics for Professional Accountants. The Code of Ethics clearly identifies the requirements and establishes acceptable behaviour for professional accountants around the world.

While we are very much aware of the extra investment required when your textbook rolls to a new edition or when you for the first time adopt this book, we believe that we owe it to our colleagues and students to provide the most up-to-date materials possible so their hard work and energy in teaching and studying represents an investment in the latest, most current concepts. We are confident that the changes made in this edition will make it easier for you to teach effectively and for your students to learn more efficiently. Thank you for your support of this text and the many compliments we have received regarding first international edition. We are gratified by the enthusiastic response the text has received as we have done our best to create a clear, easy-reading, student-friendly auditing textbook. We welcome your suggestions and hope you will be impressed with the first South African Edition.

How Does the New South African Edition Involve and Prepare Students for the Accounting Profession?

The recent implosion of financial markets has had a significant effect on the auditing profession. Upon graduation, students will need to operate in this new environment. In this ever-changing environment, it is crucial to learn from the most up-to-date resources. Once again, the author team of Auditing & Assurance Services: First South African Edition is dedicated to providing the most current professional content and real-world application, as well as helping prepare students for the qualification requirements. The South African edition combines a genuine international and South African perspective and relevant international regulatory requirements with the conceptual and systematic approach to auditing inherent in the 7th edition of Auditing & Assurance Services: A Systematic Approach (Messier, Glover, and Prawitt, 2010). In the first South African edition, authors Crous, Lamprecht, Eilifsen, Messier, Glover, and Prawitt continue to reinforce the fundamental values central to first edition:

The book has a genuine international perspective on auditing. The authors strongly believe in taking an international approach to auditing. Auditing network firms operate globally and cross borders. Professional practice and regulation are driven by international events and initiatives. Thus, students and practising auditors need to understand the international environment shaping the profession and international professional standards. The International Federation of Accountants (IFAC) and its boards are consolidated as the global standard setter. In 2004 the International Auditing and Assurance Standards Board (IAASB) launched an ambitious project designated to improve the clarity of its pronouncements. In 2009 IAASB completed its clarity project and released 36 updated and clarified International Standards on Auditing (ISAs) and a clarified International Standard on Quality Control. IAASB has decided that all clarified standards will be effective for audits of financial statements for periods beginning on or after 15 December 2009. Countries and jurisdictions all over the world will implement those clarified ISAs. The Forum of Firms, an association of over 20 of the largest networks firms of auditing firms, has committed to use the clarified ISAs from the due date. The ISAs are integrated into the text throughout all the chapters in this book. Numerous international real-world cases are inserted to illustrate concepts and application of the standards. In addition, separate chapters cover international assurance and related services engagement standards, and the revised Code of Ethics for Professional Accountants and the changes to the regulatory and corporate governance environments in South Africa.

The authors believe students are best served by acquiring a strong understanding of the basic concepts that underlie the audit process and how to apply those concepts to various audit and assurance services. The primary purpose for an auditing text is not to serve as a reference manual but to facilitate student learning, and this text is written accordingly. The text is accessible to students through straightforward writing and the use of engaging, relevant real-world examples, illustrations, and analogies. The text explicitly encourages students to think through fundamental concepts and to avoid trying to learn auditing through rote memorization. New to this edition, students are prompted by the text to ‘stop and think’, at important points in the text, in order to help them apply the principles covered. Consistent with this aim, the text’s early chapters avoid immersing students in unnecessary detail about such topics as independence and reporting requirements, focusing instead on students’ understanding of fundamental audit concepts. Additionally, the case involving EarthWear Clothiers, a mail-order retailer, has been updated and integrated throughout the book. Finally, the addition of ‘practice insights’ throughout the book engages students and helps them understand the practical nature of auditing.

The underlying concepts of auditing and the audit process are basically universal. The text continues to take a systematic approach to the audit process by first introducing the three underlying concepts: audit risk, materiality, and evidence. The assessment of control risk is then described, followed by discussion of the nature, timing, and extent of evidence necessary to reach the appropriate level of detection risk. These concepts are then applied to each major business process and related account balances using a risk-based approach.

In covering these important concepts and their applications, the book focuses on critical judgements and decision-making processes followed by auditors. Much of auditing practice involves the application of auditor judgement. If a student understands these basic concepts and how to apply them to an audit engagement, he or she will be more effective in today’s dynamic audit environment.