The events prior to the Sarbanes‐Oxley Act of 2002 (SOX) and the passage of the Act have had a dramatic impact on the auditing profession. The changes in the profession have posed resultant educational challenges. The post‐SOX auditing environment requires students at their entry into the profession to be well equipped in understanding clients' business environment and to possess greater understanding of risk assessments, including business risk and fraud risk. Further, key issues in audit education are now centred on emphasising the critical nature of internal controls and clients' internal control systems. Students are required to be able to link various internal controls to the control objectives and financial statements assertions. There is also a heightened expectation that students have an in‐depth understanding of the financial statements assertions which are central to the auditing process. Students are expected to learn about “completing the circle” in combining results of internal control testing with substantive testing. In addition, a digital business environment poses challenges. Students are expected to be able to audit in a digital environment by having thorough understanding of general and application controls in clients' IT systems. In response to corporate failures of recent years, students are expected to have greater understanding of fraud and to have exposure to fraud and forensic accounting topics in their education. The emphasis is placed on students developing professional scepticism while being educated. Finally, many members of auditing profession continue to call for educators to work on improving critical skills and problem solving skills of their students by providing opportunities for students to develop their professional judgement (Arens and Elder, 2006; Thibodeau et al., 2006).
It is no surprise then that in today's dynamic and demanding business environment, an auditing educator must carefully decide which textbook to use to deliver up‐to‐date auditing topics. There are a number of good textbooks on offer by various authors and publishers in Australia and New Zealand. One such textbook, recently issued, is the seventh edition of Auditing and Assurance Services in Australia: An Integrated Approach by Arens et al. (2006).
This textbook is based on the 11th edition of Auditing and Assurance Services: An Integrated Approach by Arens et al. (2006), one of the USA classics in the auditing textbook world. The Australian equivalent is written with the clear focus on the Australian auditing environment in terms of the current practices and standards issued by the Auditing and Assurance Standards Board (AuASB). The seventh edition is an update on the previous edition, which was issued in 2005. It has up‐to‐date references to the recently issued Australian Auditing Standards, the Professional Standards and the Code of Ethics, legislation (including new regulatory regime introduced by CLERP 9 in 2004), and many recent developments in common law. The seventh edition also has an extensive coverage of ethical responsibilities and legal liability of auditors together with strong emphasis on audit quality. The book is organised in 19 chapters: Chapters 1‐4 overview the auditing profession; Chapters 5‐12 are procedural chapters and describe the auditing process from the initial engagement stage onwards while Chapters 13‐17 present a section on concepts and auditing procedures for the audit of various transaction cycles. The chapters within this section explain well the integration of internal control structure to audit objectives and management assertions and substantive tests. In that way this textbook certainly meets the requirement of teaching students how to “complete the circle” in the auditing process. Within the latter section, chapter 15 discusses sampling, including some of the statistical sampling techniques.
To conclude the book, Chapter 18 covers the completion of the audit process, while chapter 19 exposes students to topics of other assurance services, performance, internal and public sector auditing. Overall the book provides a good coverage of standard auditing topics.
What distinguishes this textbook from other offerings is the way in which it answers the call from the profession to teach students the topic of fraud and how to assess the risk of fraud. The seventh edition has an excellent chapter on fraud, which includes references to specific fraud areas and procedures. This book also deals well with the issues of auditing in an IT and e‐commerce environment. There is a reference to the impact of e‐commerce on control in various transaction cycles and there is also an ACL supplement that provides an opportunity for educators to incorporate computer assisted audit techniques (CAAT's) in the auditing curriculum.
The authors claim, in the preface, that the textbook is written for students who have not had significant experience in the field. However, there are plenty of opportunities for students to engage in the decision‐making process using this textbook. It has a strong emphasis on professional judgement and problem‐solving skills offering a good selection of problems and cases at the conclusion of each chapter. In addition, the authors provide the “Pinnacle Manufacturing” integrated case, which is presented in six parts and referenced to the chapters to which each part relates. To illustrate various concepts and assertions presented in the financials statements, this textbook also provides students with a fictitious “Hillsburg Hardware Company” annual report. For the in‐depth research of current issues, each chapter has internet‐based cases.
Other support to students is provided in the form of a student study guide (in paperback format) and a companion textbook website. Instructors' resources are provided on CD only and include PowerPoint presentations, instructor manual and solutions manual for all chapters.
If this textbook can be faulted in any way, then it is only in two areas. Firstly, it does not answer to a great extent the call for greater reference to corporate governance and the implications of corporate governance for the control environment and auditing process. There is, albeit brief, discussion of corporate governance in Chapter 4. A longer discussion of auditor relationships with boards of directors and audit committees would be beneficial.
Secondly, this textbook does not incorporate detailed coverage of the International Standards of Auditing (ISA). The current trend towards globalisation of the auditing profession and harmonisation of various national auditing standards around ISAs is therefore not adequately addressed.. Educators using this textbook outside of Australia would require supplemental coverage of ISAs as well as any applicable national auditing standards.
Aside from these two deficiencies, the seventh edition of Auditing and Assurance Services in Australia: An Integrated Approach is a very good textbook. It lends itself to teaching auditing at an introductory level as well as at a more advanced level, for teaching auditing of public as well as non‐public companies, and auditing by large and medium size audit service providers. In conclusion, this is definitely a textbook worthy of consideration.
