![AUDITING & ASSURANCE SERVICES, SEVENTH EDITION
Published by McGraw-Hill Education, 2 Penn Plaza, New York, NY 10121. Copyright 2018 by
McGraw-Hill Education. All rights reserved. Printed in the United States of America. Previous editions
2015, 2013, and 2011. No part of this publication may be reproduced or distributed in any form or by
any means, or stored in a database or retrieval system, without the prior written consent of McGraw-Hill
Education, including, but not limited to, in any network or other electronic storage or transmission, or
broadcast for distance learning.
Some ancillaries, including electronic and print components, may not be available to customers outside
the United States.
This book is printed on acid-free paper.
1 2 3 4 5 6 7 8 9 LWI 21 20 19 18 17
ISBN 978-1-259-57328-6
MHID 1-259-57328-1
Chief Product Officer, SVP Products & Markets: G. Scott Virkler
Vice President Portfolio & Learning Content: Michael Ryan
Managing Director: Tim Vertovec
Marketing Director: Natalie King
Brand Manager: Patricia Plumb
Director, Product Development: Rose Koos
Associate Director of Digital Content: Kevin Moran
Lead Product Developers: Michele Janicek / Kristine Tibbetts
Senior Product Developer: Rebecca Mann
Product Developer: Randall Edwards
Marketing Manager: Cheryl Osgood
Digital Product Analyst: Xin Lin
Director, Content Design & Delivery: Linda Avenarius
Program Manager: Daryl Horrocks
Senior Content Project Managers: Dana M. Pauley / Angela Norris
Buyer: Laura M. Fuller
Design: Matt Diamond
Content Licensing Specialists: Shawntel Schmitt / Lori Slattery
Cover Image: The-Lightwrighter/Getty Images
Compositor: SPi Global
Printer: LSC Communications
All credits appearing on page or at the end of the book are considered to be an extension of the copyright page.
mheducation.com/highered
Library of Congress Cataloging-in-Publication Data
Names: Louwers, Timothy J., author.
Title: Auditing & assurance services / Timothy J. Louwers, James Madison
University, David H. Sinason, Northern Illinois University, Jerry R.
Strawser, Texas A&M University, Jay C. Thibodeau, Bentley College, Allen
D. Blay.
Other titles: Auditing and assurance services
Description: Seventh edition. | New York, NY: McGraw-Hill Education, [2018]
Identifiers: LCCN 2016042220 | ISBN 9781259573286 (alk. paper)
Subjects: LCSH: Auditing.
Classification: LCC HF5667 .A815 2018 | DDC 657/.45—dc23
LC record available at https://lccn.loc.gov/2016042220
The Internet addresses listed in the text were accurate at the time of publication. The inclusion of a
website does not indicate an endorsement by the authors or McGraw-Hill Education, and McGraw-Hill
Education does not guarantee the accuracy of the information presented at these sites.](https://image.slidesharecdn.com/42887-250616071215-23804d82/85/Auditing-and-Assurance-Services-7th-Edition-Timothy-J-Louwers-8-320.jpg)
![x
Engage Your Students with Real
Examples
An effective accounting textbook integrates real-world scenarios
with theoretical discussion. Auditing & Assurance Services places the
student in the role of a decision maker, by illustrating the application
of auditing concepts using actual situations experienced by account-
ing firms and companies such as:
Each chapter or module opens with a “real-world” example that draws upon concepts
discussed within that chapter or module. Finally, a series of mini-cases have been devel-
oped for use by instructors to further bring text material to life. These mini-cases feature
real situations experienced by the following companies, individuals, or accounting firms
[new cases to the seventh edition are noted with an asterisk (*)].
∙ Arthur Andersen (failure of auditors to detect fraud at Enron)
∙ Bernie Madoff Investment Securities (failure of auditors and regulators to detect fraud)*
∙ Crazy Eddie’s (failure of auditors to detect fraud)*
∙ Daily Journal Corporation (auditor changes and reporting on internal control)*
∙ General Electric (audit fees and services provided by auditors)
∙ General Motors (going-concern report by auditors)
∙ HealthSouth Corporation (failure of auditors to detect fraud)
∙ KPMG (competition in the audit marketplace)
∙ Lehman Brothers (estimation uncertainties in the audit and disclosure concerns)*
∙ Parmalat (failure of auditors to detect fraud)
∙ Satyam Computer Services Ltd. (failure of auditors to detect fraud)
∙ Scott London, KPMG partner (failure of auditor to follow the AICPA Code of Conduct)*
“The tone of the textbook is
in a conversational manner
that allows for more student-
friendly reading material.”
—Aretha Hill, Florida A&M
University
achieve this goal. Although the chapters follow a logical sequence that we recommend
professors consider for their classes, the modules have been written to be used on a
stand-alone basis. In essence, the modules have been deliberately prepared for entirely
flexible implementation of these topics without excessive reliance on chapter sequenc-
ing. We encourage you to integrate these modules into your syllabi in a manner that best
suits your approach to the auditing course.
Confirming Pages
Frederick Barnard Hawley, American economist (1843–1929)
Management Fraud
and Audit Risk
Profit is the result of risks wisely selected.
CHAPTER 4
Professional Standards References
Topic
AU-C/ISA
Section AS Section
Overall Objectives of the Independent Auditor 200 1001, 1005, 1010, 1015
Consideration of Fraud in a Financial Statement Audit 240 2401
Consideration of Laws and Regulations 250 2405
Communications with Audit Committees 260 1301
Consideration of Internal Control in an Integrated Audit 265 2201
Warren Buffett, widely regarded as one of the most successful investors in
the world
Risk comes from not knowing what you’re doing.
Fraud Awareness
The fraud coverage in Auditing & Assurance Services
is the most extensive available and is complemented by
real-world examples chosen to engage students through
the following tools:
∙ Auditing Insights integrated throughout the text.
∙ Mini-cases that may be assigned to supplement
text chapters and modules that expose students to](https://image.slidesharecdn.com/42887-250616071215-23804d82/85/Auditing-and-Assurance-Services-7th-Edition-Timothy-J-Louwers-14-320.jpg)
![which he believed would assuredly bring the man he held in despite
to a cruel death by fire. But Ory, whose special business was the
prosecution of heretics, and who knew much better than Calvin what
constituted evidence against them, was aware that the MS. book
and the two dozen pieces, written as said by Michael Servetus, were
not adequate to convict Michel Villeneuve of the charge against him.
Handwriting, it seems, could be put out of court as evidence in cases
of heresy, through simple denial on oath by the party accused. The
point upon which evidence was particularly required, by Ory and his
coadjutors, was in fact the printing of the book entitled the
‘Restoration of Christianity;’ and none of the pieces furnished gave
any assurance either that Michel Villeneuve was the writer, or
Arnoullet and Geroult the printers of this. Arneys must therefore be
desired to write to Cousin Trie once more, and ask him to do his best
with M. Calvin to furnish evidence of the kind required. So anxious
indeed were Ory and his friends for this, that they despatched this,
the third letter of Arneys to Trie, by a special messenger, who was
ordered to wait and bring back the answer with all speed.
The answer came in due course, hardly, however, so soon as we can
fancy it was looked for, but to the following effect:—
Monsieur mon Cousin!—I had hoped I should satisfy your
demands, in essentials at least, by sending you, as I did, the
handwriting of the author of the book. With my last letter,
indeed, you will find an acknowledgement by the man himself of
his real name, which he had disguised, and the excuse he
makes for calling himself Villeneuve, when his proper name is
Servetus or Revés. For the rest, I promise you, God willing, to
furnish you, if need be, not only with the entire book he has just
had printed, but with another in his handwriting, in addition to
the letters [already forwarded]. I should indeed have already
sent the book [in MS.] which I refer to, had it been in this city;
but it has been at Lausanne these two years past. Had M. Calvin
kept it by him, I believe he would long ago, for all it is worth,
have returned it to the writer; but having lent it for perusal to](https://image.slidesharecdn.com/42887-250616071215-23804d82/85/Auditing-and-Assurance-Services-7th-Edition-Timothy-J-Louwers-36-320.jpg)
![another, it was, as it seems, retained by him. I have formerly
heard Monsieur [Calvin] say that, having given answers
sufficient to satisfy any reasonable man, to no purpose, he had
at length left off reading more of the babble and foolish
reveries, of which he soon had had more than enough, there
being nothing but reiteration of the same song over and over
again. And that you may understand that it is not of yesterday
that this unhappy person persists in troubling the Church,
striving ever to lead the ignorant into the same confusion as
himself, it is now more than twenty-four years since he was
rejected and expelled by the chief Churches of Germany; had he
remained in that country, indeed, he would never have left it
alive. Among the letters of Œcolampadius, you will see that the
first and second are addressed to him under his proper name
and designation: Serveto Hispano neganti Christum esse Dei
Filium, consubstantialem Patri—To Servetus the Spaniard,
denying that Christ is the Son of God, consubstantial with the
Father. Melanchthon also speaks of him in some passages of his
writings. But methinks you have really warrant enough in what
is already sent you to dive deeper into the matter, and to put
him on his trial. As to the printers of the book, I did not send
you the table of contents as any proof that Balthasar Arnoullet
and William Geroult, his brother-in-law, were the parties; but of
the fact that they were so we are well assured, nor indeed will it
be possible for them to deny it. The printing was probably done
at the author’s expense, and he may have taken the impression
into his own keeping; he must have done so, indeed, if you find
it has left the premises of the persons named. I rather think I
omitted to say that when you have done with the epistles, I beg
you will be good enough to return them to me. And now,
commending myself to your good grace, and praying God so to
guide you that you may do all that is agreeable in his sight,
I am yours, &c.,
Guillaume Trie.](https://image.slidesharecdn.com/42887-250616071215-23804d82/85/Auditing-and-Assurance-Services-7th-Edition-Timothy-J-Louwers-37-320.jpg)
![Syruporum universa ratio ad Galeni censuram disposita—a treatise
on Syrups according to the principles of Galen; and a pamphlet
entitled: In Leonartum Fussinum, Apologia pro Symphoriano
Campeggio—an apologetic address to Leonard Fuchs for Symphorian
Campeccius. He had further edited and annotated the ‘Geography of
Ptolemy.’ Other than these, the works now named, he had written
none, nor had he had any others printed for him; but he admitted
that he had corrected the text of many more, without adding to
them anything of his own, or taking from them anything of their
writers.
Being now shown two sheets of paper, printed on both sides and
having marginal annotations in writing, and admonished that the
matter of the writing might bring him into trouble, he was informed,
further, that he, if he were the writer, might be able to explain or to
say in what sense he understood what was there set down. One of
the propositions in the writing was particularly pointed out to this
effect: Justificantur ergo Parvuli sine Christi fide, prodigium,
monstrum dæmonum!—Infants therefore are justified without faith
in Christ, a prodigy, a portent of devils! and he was informed that if
he understood the words to say that infants had not by their
regeneration [through baptism, understood] received the perfect
grace of Christ and so were acquitted of Adam’s sin, this would be to
contemn Christ. He was therefore required to declare how he
understood the words. He replied that he firmly believed that the
grace of Christ, imparted by baptism, overcame the sin of Adam, as
St. Paul declares (Rom. v.): ‘Where sin abounds there doth grace
more abound;’ and that infants are saved without faith acquired, but
through faith then infused by the Holy Ghost.
Having shown him how necessary it was that he should alter several
words in the written matter, he promised to do so, saying however
that he was not prepared at a moment’s notice to say whether the
writing was his or not. It was very long, indeed, since he had written
anything. On examining the character particularly, however, he now
thinks it must be his. In all that concerns the faith he yet begs to say](https://image.slidesharecdn.com/42887-250616071215-23804d82/85/Auditing-and-Assurance-Services-7th-Edition-Timothy-J-Louwers-42-320.jpg)
Auditing and Assurance Services 7th Edition Timothy J. Louwers
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- 7. Timothy J. Louwers, PhD, CPA, CISA, CFF Director of the School of Accounting and KPMG Eminent Professor in Accounting Allen D. Blay, PhD, CPA Associate Professor of Accounting Florida State University David H. Sinason, PhD, CPA, CIA, CFE, CFSA, CRMA PwC Professor of Accountancy Northern Illinois University Jerry R. Strawser, PhD, CPA KPMG Chair of Accounting Texas A&M University Jay C. Thibodeau, PhD, CPA Rae D. Anderson Professor of Accounting Bentley University Auditing & Assurance Services
- 8. AUDITING & ASSURANCE SERVICES, SEVENTH EDITION Published by McGraw-Hill Education, 2 Penn Plaza, New York, NY 10121. Copyright 2018 by McGraw-Hill Education. All rights reserved. Printed in the United States of America. Previous editions 2015, 2013, and 2011. No part of this publication may be reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without the prior written consent of McGraw-Hill Education, including, but not limited to, in any network or other electronic storage or transmission, or broadcast for distance learning. Some ancillaries, including electronic and print components, may not be available to customers outside the United States. This book is printed on acid-free paper. 1 2 3 4 5 6 7 8 9 LWI 21 20 19 18 17 ISBN 978-1-259-57328-6 MHID 1-259-57328-1 Chief Product Officer, SVP Products & Markets: G. Scott Virkler Vice President Portfolio & Learning Content: Michael Ryan Managing Director: Tim Vertovec Marketing Director: Natalie King Brand Manager: Patricia Plumb Director, Product Development: Rose Koos Associate Director of Digital Content: Kevin Moran Lead Product Developers: Michele Janicek / Kristine Tibbetts Senior Product Developer: Rebecca Mann Product Developer: Randall Edwards Marketing Manager: Cheryl Osgood Digital Product Analyst: Xin Lin Director, Content Design & Delivery: Linda Avenarius Program Manager: Daryl Horrocks Senior Content Project Managers: Dana M. Pauley / Angela Norris Buyer: Laura M. Fuller Design: Matt Diamond Content Licensing Specialists: Shawntel Schmitt / Lori Slattery Cover Image: The-Lightwrighter/Getty Images Compositor: SPi Global Printer: LSC Communications All credits appearing on page or at the end of the book are considered to be an extension of the copyright page. mheducation.com/highered Library of Congress Cataloging-in-Publication Data Names: Louwers, Timothy J., author. Title: Auditing & assurance services / Timothy J. Louwers, James Madison University, David H. Sinason, Northern Illinois University, Jerry R. Strawser, Texas A&M University, Jay C. Thibodeau, Bentley College, Allen D. Blay. Other titles: Auditing and assurance services Description: Seventh edition. | New York, NY: McGraw-Hill Education, [2018] Identifiers: LCCN 2016042220 | ISBN 9781259573286 (alk. paper) Subjects: LCSH: Auditing. Classification: LCC HF5667 .A815 2018 | DDC 657/.45—dc23 LC record available at https://lccn.loc.gov/2016042220 The Internet addresses listed in the text were accurate at the time of publication. The inclusion of a website does not indicate an endorsement by the authors or McGraw-Hill Education, and McGraw-Hill Education does not guarantee the accuracy of the information presented at these sites.
- 9. Some people come into our lives and quickly go. Some stay awhile and leave footprints on our hearts and we are never quite the same. Anonymous We dedicate this book to the following educators whose footprints we try to follow: Professor Homer Bates (University of North Florida) Professor Stanley Biggs (University of Connecticut) Professor Lewis C. Buller (Indiana State University) Professor Patrick Delaney (Northern Illinois University) Professor William Hillison (Florida State University) Professor John Ivancevich (University of Houston) Professor Richard Kochanek (University of Connecticut) Professor John L. “Jack” Kramer (University of Florida) Professor Jack Robertson (University of Texas at Austin) Professor Robert Strawser (Texas A&M University) Professor Sally Webber (Northern Illinois University) Professor “IBM Jim” Whitney (The Citadel)
- 10. vi Meet the Authors Timothy J. Louwers is the Director of the School of Accounting and KPMG Eminent Professor in Accounting at James Madison University. Professor Louwers received his undergraduate and master’s degrees from The Citadel and his PhD from Florida State University. Prior to beginning his academic career, he worked in public accounting with KPMG, specializing in financial, governmental, and informa- tion systems auditing. He is a certified public accountant (South Carolina and Virginia) and a certified information systems auditor. He is also certified in financial forensics. Professor Louwers’s research interests include auditors’ reporting decisions and ethical issues in the accounting profession. He has authored or coauthored more than 60 publications on a wide range of accounting, auditing, and technology-related topics, including articles in the Journal of Accounting Research, Accounting Horizons, the Journal of Business Ethics, Behavioral Research in Accounting, Decision Sciences, the Journal of Forensic Accounting, Issues in Accounting Education, the Journal of Accountancy, the CPA Journal, and Today’s CPA. Some of his published work has been reprinted in Russian and Chinese. He is a respected lecturer on auditing and technology-related issues and has received teaching excellence awards from the University of Houston and Louisiana State University. He has appeared on both local and national television news broadcasts, including MSNBC and CNN news programs. Allen D. Blay is an Associate Professor of Accounting at Florida State University. Professor Blay completed his PhD at the University of Florida in 2000. He teaches auditing at all levels and teaches a seminar in auditing research in the doctoral program. His research interests relate to auditor judgment and decision making. Professor Blay has authored or coau- thored publications on a wide range of accounting and auditing topics in journals such as Contemporary Accounting Research, Auditing: A Journal of Practice and Theory, Organiza- tional Behavior and Human Decision Processes, the Journal of Business Ethics, Behavioral Research in Accounting, Issues in Accounting Education, the International Journal of Audit- ing, and the Journal of Accounting, Auditing, and Finance. He is currently Associate Editor for Issues in Accounting Education and serves on several editorial boards. Professor Blay has been active in the American Accounting Association, serving on the auditing education committee and the annual meeting committee as Accounting, Behavior, and Organizations section chair, among other committees. He is also active in the American Institute of CPAs, serving in various volunteer roles relating to the Uniform CPA Exam. Prior to entering academics, Professor Blay worked in public accounting auditing financial institutions. He currently directs the accounting doctoral program at Florida State University. David H. Sinason is the PwC Professor of Accountancy at Northern Illinois University (NIU) and director of the NIU Internal Audit program. Professor Sinason received a BS in engineering from the University of Illinois, a BS in History from Northern Illinois University, a BBA and MAcc in accounting from the University of North Florida, and a PhD in accounting from Florida State Univer- sity. He has certifications as a certified public accountant, a certified internal audi- tor, a certified financial services auditor, and a certified fraud examiner. He also has certification in risk management assurance. Professor Sinason has written more than 50 articles, mostly in the areas of assurance services, fraud prevention and detection, and auditor liability. Courtesy James Madison University Courtesy Kallen M. Lunt Courtesy Northern Illinois University
- 11. Meet the Authors vii Professor Sinason has taught in the areas of accounting information systems, auditing and assurance services, and financial accounting. He has received teaching awards at each of the universities where he has taught including the 2002–2003 Department of Accoun- tancy and Northern Illinois University Awards for Excellence in Undergraduate Teaching. Jerry R. Strawser is Executive Vice President and Chief Financial Officer at Texas A&M University and holds the KPMG Chair in Accounting. Prior to his current appointment, Professor Strawser served as dean of Mays Business School at Texas A&M University, interim executive vice president and provost at Texas A&M University, interim dean of the C. T. Bauer College of Business at the University of Houston, and Arthur Andersen & Co. Alumni Professor of Accounting. Professor Strawser has coauthored three textbooks and more than 60 journal articles. In addition to his academic experience, he had prior public accounting experience at two Big Five accounting firms. He has also developed and delivered numerous executive devel- opment programs to organizations such as AT&T, Centerpoint Energy, Continental Airlines, ConocoPhillips, Halliburton, KBR, KPMG, Minute Maid, PricewaterhouseCoopers, McDermott International, Shell, Southwest Bank of Texas, and the Texas Society of Certi- fied Public Accountants. Professor Strawser is a certified public accountant in the state of Texas and earned his BBA and PhD in Accounting from Texas A&M University. Jay C. Thibodeau is the Rae D. Anderson Professor of Accounting at Bentley University. Professor Thibodeau is a certified public accountant and a former auditor. He received his bachelor’s degree from the University of Connecticut in 1987 and his PhD from the University of Connecticut in 1996. He joined the faculty at Bentley in 1996 and has remained there. At Bentley, he serves as the coordinator for all audit and assurance cur- riculum matters. His off-campus commitments include consulting with the Audit Learn- ing and Development group at KPMG. Professor Thibodeau’s scholarship focuses on audit judgment and decision making and audit education. He is a coauthor of two textbooks and has written more than 40 book chapters and articles for academics and practitioners in journals such as Auditing: A Jour- nal of Practice & Theory, Accounting Horizons, and Issues in Accounting Education. Professor Thibodeau served as the President of the Auditing Section of the American Accounting Association for the 2014/2015 academic year. He served on the Executive Com- mittee for the Auditing Section from 2008 to 2010. He has received national recognition for his work five times. First, for his thesis, winning the 1996 Outstanding Doctoral Dissertation Award presented by the ABO section of the AAA. Three other times, for curriculum inno- vation, winning the 2001 Joint AICPA/AAA Collaboration Award, the 2003 Innovation in Assurance Education Award, and the 2016 Forensic Accounting Teaching Innova- tion Award. Finally, for outstanding service, receiving a Special Service Award from the Auditing Section for his work in helping to create the “Access to Auditors” program sponsored by the Center for Audit Quality. Courtesy Jerry R. Strawser Courtesy Bentley University
- 12. viii Look Beneath the Surface . . . As auditors, we are trained to investigate beyond appearances to determine the underlying facts—in other words, to look beneath the surface. From the Enron and WorldCom scandals of the early 2000s to the financial crisis of 2007–2008 to present-day issues and challenges related to significant estimation uncertainty, understanding the auditor’s responsibility related to fraud, maintaining a clear perspective, probing for details, and understanding the big picture are indispensable to effective auditing. With the avail- ability of greater levels of qualitative and quantitative information (“big data”), the need for technical skills and challenges facing today’s auditor is greater than ever. The author team of Louwers, Blay, Sinason, Strawser, and Thibodeau has dedicated years of expe- rience in the auditing field to this new edition of Auditing & Assurance Services, sup- plying the necessary investigative tools for future auditors. Cutting-Edge Coverage The seventh edition of Auditing & Assurance Services continues its tradition as the most up-to-date auditing text on the market. All chapters and modules have been revised to incorporate the latest professional standards, recodifications, and proposals from the Inter- national Auditing and Assurance Standards Board, Auditing Standards Board, and Public Company Accounting Oversight Board. To acquaint students with the professional stan- dards, each chapter or module begins with a list of the relevant professional standards that are covered in that chapter. Importantly, this text incorporates the reorganized PCAOB standards effective December 31, 2016. As a team, we use a variety of contacts and resources to stay informed of ongoing developments that affect learning objectives in the financial statement auditing course(s). In fact, changes to key learning goals and objectives are usually prompted by interactions with colleagues from practice. In that spirit, since the publication of our sixth edition, we have been working hard to stay in touch with developments in practice so we can always respond to your needs in the financial statement auditing classroom. Among our many observations, one trend has emerged as a potential sea change in the financial statement auditing process, the “big data” challenge. Indeed, based on our collective observations, we believe that students should be prepared to make the best use possible of relevant data using state-of-the art analytical tools. In fact, the terms big data and data analytics are frequently being used to describe a growing movement among audit professionals. Our collective view is that students must be prepared to meet the “big data” challenge. To help students be prepared, the seventh edition of Auditing & Assurance Services has been revised deliberately to help students critically think about the use of increased data and analytical tools in the financial statement audit. In addition, we would like to help students learn how to effectively document their conclusions in the current “big data” environment. In a recent white paper, PwC (2015)1 lists five “new” skills that will be required of auditors moving forward. Although many of these skills require special statistical or programming knowledge, the first listed skill is one that is applicable to all auditors: “Research and identify anomalies and risk factors in underlying data.” Although 1 “Data Driven: What Students Need to Succeed in a Rapidly Changing Business World.” Available at: http://www.pwc.com/us/en/faculty-resource/assets/PwC-Data-driven-paper-Feb2015.pdf.
- 13. ix extraction and analysis from client accounting data are critical skills for newly minted auditors, we are unaware of sufficient materials to assist professors in integrating data analytics into the auditing classroom. Thus, an important goal of the seventh edition is to provide a clear and implementable method to fully integrate a leading data analysis tool, the IDEA data analysis software, into the auditing class. To start, McGraw-Hill Education is excited to announce a partnership with the developers of the IDEA software. We believe that IDEA provides an outstanding platform to illustrate the steps that auditors need to take related to data and data analysis while completing the financial statement audit. Leading auditing professionals have confirmed that using IDEA is an outstanding way for an entry-level auditing professional to begin the journey into the world of “big data” and “data analytics.” Simply stated, big data is manifested in the finan- cial statement auditing process through the use of tools like IDEA. Overall, our revisions related to the big data challenge were designed to provide instructors a set of tools and mechanisms to bring data and analytics into the classroom in a meaningful way. Through the use of these tools, students can be sure they are pre- pared to enter practice with an appreciation for and knowledge of the increasing impor- tance of data and analytics in the auditing profession. We hope that everyone enjoys our attempts to help students get ready for the big data challenge. Of course, and perhaps most importantly, the seventh edition of Auditing & Assurance Services also continues to be the most up-to-date auditing text on the market. The book has fully integrated the reorganized PCAOB Auditing Standards. In addition, all chapters and modules in the seventh edition have been revised to incorporate the two new standards (AS 2701 and AS 2410) adopted by the PCAOB that relate to the auditor’s work on supplementary information provided in the financial statements and related parties. In addition, all chapters and modules have been revised to incorporate the latest updates from the international standards of auditing (ISAs) and the Auditing Standards Board (ASB). With Auditing & Assurance Services, seventh edition, students are prepared to take on auditing’s latest challenges. The Louwers author team uses a conversational, yet professional tone —hailed by reviewers as a key strength of the book. “The format allows you to integrate the modules into the chapter material in any way you would find useful.” —Frank J. Beil, University of Minnesota Flexible Organization Auditing & Assurance Services teaches students auditing concepts by emphasizing real-life contexts when describing the auditing process. The authors use chapters and modules to Chapters Modules The 12 chapters cover the auditing process extensively with a multitude of cases designed to give students a better understanding of how a best-practice concept developed from real-world situations. Modules A–H provide instructors additional material that can be used throughout the course. Topics such as fraud, ethics, sampling, and technology are covered in the modules, which are designed to be taught whenever instruc- tors want to introduce the topic in their course.
- 14. x Engage Your Students with Real Examples An effective accounting textbook integrates real-world scenarios with theoretical discussion. Auditing & Assurance Services places the student in the role of a decision maker, by illustrating the application of auditing concepts using actual situations experienced by account- ing firms and companies such as: Each chapter or module opens with a “real-world” example that draws upon concepts discussed within that chapter or module. Finally, a series of mini-cases have been devel- oped for use by instructors to further bring text material to life. These mini-cases feature real situations experienced by the following companies, individuals, or accounting firms [new cases to the seventh edition are noted with an asterisk (*)]. ∙ Arthur Andersen (failure of auditors to detect fraud at Enron) ∙ Bernie Madoff Investment Securities (failure of auditors and regulators to detect fraud)* ∙ Crazy Eddie’s (failure of auditors to detect fraud)* ∙ Daily Journal Corporation (auditor changes and reporting on internal control)* ∙ General Electric (audit fees and services provided by auditors) ∙ General Motors (going-concern report by auditors) ∙ HealthSouth Corporation (failure of auditors to detect fraud) ∙ KPMG (competition in the audit marketplace) ∙ Lehman Brothers (estimation uncertainties in the audit and disclosure concerns)* ∙ Parmalat (failure of auditors to detect fraud) ∙ Satyam Computer Services Ltd. (failure of auditors to detect fraud) ∙ Scott London, KPMG partner (failure of auditor to follow the AICPA Code of Conduct)* “The tone of the textbook is in a conversational manner that allows for more student- friendly reading material.” —Aretha Hill, Florida A&M University achieve this goal. Although the chapters follow a logical sequence that we recommend professors consider for their classes, the modules have been written to be used on a stand-alone basis. In essence, the modules have been deliberately prepared for entirely flexible implementation of these topics without excessive reliance on chapter sequenc- ing. We encourage you to integrate these modules into your syllabi in a manner that best suits your approach to the auditing course. Confirming Pages Frederick Barnard Hawley, American economist (1843–1929) Management Fraud and Audit Risk Profit is the result of risks wisely selected. CHAPTER 4 Professional Standards References Topic AU-C/ISA Section AS Section Overall Objectives of the Independent Auditor 200 1001, 1005, 1010, 1015 Consideration of Fraud in a Financial Statement Audit 240 2401 Consideration of Laws and Regulations 250 2405 Communications with Audit Committees 260 1301 Consideration of Internal Control in an Integrated Audit 265 2201 Warren Buffett, widely regarded as one of the most successful investors in the world Risk comes from not knowing what you’re doing. Fraud Awareness The fraud coverage in Auditing & Assurance Services is the most extensive available and is complemented by real-world examples chosen to engage students through the following tools: ∙ Auditing Insights integrated throughout the text. ∙ Mini-cases that may be assigned to supplement text chapters and modules that expose students to
- 15. xi Create a State-of-the-Art Learning Environment: Instructor Resources The author team and McGraw-Hill are dedicated to providing instructors with the best teaching resources available. In addition to the solutions manual, test bank, and PowerPoint Presentations, and the Apollo Shoe Case, the following resources are also available. The Updated Auditor The author team scrutinizes leading business and academic publications for relevant issues and research that sheds light on auditing and the audit process. Recent findings from academic research and discussions from professional literature are drawn from the following publications: ∙ Accounting Horizons ∙ Accounting Today ∙ Auditing: A Journal of Practice & Theory ∙ Behavioral Research in Accounting ∙ Bloomberg Businessweek ∙ CFO.com ∙ CPA Journal ∙ Journal of Accountancy ∙ Journal of Accounting and Economics ∙ The Accounting Review ∙ The Wall Street Journal These excerpts are highlighted throughout the text as Auditing Insights to allow for easy identification and review by instructors and students. In addition to the use of Auditing Insights, on a monthly basis, the author team pro- vides an Updated Auditor briefing, which summarizes the content of relevant business and academic publications on a chapter-by-chapter basis, to allow students to apply cur- rent developments in the profession with material discussed in class. The Updated Audi- tor briefing is available in Connect. With the Updated Auditor, instructors will always be at the cutting edge of auditing practice! landmark fraud cases at Bernie Madoff Investment Securities, Enron, HealthSouth, Parmalat, PTL Club, and Satyam Computer Services. ∙ Specific discussion of management fraud (Chapter 4), employee fraud (Chapter 6), and the Certified Fraud Examiner Exam (Module D). ∙ Apollo Shoes Case, the only stand-alone fraud audit case on the market (available online).
- 16. xii IDEA Software and Workbook With the availability of unprecedented amounts of quantitative and qualitative infor- mation and tools available to access and process that information, it is imperative that students learn and utilize the latest technologies used by auditing professionals. As previously stated, McGraw-Hill Education has forged a partnership with Caseware Analytics for the use of the IDEA data analysis tool. Chapters 3 (audit planning), 4 (risk assessment), 5 (internal control), 7–9 (operating cycle chapters), Module F (attributes sampling), and Module G (variables sampling) have been revised to reference the use of IDEA within the chapter or module. In addition, the seventh edition includes end-of-chapter exercises utilizing author- developed databases exclusively for use with Auditing & Assurance Services as well as supplemental materials available in Connect to complement the IDEA workbook and provide hands-on instructions on using the IDEA software. The authors also provide implementation guidance to instructors and detailed solutions and explanations on this new content. Overall, the author team has provided significant resources to prepare stu- dents for the auditing environment in 2017 and beyond. Roger CPA Review McGraw-Hill Education has partnered with Roger CPA Review, a global leader in CPA Exam preparation, to provide students a smooth transition from the accounting class- room to successful completion of the CPA Exam. While many aspiring accountants wait until they have completed their academic studies to begin preparing for the CPA Exam, research shows that those who become familiar with exam content earlier in the process have a stronger chance of successfully passing the CPA Exam. Accordingly, students using these McGraw-Hill materials will have access to sample CPA Exam Multiple-Choice questions and Task-based Simulations from Roger CPA Review, with expert-written explanations and solutions. All questions are either directly from the AICPA or are modeled on AICPA questions that appear in the exam. Task-based Simu- lations are delivered via the Roger CPA Review platform, which mirrors the look, feel and functionality of the actual exam. McGraw-Hill Education and Roger CPA Review are dedicated to supporting every accounting student along their journey, ultimately helping them achieve career success in the accounting profession. For more information about the full Roger CPA Review program, exam requirements and exam content, visit www.rogercpareview.com. TestGen TestGen is a complete, state-of-the-art test generator and editing application software that allows instructors to quickly and easily select test items from McGraw Hill’s Test- Gen testbank content and to organize, edit and customize the questions and answers to rapidly generate paper tests. Questions can include stylized text, symbols, graphics, and equations that are inserted directly into questions using built-in mathematical templates. With both quick-and-simple test creation and flexible and robust editing tools, TestGen is a test generator system for today’s educators.
- 17. xiii Association to Advance Collegiate Schools of Business (AACSB) Statement McGraw-Hill Education is a proud corporate member of AACSB International. Under- standing the importance and value of AACSB accreditation, Auditing & Assurance Services, 7e, recognizes the curricula guidelines detailed in the AACSB standards for business accreditation by connecting selected questions in the text and test bank to the eight general knowledge and skill guidelines in the AACSB standards. The statements contained in Auditing & Assurance Services, 7e, are provided only as a guide for the users of this textbook. The AACSB leaves content coverage and assessment within the purview of individual schools, their mission, and their faculty. Although Auditing & Assurance Services, 7e, and the teaching package make no claim of any specific AACSB qualification or evaluation, we have within Auditing & Assurance Services, 7e, labeled selected questions according to the eight general knowledge and skills areas. MCGRAW-HILL CUSTOMER EXPERIENCE GROUP CONTACT INFORMATION At McGraw-Hill Education, we understand that getting the most from new technology can be challenging. That's why our services don't stop after you purchase our products. You can contact our Product Specialists 24 hours a day to get product training online. Or you can search the knowledge bank of Frequently Asked Questions on our support website. For Customer Support, call 800-331-5094 or visit www.mhhe.com/support. One of our Technical Support Analysts will be able to assist you in a timely fashion.
- 18. xiv New to the Seventh Edition of Part I: The Contemporary Auditing Environment CHAPTER 1: Auditing and Assurance Services ∙ Our discussion about the CPA exam has been revised to fully reflect the substantial changes being made to the exam as of April 1, 2017. Due primarily to the outsourc- ing of routine tasks and significant advances in informa- tion technology, the job of a newly licensed CPA has changed. The AICPA responded with a revised exam that has an increased emphasis on higher-order skills like problem solving, critical thinking, and analytical ability. The changes are fully described in the text. ∙ Increased our emphasis about the importance of audit qual- ity in the current environment and added an Auditing Insight that describes the audit quality indicators project recently completed by the PCAOB in 2015. ∙ Added a new exhibit that provides an example of the 2014/2015 Sustainability Report for the Coca-Cola Com- pany. We also added a new exhibit that features Mickey Mantle’s baseball card from 1961. ∙ Increased our emphasis on the emergence of big data in the auditing environment and added an Auditing Insight that describes what students need to succeed in a world characterized by big data. CHAPTER 2: Professional Standards ∙ Summarized recent academic research related to the impact of PCAOB inspections and results of inspec- tions on audit quality, client attraction and reten- tion, and audit fee growth rates (including research specifically related to the Deloitte vignette in the intro- duction of this chapter). ∙ Summarized recent independence issues encountered by EY and KPMG. ∙ McDonald’s 2016 audit report, which demonstrates the contents of an actual audit report and how this report reflects the guidance in the reporting principle. ∙ Included an Auditing Insight regarding controversy over PCAOB inspection of audits of Alibaba Group Holding Limited, which have been impacted by China’s ban of PCAOB inspections. ∙ Summarized PCAOB inspections of 2012, 2013, and 2014 audits conducted by Big Four firms and expanded analysis to summarize the number of audits in which the client’s report on internal control was revised as a result of the inspection. In response to feedback and guidance from numerous auditing accounting faculty, the authors have made many important changes to the seventh edition of Auditing & Assurance Services, including the following: Highlights of Auditing & Assurance Services, 7e ∙ The seventh edition of Auditing & Assurance Ser- vices features Connect and SmartBook. ∙ All chapter and modules have been revised to incorpo- rate professional standards adopted through May 2016. In addition, the reorganized PCAOB framework (which becomes effective December 31, 2016) has been utilized throughout the text. ∙ Auditing Insight boxes have been added and updated throughout the textbook to place issues discussed within the text into a real-world context. These boxes incorporate numerous examples from business and academic publica- tions as well as actual company annual reports and audit reports. ∙ Examples using the Caseware IDEA software have been added in Chapters 3, 4, 5, 7, 8, 9, Module F, and Module G. In addition, end-of-chapter exercises using author- developed databases exclusively for use with Auditing & Assurance Services as well as supplemental materials to complement the IDEA workbook are provided. ∙ Coverage in the cycle chapters has been standardized to focus on the risk assessment process for each relevant assertion. In addition, the chapters provide a consistent focus on how auditors respond to assessed risk of material misstatement, through the incorporation of easy-to-read tables throughout Chapters 6 through 10 to highlight the key issues and risks faced by auditors in the examination of different accounts. These tables take the students through the risk assessment process for each cycle on a step-by-step basis to mirror the methodology used in current audit practice. ∙ Five new Mini-cases have been added that feature Bernie Madoff Investment Securities (failure of auditors and regulators to detect fraud); Crazy Eddie’s (failure of auditors to detect fraud); Daily Journal Corporation (audi- tor changes and internal control reporting); Lehman Broth- ers (estimation uncertainties in the audit and failure to make informative disclosures); and Scott London, KPMG Partner (failure of auditor to follow the AICPA Code of Conduct).
- 19. xv Auditing & Assurance Services Part II: The Financial Statement Audit CHAPTER 3: Engagement Planning ∙ Added a discussion to emphasize the importance of iden- tifying all of the significant accounts and each of the rele- vant financial statement assertions during the engagement planning process. ∙ Included a new table to help facilitate the understanding of significant accounts and relevant financial statement assertions and to show how this might be documented in the audit work papers. ∙ Added an Auditing Insight to describe the importance of audit quality and why planning is such an important aspect in helping to ensure that the engagement plan has been developed to achieve quality outcomes on the audit. ∙ Added a discussion about the availability of big data on the audit and included a demonstration problem of how to access a client’s data using IDEA. CHAPTER 4: Management Fraud and Audit Risk ∙ Increased focus on the importance of assessing the risk of mate- rial misstatement for each relevant financial statement assertion foreachsignificantaccountanddisclosure.Thisfocusisentirely consistent with the audit approaches of each of the largest audit firms in the world. This focus will be very helpful in preparing students to enter the auditing environment in 2017 and beyond. ∙ Added a new easy-to-read table to highlight the impor- tance of identifying “what can go wrong” for each relevant assertion identified in the planning process. This process is instrumental for assessing the risk of material misstatement for each relevant assertion. ∙ Moved our discussion of an audit client’s risk manage- ment system to Chapter 5, where it is incorporated into our discussion of the risk assessment component of an effective internal control system as defined by COSO. By moving this section, students are able to better focus on inherent risk assessment in this chapter. ∙ Added an Auditing Insight to illustrate the potential dangers of analyst expectations at Bankrate and an Auditing Insight to illustrate the difficulty involved in auditing percentage of completion estimates at Toshiba. These examples are used to emphasize the importance of considering a client’s business and operating environment during the risk assessment process. ∙ Incorporated newly released PCAOB Auditing Standard 2410 about Related Parties into the chapter. CHAPTER 5: Risk Assessment: Internal Control Evaluation ∙ Fully integrated the specifics of the COSO 2013 update to its internal control framework. The update adds 17 explicit principles that are associated with the five components of internal control (i.e., control environment, risk assessment, control activities, information and communication, and monitoring). The chapter now includes five new exhibits to help clarify and make these principles salient to students. ∙ Added a new easy-to-read table to reinforce the impor- tance of identifying “what can go wrong” to help assess the risk of material misstatement for each relevant asser- tion that provides a foundation to help identify control activities that might mitigate that risk. This is an impor- tant aspect of the audit process employed by each of the large audit firms, and the table is designed to help stu- dents better understand that process. ∙ Added a section on internal control testing alternatives with a focus on how auditors can use a tool such as IDEA to test the entire population of control instances in today’s environment. We also added two new problems where students can complete exception tests using IDEA. CHAPTER 6: Employee Fraud and the Audit of Cash ∙ Added two easy-to-read tables to allow for a focus on the risk assessment process for each relevant assertion related to cash. For each relevant assertion, students can see how the risk of material misstatement was assessed and how the auditors might respond to the assessed risks with tests of control and substantive tests. The step-by-step process mirrors the methodology used in current audit practice. ∙ Improved the flow and organization of the chapter by integrating the section on controls designed to mitigate the risk of employee fraud into the section on internal control testing for the cash account. In addition, the sec- tion on proof of cash has been moved to the extended fraud procedures section to better align the chapter with current audit practice. ∙ Added an Auditing Insight describing the fraud perpetrated by a controller at a Pepsi-Cola Bottler and how he escaped to the Appalachian trail for an extended period of time. CHAPTER 7: Revenue and Collection Cycle ∙ Revised format tracking the audit process beginning with identification of significant accounts and relevant assertions. ∙ Added four new tables outlining risks and tracking them through the audit process, including tests of controls and substantive procedures. ∙ Updated discussion of revenue recognition restatements. ∙ Increased discussion of risks related to data breaches, includ- ing an Auditing Insight on the Target Corp. data breach. ∙ Added a discussion of the new revenue recognition standards, including examples from financial statements of Apple Inc.
- 20. xvi ∙ Updated PCAOB inspection findings through the latest inspection reports. ∙ Includes a focus on data and analytics that inte- grates several IDEA exercises, including new author- created content and end-of-chapter materials. CHAPTER 8: Acquisition and Expenditure Cycle ∙ Revised format tracking the audit process beginning with identification of significant accounts and relevant assertions. ∙ Added five new tables outlining risks and tracking them through the audit process, including tests of controls and substantive procedures. ∙ Increased discussion of risks related to accounts payable. ∙ Updated PCAOB inspection findings through the latest inspection reports. ∙ Includes a focus on data and analytics that inte- grates several IDEA exercises, including new author- created content and end-of-chapter materials. CHAPTER 9: Production Cycle ∙ Revised format tracking the audit process beginning with identification of significant accounts and relevant assertions. ∙ Added six new tables outlining risks and tracking them through the audit process, including tests of controls and substantive procedures. ∙ Extensive discussion of the production process and key reports of interest to the auditors. ∙ Updated PCAOB inspection findings through the latest inspection reports. ∙ Includes a focus on data and analytics that integrates sev- eral IDEA exercises, including new author-created con- tent and end-of-chapter materials. CHAPTER 10: Finance and Investment Cycle ∙ Revised format tracking the audit process beginning with identification of significant accounts and relevant assertions. ∙ Added five new tables outlining risks and tracking them through the audit process, including tests of controls and substantive procedures. ∙ Added a new Auditing Insight regarding Verizon’s pur- chases, including the recent proposed purchase of Yahoo! ∙ Added a new Auditing Insight describing off- balance-sheet risk for Citigroup. ∙ Expanded discussion of auditing accounting estimates and fair values, with discussion of extreme estimation uncertainty and an Auditing Insight on the Lehman Brothers collapse. ∙ Added a discussion of blockchain technology and Bitcoin transactions. ∙ Updated PCAOB inspection findings through the latest inspection reports. CHAPTER 11: Completing the Audit ∙ New introductory vignette discusses Valeant’s year-end financial troubles and the effect on the auditors trying to complete the company’s audit. Added discussion of AS 16’s increased responsibilities to communicate with those charged with governance. CHAPTER 12: Reports on Audited Financial Statements ∙ New introductory vignette discusses KPMG’s report on the audit of Rolls-Royce and the identification of critical audit matters in this report. ∙ Discuss recently approved and proposed standards of audit report disclosures and practices related to critical audit matters, naming of the engagement partner, and audits of group financial statements. ∙ Summarize recent academic research related to the dis- closure of critical audit matters, disclosure of engagement partner identity, receipt and issuance of going concern reports, and inclusion of explanatory paragraphs in other- wise unmodified audit opinions. ∙ Included examples from recent auditors’ reports of Abbott Laboratories, Alaska Air, Best Buy Co. Inc., Caesars Enter- tainment Corporation, The Coca-Cola Company, General Electric, Harris Teeter Supermarkets Inc., The Kroger Co., Penske Automotive Group, and Softbank Corp. to illustrate how auditors modify their reports for situations encountered in practice. ∙ Include results of an Audit Analytics research report sum- marizing 15 years of data regarding going-concern reports. Part III: Stand-Alone Modules MODULE A: Other Public Accounting Services ∙ New section added on PCAOB broker–dealer standards, including an Auditing Insight describing compliance issues that led to the new standards. ∙ Updated for the revised standards on accounting and review services, including a section on preparation engagements. ∙ A new table clarifies the differences between prepara- tion engagements and services that are not preparation engagements.
- 21. xvii MODULE B: Professional Ethics ∙ Opened the module with the story of disgraced former KPMG partner Scott London who sacrificed his career to share confidential client information with a friend. ∙ Added a discussion of Aristotelian virtue ethics to already existing discussions of Kantian categorical imperatives and utilitarianism. ∙ Added a discussion of the role of the PCAOB’s Division of Enforcement and Investigations. MODULE C: Legal Liability ∙ Updated the introductory vignette on litigation involving BDO Seidman for its audits of E.S. Bankest to include the ultimate resolution of this litigation. ∙ Updated the summary of major settlements involving Big Four accounting firms to include settlements occurring since 2008. ∙ Expanded the discussion of academic research examining auditor litigation to include recent studies that investigated the factors affecting the litigation risk faced by audit firms. MODULE D: Internal Audits, Governmental Audits, and Fraud Examinations ∙ Updated the coverage of the reliance of Congress on the GAO. ∙ Discussed the variety of services provided by internal auditors. ∙ Added Benford’s law to the fraud investigation discussion. MODULE E: Overview of Sampling ∙ New introductory vignette involve the recent U.S. Supreme Court ruling on use of sampling methods to determine monetary damages against Tyson Foods in an employment dispute. ∙ Revised walk-through example of the use of sampling to address a nonauditing issue. ∙ Auditing Insight addresse how sampling risk affected pre- dictions in the 2015 United Kingdom general elections for David Cameron and the Conservative Party. ∙ Included a brief example of sampling in the evaluation of internal control to illustrate the major steps and decisions made in the sampling process. MODULE F: Attributes Sampling ∙ Introductory section provide an overview of the audit engagement, the use of the audit risk model, and the role of attributes sampling in the audit engagement to place the attributes sampling process in context. ∙ IDEA is used in the determination of sample size, selec- tion of sample items, and evaluation of sample results to supplement the use of AICPA sampling tables. ∙ Additional end-of-chapter items provide students with the opportunity to use IDEA in various stages of the attributes sampling process. ∙ Summarized a recent academic study that surveyed the sampling practices of six international accounting firms with respect to establishing parameters and selecting sam- ple items. MODULE G: Variables Sampling ∙ Introductory section provides an overview of the audit engagement, the use of the audit risk model, and the role of variables sampling in the audit engagement to place the variables sampling process in context. ∙ IDEA is used in the determination of sample size, selec- tion of sample items, and evaluation of sample results to supplement the use of formulae in MUS. ∙ Additional end-of-chapter items to provide students with the opportunity to use IDEA in various stages of MUS applications. ∙ Auditing Insight summarize the results of a recent aca- demic study that surveyed the sampling practices of six international accounting firms. ∙ Previous content on classical variables sampling and nonstatistical sampling has been expanded and relocated into appendixes to provide instructors with flexibility in addressing these topics. MODULE H: Auditing and Information Technology ∙ Significantly revised (and simplified) the module throughout to reinforce how the client’s use of auto- mated transaction processing systems affects the major stages of the audit team’s study and evaluation of inter- nal control. ∙ Provided an example of how students encounter IT gen- eral and app controls when using a smartphone. ∙ Added additional end-of-chapter material that requires students to identify tests of controls that would be used to evaluate the operating effectiveness of general and auto- mated application controls.
- 22. McGraw-Hill Connect® Learn Without Limits Connect is a teaching and learning platform that is proven to deliver better results for students and instructors. Connect empowers students by continually adapting to deliver precisely what they need, when they need it, and how they need it, so your class time is more engaging and effective. Connect Insight® Connect Insight is Connect’s new one- of-a-kind visual analytics dashboard that provides at-a-glance information regarding student performance, which is immediately actionable. By presenting assignment, assessment, and topical performance results together with a time metric that is easily visible for aggregate or individual results, Connect Insight gives the user the ability to take a just-in-time approach to teaching and learning, which was never before available. Connect Insight presents data that help instructors improve class performance in a way that is efficient and effective. 73% of instructors who use Connect require it; instructor satisfaction increases by 28% when Connect is required. Analytics ©Getty Images/iStockphoto Using Connect improves retention rates by 19.8%, passing rates by 12.7%, and exam scores by 9.1%. Required=Results
- 23. SmartBook® Proven to help students improve grades and study more efficiently, SmartBook contains the same content within the print book, but actively tailors that content to the needs of the individual. SmartBook’s adaptive technology provides precise, personalized instruction on what the student should do next, guiding the student to master and remember key concepts, targeting gaps in knowledge and offering customized feedback, and driving the student toward comprehension and retention of the subject matter. Available on tablets, SmartBook puts learning at the student’s fingertips—anywhere, anytime. Adaptive Over 8 billion questions have been answered, making McGraw-Hill Education products more intelligent, reliable, and precise. THE ADAPTIVE READING EXPERIENCE DESIGNED TO TRANSFORM THE WAY STUDENTS READ More students earn A’s and B’s when they use McGraw-Hill Education Adaptive products. www.mheducation.com
- 24. xx Acknowledgments OUR SINCEREST THANKS . . . The American Institute of Certified Public Accountants (AICPA) has generously given permission for liberal quotations from official pronouncements and other AICPA publi- cations, all of which lend authoritative sources to the text. In addition, several publish- ing houses, professional associations, and accounting firms have granted permission to quote and extract from their copyrighted material. Their cooperation is much appreci- ated because a great amount of significant auditing thought exists in this wide variety of sources. A special acknowledgment is due to the Association for Certified Fraud Examiners (ACFE). It has been a generous contributor to the fraud auditing material in this text. The authors also acknowledge the valuable inclusion of the educational version of IDEA software in the seventh edition, which significantly enhances the practical application of the book. Also, the authors are particularly grateful to Meghann Cefaratti (Northern Illinois University), Brad Roof (James Madison University), and Yigal Rechtman (Pace University) for their many insightful comments over the past several years. The feedback they con- tributed while teaching from our text has contributed greatly to the clarity and accuracy of subsequent editions. A special thanks to Michael K. Shaub for his valuable critique of Chapter 5 and to Steven Dwyer, Suzanne McLaughlin, and Frank Wimer for the example developed to help explain the difference between general and application controls in Module H. Thanks to Helen Roybark for her help with the preparation of the instructor PowerPoint presentations. We are sincerely grateful for the valuable input of all those who helped guide our developmental decisions for the past seven editions of Auditing & Assurance Services: Dawn P. Addington, Central New Mexico Community College Michael D. Akers, Marquette University Fatima Alali, California State University–Fullerton Sylvia Anderson, University of Maryland University College Jeffrey J. Archambault, Marshall University Jack Armitage, University of Nebraska–Omaha MaryAnne Atkinson, Central Washington University Dereck D. Barr, The University of Mississippi LuAnn Bean, Florida Institute of Technology Frank J. Beil, University of Minnesota Marie Blouin, Penn State University–Harrisburg David Blum, Moraine Park Technical College Russell F. Briner, University of Texas at San Antonio Alexander K. Buchholz, Brooklyn College of the City University of New York Suzanne M. Busch, California State University–East Bay Eric Carlsen, Kean University
- 25. Acknowledgments xxi Meghann Cefaratti, Northern Illinois University John Critchett Madonna University Karl Dahlberg, Rutgers University John E. Delaney, Southwestern Texas University Marcus Mason Doxey, University of Kentucky Raymond Elson, Valdosta State University Tom English, Boise State University Patricia Feller, Nashville State Community College Marilyn Fisher, Corinthian Colleges Diana R. Franz, University of Toledo John Gabelman, Columbus State Community College Clyde Galbraith, West Chester University Andy Garcia, Bowling Green State University David Gelb, Seton Hall University Earl Godfrey, Gardner-Webb University Judith G. Grant, Northern Virginia Community College at Annandale Emily Elaine Griffith, The University of Georgia Richard Hale, Midway College James Hansen, University of Illinois at Chicago Aretha Hill, Florida A&M University Steven C. Hunt, Western Illinois University Venkataraman Iyer, The University of North Carolina at Greensboro Keith Jones, George Mason University Bonita K. Peterson Kramer, Montana State University–Bozeman Joseph M. Larkin, St. Joseph’s University Rose Layton, University of Southern California Pamela Legner, College of DuPage Philip Levine, Berkeley College R. D. Licastro, Penn State University–University Park Maureen Mascha, Marquette University Dorothy McMullen, Rider University Heidi H. Meier, Cleveland State University Bharat Merchant, Baruch College Eddie Metrejean, Georgia Southern University Charles Miller, California Polytech University Perry Moore, Lipscomb University Fowler A. Murrell, Lehman College Ramesh Narasimhan, Montclair State University Vincent Owhoso, Northern Kentucky University Dwight M. Owsen Long Island University Brooklyn Gary Peters, University of Arkansas Byron Pike, Minnesota State University–Mankato Marshall Pitman, University of Texas–San Antonio Sharon Polansky, Texas A&M University–Corpus Christi
- 26. xxii Acknowledgments Kathy Pollock, Indiana University–Purdue University Fort Wayne Duane Ponko, Indiana University of Pennsylvania Dwayne Powell, Arkansas State University Abdul Qastin, North Carolina A&T State Linda Quick, University of South Carolina Hema Rao, SUNY–Oswego Jason T. Rasso, University of South Florida Yigal Rechtman, Pace University Barbara Reider, University of Montana Raymond Reisig, Pace University John Rigsby, Mississippi State University Pamela Roush, University of Central Florida Maria Sanchez, Rider University Kristen Kelli Saunders, University of South Carolina Tammi Schaefer, University of South Carolina Bunney L. Schmidt, Utah Valley State College Timothy Andrew Seidel, University of Arkansas Carol Shaver, Louisiana Tech University Jaysinha Shinde, Eastern Illinois University Adrianne Slaymaker, Metropolitan State University Duane Smith, Brescia University Beverly Strachan, Troy University at Montgomery Iris Stuart, California State University Christine N. Todd, Colorado State University–Pueblo John Trussel, Penn State University–Harrisburg Jerry L. Turner, University of Memphis Frank Venezia, State University at Albany Barbara Vinciguerra, Moravian College Bobby Waldrup, University of North Florida Rick Warne, University of Cincinnati J. Donald Warren Jr., Rutgers University Christian Wurst, Temple University Tu Xu, Georgia State University Xu Zhaohui, University of Houston–Clear Lake Lin Zheng, Northeastern Illinois University Douglas Ziegenfuss, Old Dominion University In addition, we would like to recognize our outstanding staff at McGraw-Hill: Man- aging Director, Tim Vertovec; Brand Manager, Pat Plumb; Marketing Manager, Cheryl Osgood; Product Developers, Rebecca Mann and Randall Edwards; Senior Content Project Managers, Dana Pauley and Angela Norris; Buyer, Laura Fuller; and Designer, Matt Diamond. For their encouragement, assistance, and guidance in the production of this book, we are grateful.
- 27. Acknowledgments xxiii Few understand the enormous commitment of time and energy that it takes to put together a textbook. As authors, we are constantly scanning The Wall Street Journal and other news outlets for real-world examples to illustrate theoretical discussions, reread- ing and rewriting each other’s work to make sure that key concepts are understandable, and double-checking our solutions to end-of-chapter problems. Among the few who do understand the time and energy commitment are our family members (Barbara Louwers; Kristin, Jackson, Elijah, Jonah, Ansley, and Laney Grace Blay; Karen, Matthew, Joshua, and Adam Sinason; Susan and Meghan Strawser; and Ellen, Jenny, Eric, and Jessica Thibodeau) who uncomplainingly endured endless refrains of, “I just need a couple more minutes to finish this section.” Words cannot express our gratitude to each of them for their patience and unending support. Tim Louwers Allen Blay Dave Sinason Jerry Strawser Jay Thibodeau
- 28. xxiv Brief Contents PART ONE The Contemporary Auditing Environment 1. Auditing and Assurance Services 1 2. Professional Standards 40 PART TWO The Financial Statement Audit 3. Engagement Planning 75 4. Management Fraud and Audit Risk 117 5. Risk Assessment: Internal Control Evaluation 173 6. Employee Fraud and the Audit of Cash 227 7. Revenue and Collection Cycle 279 8. Acquisition and Expenditure Cycle 336 9. Production Cycle 394 10. Finance and Investment Cycle 443 11. Completing the Audit 500 12. Reports on Audited Financial Statements 540 PART THREE Stand-Alone Modules Please refer to pages xviii–xxiii for guidance on when to best integrate these modules. A. Other Public Accounting Services 583 B. Professional Ethics 628 C. Legal Liability 676 D. Internal Audits, Governmental Audits, and Fraud Examinations 720 E. Overview of Sampling 762 F. Attributes Sampling 795 G. Variables Sampling 835 H. Auditing and Information Technology 883 CASES C1 INDEX I1
- 29. xxv Contents PART ONE THE CONTEMPORARY AUDITING ENVIRONMENT Chapter 1 Auditing and Assurance Services 1 User Demand for Reliable Information 2 Information Risk in a Big Data World 3 Auditing, Attestation, and Assurance Services 4 Definition of Financial Statement Auditing 5 Auditing in a Big Data Environment 6 Attestation Engagements 7 Assurance Services 9 Examples of Assurance Services 10 Management’s Financial Statement Assertions 12 Existence or Occurrence (Existence, Occurrence) 13 Rights and Obligations (Rights and Obligations) 14 Completeness (Completeness, Cutoff) 15 Valuation and Allocation (Accuracy or Valuation) 15 Presentation and Disclosure (Classification, Understandability) 15 Importance of Assertions 17 Professional Skepticism 18 Public Accounting 21 Assurance Services 21 Tax Services 23 Consulting and Advisory Services 23 Other Kinds of Engagements and Information Professionals 24 Internal Auditing 24 Governmental Auditing 25 Regulatory Auditors 26 Become a Professional and Get Certified! 26 Education 27 Examination 27 Experience 28 State Certificate and License 29 Skill Sets and Your Education 30 Summary 31 Key Terms 31 Multiple-Choice Questions for Practice and Review 32 Exercises and Problems 37 Chapter 2 Professional Standards 40 Introduction 41 Generally Accepted Auditing Standards (GAAS) 42 Fundamental Principle: Responsibilities 45 Fundamental Principle: Performance 48 Fundamental Principle: Reporting 54 Evaluating the Quality of Public Accounting Firms’ Practices 56 System of Quality Control 56 PCAOB Inspection of Firms 58 Summary 60 Key Terms 61 Multiple-Choice Questions for Practice and Review 63 Exercises and Problems 66 Appendix 2A Referencing Professional Standards 73 PART TWO THE FINANCIAL STATEMENT AUDIT Chapter 3 Engagement Planning 75 Introduction 76 Pre-Engagement Activities (AU-C 300, AS 2101) 77 Client Acceptance or Continuance 77 Compliance with Independence and Ethical Requirements 79 Engagement Letters 80 Audit Plan (AU-C 300, AS 2101) 82 Staffing the Audit Engagement 83 Considering the Work of Internal Auditors (AU-C 610, AS 2605) 84 Using the Work of an Audit Specialist (AU-C 620, AS 1210) 85 Use of IT Auditors 85 Time Budget 85 Materiality (AU-C 320, AS 2105) 87 Materiality Calculation 89 Audit Procedures for Obtaining Audit Evidence (AU-C 500, AS 1105) 90 1. Inspection of Records and Documents 93 2. Inspection of Tangible Assets 96
- 30. Discovering Diverse Content Through Random Scribd Documents
- 31. that he use extreme dispatch, the other that the business be kept as secret as possible. Roussillon, March 15, 1553. Acting at once on the advice of the Cardinal, Maugiron sent to the Vibailly, bidding him hold himself ready to act in a certain unspecified contingency. Next day, March 16, the two Vicars in company with the Vibailly proceeded to the office of the Sieur Peyrolles, Lay official of the Primate, before whom Bautier, as the party immediately interested in virtue of his office, made a deposition to the effect that within the last few days letters had been received from Geneva addressed to a personage resident in Lyons, in which great surprise was expressed that a certain Michael Servetus, otherwise called Villanovanus, should be then living unmolested at Vienne; that four printed leaves of a book written by the said Villanovanus had also been forwarded from Geneva and examined by brother Ory, Inquisitor of the Faith, by whom they had been found heretical; and, to conclude, that the Cardinal Archbishop, having been made acquainted with the matter, had written to M. de Maugiron requesting him to take cognizance of the business with all secrecy and dispatch. Bautier, at the same time, put in the Geneva letter of Trie, and the four leaves of the printed book entitled ‘Christianismi Restitutio,’ in support of his allegations; the letter of the Inquisitor and that of the Cardinal to Maugiron being added as further documents on which the Procurator of the King and the Justiciary were to proceed. The judicial authorities of Vienne lost no time in obeying their instructions. On the same day they met at the house of M. Maugiron, and having consulted with him, they sent to M. Michel de Villeneuve, desiring his presence and saying they had something to communicate to him. Being from home when the message arrived, and not appearing for a couple of hours, the authorities were fearful that he had been somehow warned of the danger which threatened him and so had fled; but their fears were unfounded: he came at length, and with a perfectly confident air, it is said. The authorities informed him that they had certain informations against him which
- 32. would make it necessary for them to visit and search his lodgings for books or papers of a heretical tendency. Villeneuve replied that he had lived long at Vienne on good terms with the clergy and professors of theology, and had never until now been suspected of heresy; but he was quite ready to open his rooms to them or those they might delegate, to make what search they pleased. The Grand Vicar and the Vibailly, accompanied by the Secretary of the Cardinal Governor of Dauphiny, then proceeded with Villeneuve to his apartments, which adjoined and were among the dependencies of the archiepiscopal palace, and made a particular examination of his papers; but they found nothing more compromising than a couple of copies of his apology or pamphlet against the Parisian Doctors, of which they took possession. Next day, the 17th, the Judges made a perquisition in the house of Arnoullet, the publisher and printer, in his absence, he being away at the time on business at Toulouse; and there also they had Geroult, the superintendent of the printing establishment, brought before them. After a lengthened interrogatory of the foreman, in which nothing was elicited, they proceeded to search the house and printing office, examining Arnoullet’s papers minutely, but without finding a word to compromise him in any way. The workmen on the establishment were then severally examined. They were shown the printed leaves of the ‘Christianismi Restitutio’ and asked if they knew anything of the book of which the leaves were a part; or if they recognised the type, or could give any information as to the books they had had a hand in composing or printing during the last eighteen months or so. But they all agreed in saying that the four leaves shown them had not been printed in the office; and among all the books that had issued from their presses during the last two years, a list of which was supplied, there was not one in the octavo form. The search and inquiry over, the officials had the entire staff of the printing establishment brought into their presence, and cautioned them against saying a word of all they had been asked
- 33. about, on pain of being declared suspected or even convicted of heresy and punished accordingly. On the 18th, Arnoullet, having but just returned from Toulouse, was visited and examined; but all the papers about him being found in order and his replies in complete conformity with those of his manager Geroult, he too was dismissed. The authorities found themselves at fault, but by no means satisfied that the information they had had from Geneva was groundless. An adjournment was therefore resolved on, an informal consultation being, however, held meantime at the archiepiscopal palace of Vienne. And it is not perhaps without significance that it is only now that we find the archbishop of Vienne, Pierre Paumier, named in connection with the proceedings, and his palace spoken of as the place of assembly. It was at this moment in fact that Paumier had the first intimation of what was going on. At the meeting it was decided that nothing had been discovered sufficiently positive to warrant the arrest of anyone. The archbishop of Vienne, once made a party to the proceedings, appears to have taken up the case warmly. The known protector and frequent associate of Villeneuve the physician, he seems to have thought it incumbent on him to show the world that he had no sympathy with heresy, and nothing in common with a suspected heretic. He accordingly wrote immediately to Brother Ory, the Inquisitor, begging him to come to Vienne and have some conversation with him on matters touching the Faith. In the course of the interview which followed, Ory suggested that, in order to have further or more satisfactory information against Villeneuve, Arneys should be made to write again to his relation Trie at Geneva, and ask him to send the whole of the printed book from which the leaves already forwarded had been cut. Returning to Lyons, Ory himself, we must presume, dictated the letter which Arneys was required to write to his cousin Trie. This epistle unhappily has not reached us. It would have been both curious and interesting to have had the Inquisitor of three centuries and a half ago brought so immediately before us, as we should there have had him. But as Ory doubtless
- 34. led the pen at Lyons, so did Calvin assuredly guide it again at Geneva in reply; and as his letter has been preserved, we come face to face with one who is still more interesting to us than brother Matthew Ory, Inquisitor of the kingdom of France and all the Gauls— with the great head of the Reformed Churches of France and Switzerland, at the zenith of his power, though not without misgivings as to its stability, zealous as brother Ory could have been in upholding the Faith as he apprehended it, and as ruthless as Cardinal Tournon in dealing with all who called it in question. The letter is to the following effect:— Monsieur mon Cousin!—When I wrote the letter you have thought fit to impart to those who are taxed therein with indifference and neglect, I thought not that the matter would be taken up so seriously as it seems to be. My sole purpose was to show you the fine zeal and devotion of those who call themselves pillars of the Church, suffering as they do such disorder among themselves, yet persecuting so cruelly poor Christians who only desire to obey God in simplicity. As the instance was so notable, however, and I was advised of it, an opportunity presented itself, as I thought, of touching on it, the matter falling, as it seemed, fairly within the scope of my writing. But as you have shown to others the letter I meant for yourself alone, God grant that it tend to purge Christianity of such filth, of pestilence so mortal to man! If your people are really so anxious to look into the matter as you say, there will be no difficulty in furnishing you, besides the printed book you ask for, with documents enough to carry conviction to their minds. For I shall put into your hands some two dozen pieces written by him who is in question, in which some of his heresies are set prominently forth. Did you rely on the printed book by itself, he might deny it as his; but this he could not do if his own handwriting were brought against him. In this way, the parties you speak of, having the thing completely proven, will be without excuse if they hesitate further, or put off taking the steps required. All the pieces I send you now—the great volume
- 35. as well as the letters in the handwriting of the author—were produced before the printed work; but I have to own to you that I had great difficulty in getting these documents from Mons. Calvin. Not that he would not have such execrable blasphemies put down; but that, as he does not wield the sword of justice himself, he thinks it his duty rather to repress heresy by sound teaching, than to pursue it by force. I importuned him, however, so much, showing him the reproaches I might incur did he not come to my aid, that he consented at length to entrust me with the contents of my parcel to you. For the rest, I hope, when the case shall have been somewhat farther advanced, to obtain from him something like a whole ream of paper, which the fine fellow—le Galand—has had printed. At the moment, I fancy you are furnished with evidence enough, and that there need be no more beating about the bush, before seizing on his person and putting him on his trial. For my own part, I pray God to open the eyes of those who speak of us so evilly, to the end that they may more truly judge of the motives by which we are actuated. As I learn by your letter that you will not trouble me further with the old proposals, I, on my side, will do nothing to displease you; hoping nevertheless, that God will lead you to see that I have not, without due consideration, taken the step you disapprove. Recommending myself to your favour, and praying God to give you his, &c., I remain, (Signed) Guillaume Trie. Geneva, this 26th of March. The art and purpose so plainly to be seen in the foregoing letter need not be dwelt on. Anxious to escape appearing in the odious light of informer, Calvin was still eager to furnish the zealots of the Church he had quitted himself, and by the heads of which he was looked on as standing in the foremost ranks of heresy, with evidence
- 36. which he believed would assuredly bring the man he held in despite to a cruel death by fire. But Ory, whose special business was the prosecution of heretics, and who knew much better than Calvin what constituted evidence against them, was aware that the MS. book and the two dozen pieces, written as said by Michael Servetus, were not adequate to convict Michel Villeneuve of the charge against him. Handwriting, it seems, could be put out of court as evidence in cases of heresy, through simple denial on oath by the party accused. The point upon which evidence was particularly required, by Ory and his coadjutors, was in fact the printing of the book entitled the ‘Restoration of Christianity;’ and none of the pieces furnished gave any assurance either that Michel Villeneuve was the writer, or Arnoullet and Geroult the printers of this. Arneys must therefore be desired to write to Cousin Trie once more, and ask him to do his best with M. Calvin to furnish evidence of the kind required. So anxious indeed were Ory and his friends for this, that they despatched this, the third letter of Arneys to Trie, by a special messenger, who was ordered to wait and bring back the answer with all speed. The answer came in due course, hardly, however, so soon as we can fancy it was looked for, but to the following effect:— Monsieur mon Cousin!—I had hoped I should satisfy your demands, in essentials at least, by sending you, as I did, the handwriting of the author of the book. With my last letter, indeed, you will find an acknowledgement by the man himself of his real name, which he had disguised, and the excuse he makes for calling himself Villeneuve, when his proper name is Servetus or Revés. For the rest, I promise you, God willing, to furnish you, if need be, not only with the entire book he has just had printed, but with another in his handwriting, in addition to the letters [already forwarded]. I should indeed have already sent the book [in MS.] which I refer to, had it been in this city; but it has been at Lausanne these two years past. Had M. Calvin kept it by him, I believe he would long ago, for all it is worth, have returned it to the writer; but having lent it for perusal to
- 37. another, it was, as it seems, retained by him. I have formerly heard Monsieur [Calvin] say that, having given answers sufficient to satisfy any reasonable man, to no purpose, he had at length left off reading more of the babble and foolish reveries, of which he soon had had more than enough, there being nothing but reiteration of the same song over and over again. And that you may understand that it is not of yesterday that this unhappy person persists in troubling the Church, striving ever to lead the ignorant into the same confusion as himself, it is now more than twenty-four years since he was rejected and expelled by the chief Churches of Germany; had he remained in that country, indeed, he would never have left it alive. Among the letters of Œcolampadius, you will see that the first and second are addressed to him under his proper name and designation: Serveto Hispano neganti Christum esse Dei Filium, consubstantialem Patri—To Servetus the Spaniard, denying that Christ is the Son of God, consubstantial with the Father. Melanchthon also speaks of him in some passages of his writings. But methinks you have really warrant enough in what is already sent you to dive deeper into the matter, and to put him on his trial. As to the printers of the book, I did not send you the table of contents as any proof that Balthasar Arnoullet and William Geroult, his brother-in-law, were the parties; but of the fact that they were so we are well assured, nor indeed will it be possible for them to deny it. The printing was probably done at the author’s expense, and he may have taken the impression into his own keeping; he must have done so, indeed, if you find it has left the premises of the persons named. I rather think I omitted to say that when you have done with the epistles, I beg you will be good enough to return them to me. And now, commending myself to your good grace, and praying God so to guide you that you may do all that is agreeable in his sight, I am yours, &c., Guillaume Trie.
- 38. Geneva, this last day of March, 1553. It must still be needless to say that neither is this any letter of young Trie. What could he have known of the printed works of Michael Serveto, alias Revés, or of his being condemned by the Churches of Germany—which by the way he never was—or of his expulsion from that country—which is also against the fact? What intimation could he have had that Œcolampadius had written to Servetus, the Spaniard, combating his heresies and that Melanchthon had mentioned him in sundry passages of his work, the ‘Loci communes’? Calvin, on the other hand, was not only well informed of much that had happened to Michael Servetus from the date of their meeting in Paris in 1534, even to the hour in which he was now writing by the hand of William Trie, but was himself the author of some of the statements put into the mouth of that worthy.64
- 39. CHAPTER XX. ARREST OF SERVETUS AND ARNOULLET, THE PUBLISHER.—THE TRIAL FOR HERESY AT VIENNE—SERVETUS IS SUFFERED TO ESCAPE FROM PRISON. April 4. After the receipt of Trie’s third epistle, a solemn council was convened within the Archiepiscopal Château of Roussillon, at which were present the Cardinal Tournon, the Archbishop of Vienne, the two Grand Vicars, the Inquisitor Ory, and many Ecclesiastics and Doctors in Divinity. There and then the letters of Trie, the printed leaves of the ‘Christianismi Restitutio,’ and more than twenty epistles addressed to John Calvin, were examined with every care and attention, all being reported the work of Michael Servetus, alias Revés, living at Vienne under the assumed name of Michel Villeneuve. The documents being held of the most seriously compromising character, the Cardinal Archbishop of Lyons and the Archbishop of Vienne, with the concurrence of the whole assembly, now gave orders for the arrest of Michel Villeneuve, Physician, and Balthasar Arnoullet, bookseller, to answer for their faith on certain charges and informations to be laid against them. The Archbishop of Vienne returned home in the afternoon in company with his Grand Vicar, Arzelier, and having summoned the Vibailly de la Cour to the Palace, informed him of the resolutions come to and the pleasure of the Cardinal. In order that nothing might transpire, and no understanding be come to between the parties incriminated, the Vicar and Vibailly agreed so to arrange matters that Villeneuve and Arnoullet should be arrested at the same moment, but imprisoned separately. The Vibailly accordingly proceeded to the house of Arnoullet, and having sent in a message
- 40. desiring him to bring a copy of the New Testament but just printed, Arnoullet was arrested on the spot, and carried off to the Archiepiscopal prison. Proceeding next to the house of M. de Maugiron, the Lieutenant-Governor of Dauphiny, then indisposed, and on whom it was known that Doctor Villeneuve was in attendance, the Vibailly informed the Doctor that there were several prisoners sick and some wounded in the hospital of the royal prison who required his services, as was indeed the case. Doctor Villeneuve replied that independently of his profession making it imperative on him immediately to obey such a summons, he still took pleasure in being so usefully employed. He therefore went at once; and whilst engaged in his visit, the Vibailly sent requesting the presence of the Grand Vicar. On his arrival Villeneuve was informed that certain charges having been made and informations laid against him, he must consent to hold himself a prisoner until he had given satisfactory answers to the questions that would be put to him. The gaoler, Anton Bonin, was then summoned and enjoined to guard the prisoner strictly, but to treat him respectfully, according to his quality. He was to be allowed his personal attendant or valet, Benoît Perrin, a lad fifteen years of age, to wait on him; and his friends were to have free access to him. April 5. Archbishop Paumier now hastened to inform Brother Ory, the inquisitor, that they had Villeneuve in custody, and begged him to come immediately to Vienne. Ory, like a vulture swooping on the carcass, is said to have made such haste—pressa tellement sa monture—that he arrived in an incredibly short space of time at Vienne. As it was then about the hour of the midday meal, however, the Archbishop and he, thinking it well to recruit the inward man before entering on the serious business they had on hand, sate themselves quietly down to table and dined. The cravings of nature satisfied, Arzelier the Vicar-General, and De la Cour the Vibailly of Vienne, were summoned to the Palace—the secular in aid of the spiritual arm—and the party proceeded to the prison.
- 41. Having had Michel Villeneuve, sworn physician, and now prisoner at their instance, brought before them in the Criminal Court of the Palace, they proceeded to question him on matters of which they at the moment knew more than he, though we may well believe his fears pointed in the true direction. Informing the prisoner, as a preliminary, that he was bound to answer truthfully to the interrogatories put to him, which he promised to do, he was then sworn on the Gospels and asked his name, his age, his place of birth, and his profession. His name, he replied, was Michel Villeneuve, doctor in medicine, forty-four years of age, and a native of Tudela, in the kingdom of Navarre, residing for the present, as he had done during the last twelve years or thereabouts, at Vienne. Asked where and in what places he had lived since he left his native country; he said that some seven or eight and twenty years ago, before the Emperor Charles V. left Spain for Italy, in view of his coronation, he had entered the service of brother John Quintana, the Confessor of the Emperor, being then no more than fifteen or sixteen years old; that he had gone to Italy in the suite of the Emperor, and been present at his coronation at Bologna. That he then accompanied Quintana to Germany, in which country he resided for about a year, when his patron died; since which time he had lived without a master, first at Paris, having had lodgings in the Collége de Calvi, and then in the Collége des Lombards, engaged in the study of Mathematics. From Paris he had gone to Lyons, and spent some time between that city and Avignon, but had finally settled at Charlieu, where, having lived practising his profession, for about three years, he had finally been induced by Messeigneurs the Archbishop of Vienne and the Archbishop of Maurice, to quit Charlieu and establish himself at Vienne, in which city, as said, he had lived since then to the present time. Asked whether he had not had several books printed for him? he replied that at Paris he had a book printed, the title of which was:
- 42. Syruporum universa ratio ad Galeni censuram disposita—a treatise on Syrups according to the principles of Galen; and a pamphlet entitled: In Leonartum Fussinum, Apologia pro Symphoriano Campeggio—an apologetic address to Leonard Fuchs for Symphorian Campeccius. He had further edited and annotated the ‘Geography of Ptolemy.’ Other than these, the works now named, he had written none, nor had he had any others printed for him; but he admitted that he had corrected the text of many more, without adding to them anything of his own, or taking from them anything of their writers. Being now shown two sheets of paper, printed on both sides and having marginal annotations in writing, and admonished that the matter of the writing might bring him into trouble, he was informed, further, that he, if he were the writer, might be able to explain or to say in what sense he understood what was there set down. One of the propositions in the writing was particularly pointed out to this effect: Justificantur ergo Parvuli sine Christi fide, prodigium, monstrum dæmonum!—Infants therefore are justified without faith in Christ, a prodigy, a portent of devils! and he was informed that if he understood the words to say that infants had not by their regeneration [through baptism, understood] received the perfect grace of Christ and so were acquitted of Adam’s sin, this would be to contemn Christ. He was therefore required to declare how he understood the words. He replied that he firmly believed that the grace of Christ, imparted by baptism, overcame the sin of Adam, as St. Paul declares (Rom. v.): ‘Where sin abounds there doth grace more abound;’ and that infants are saved without faith acquired, but through faith then infused by the Holy Ghost. Having shown him how necessary it was that he should alter several words in the written matter, he promised to do so, saying however that he was not prepared at a moment’s notice to say whether the writing was his or not. It was very long, indeed, since he had written anything. On examining the character particularly, however, he now thinks it must be his. In all that concerns the faith he yet begs to say
- 43. that he submits himself entirely to his holy mother the Church, from whose teachings he has never wished to swerve. If there be some things in the papers before the Court open to objection, he believes he must have written them inconsiderately, or only advanced them as subjects for discussion. He then goes on to say that, having now looked closely at the writing on the two leaves, he acknowledges it as his, having the opportunity at the same time of explaining the sense in which he would have it understood. If there were anything else, he concluded, that was found objectionable or that savoured of false doctrine, he was ready on having it pointed out to him to alter and amend it. The two leaves paged from 421 to 424, and treating of baptism,65 were then ordered to be marked by the clerk of the Court, and with the other papers produced, to be taken under his charge; after which the sitting was suspended. April 6. Sworn as before upon the Gospels to speak the truth (and from what we know and have just seen feeling assured how indifferently he had hitherto kept his word), Villeneuve was further interrogated as follows: 1st. How he understands a proposition in an epistle numbered xv., wherein the Living Faith and the Dead Faith are treated of in terms that seem perfectly Catholic, and wholly opposed to the errors of Geneva, the words being these, Mori autem sensim dicitur in nobis Fides quando tolluntur vestimenta—now faith dies perceptibly in us when its vestments are thrown off? To this he answered that he believed the vestments of faith to be works of charity and mercy. 2nd. Shown another epistle, numbered xvi., on Free will, in opposition to those who hold that the will is not free, he is asked how he understands what is there said? With tears in his eyes he replies, ‘Sirs, these letters were written when I was in Germany, now some five and twenty years ago, when there was printed in that country a book by a certain Servetus, a Spaniard; but from what part of Spain I know not, neither do I know in what part of Germany he dwelt, though I have heard say that it was at Agnon (Hagenau in Elsass), four leagues from Strasburg, that the book in question was printed. Having read it when I was very young—not more than fifteen or sixteen—I thought that the writer said many
- 44. things that were good, that were better treated by him, indeed, than by others.’ Quitting Germany for France, without taking any books with him, Villeneuve went on to say, that he had gone to Paris with a view to study mathematics and medicine, and had lived there, as already said, for some years. Whilst residing there, having heard Monsieur Calvin spoken of as a learned man, he had, out of curiosity, and without knowing him personally, entered into correspondence with him, but begged him to hold his letters as private and confidential—sub sigillo secreti. ‘I, on my part,’ he proceeds, ‘seeking brotherly correction, as it were, but saying that if he could not wean me from my opinions or I wean him from his, I should not feel myself bound to accept his conclusions. On which I proposed certain weighty questions for discussion. He replied to me shortly after, and seeing that my questions were to the same effect as those discussed by Servetus, he said that I must myself be Servetus. To this I answered that, though I was not Servetus, nevertheless, and that I might continue the discussion, I was content for the time to personate Servetus, and should reply, as I believed he would have done, not caring for what he might please to think of me, but only that we might debate our views and opinions with freedom. With this understanding we interchanged many letters, but finally fell out, got angry, and began to abuse each other. Matters having come to this pass, I ceased writing, and for ten years or so I have neither heard from him nor he from me. And here, gentlemen, I protest before God and before you all, that I had no will to dogmatise, or to substitute aught of mine that might be found adverse to the Church or the Christian Religion.’ The prisoner being shown a third epistle numbered xvii., on the Baptism of Infants, in which he says, ‘Parvuli carnis non sunt capaces doni Spiritus—Infants as mere carnal beings are incapable of receiving the gift of the Spirit,’—was desired to say in what sense he meant these words to be taken. He answered that he had formerly been of opinion that infants were incompetent in the matter, as stated; but that he had long given up such an opinion and now desired to range himself with the teaching of the Church.
- 45. Shown a fourth epistle, numbered xviii., its heading or argument being, ‘Of the Trinity, and the Generation of the Son of God, according to Servetus,’ he acknowledged it as having been written by him in the course of his discussion with Calvin, when he was assuming the part of Servetus; but as he had said of the former letter, No. xvii., so he says of this, that he does not now believe what is there set down, everything in the letter having only been propounded to learn what Calvin might have to advance in opposition to the views set forth. A fifth letter, the burden of which is, ‘Of the glorified flesh of Christ absorbed in the Glory of the Deity more fully than it was at the Transfiguration,’ being handed to him, he said that when he addressed his correspondent on this subject, he felt at greater liberty than usual to say all he thought of it individually, and was now ready to answer any question put to him bearing upon it. None, however, were asked. But the letters to Calvin were not yet done with. A whole bundle of them, fourteen in number, was exhibited, and the prisoner informed that the judges found much matter there for which very particular answers would be required. Having looked at the letters, the prisoner said he saw that they were all addressed to Calvin long ago, and with a view to learn from him what he thought of the questions raised, as already said. But he added that he was by no means now disposed to abide by all he had written of old, save and except in respect of such views as might be approved by the Church and his Judges. He was therefore ready to answer to each particular head on which he might be interrogated. This the Judges proposed to do at their next meeting, and meantime having ordered a schedule of the principal points upon which there appeared to be error against the faith to be drawn up from the writings, all the documents being duly labelled and signed, the session was suspended until the morrow. Immediately after the second interrogatory to which he was subjected, Servetus on his return to prison sent his servant Perrin to the Monastery of St. Pierre to ask the Grand Prior if he had received
- 46. the 300 crowns owing to him—Villeneuve by M. St. André. The money having been received, was remitted by the hands of Perrin to his master. Had Servetus put off his message to the Prior but for an hour, he would have lost his money, the Inquisitor Ory having given fresh orders to the gaoler to guard M. Villeneuve very strictly, and to suffer him to see and have speech of no one without his—the Inquisitor’s express permission. Ory, we may presume, had not only no favour for Servetus, but, with so much against him as already appeared, could have had little doubt of bringing conviction home to him and so having him sent in smoke as an acceptable sacrifice to heaven. But Villeneuve had friends among his other judges who were every way disposed to aid him, if it were possible. Matters certainly looked very black indeed: Michel Villeneuve was plainly Michael Servetus of evil theological reputation; flagrant heresy was already manifest in the documents produced, and his answers to the interrogatories were so little satisfactory that acquittal from the charges laid against him, even at the outset of the process, seemed out of the question. The judges, however, were not all Brother Orys nor Cardinal Tournons, though most of them were churchmen, and, to their honour, both tolerant and merciful in circumstances where their creed prescribed intolerance and deadening of the heart to pity. Servetus had however to be sent back to his prison; but the door of the cage might be left open and the bird allowed to fly. And everything leads to the conclusion that this was exactly what was done. Connected with the prison there was a garden having a raised terrace looking on to the court of the palace of justice; and, abutting on the garden wall, a shed, by the roof of which and a projecting buttress on the other side a descent into the court-yard of the palace could easily be made. The garden as a rule was kept shut, but prisoners above the common in station were permitted to use it for exercise and also for occasions of nature. Having enjoyed this privilege from the first, Servetus appears to have scrutinised everything in the afternoon of April 6, after the conclusion of his second examination. On the morning of the seventh he rose at four
- 47. o’clock and asked the gaoler, whom he found afoot and going out to tend his vines, for the key of the garden. The man, seeing his prisoner in velvet cap and dressing-gown, not aware that he was completely dressed and had his hat under his robe de chambre, gave him the key and went out shortly afterwards to his work. Servetus, on his part, when he thought the coast must be clear, left his black velvet cap and furred dressing-gown at the foot of a tree, leaped from the terrace on to the roof of the outhouse and from that, without breaking any bones, gained the open court of the Palais de Justice Dauphinal. Thence he made for the gate of the Pont du Rhône, which was at no great distance from the prison and passed into the Lyonnais—these latter facts being by and by deposed to by a peasant woman who had met him. Two hours or more elapsed before his escape became known in the prison, the gaoler’s wife having been the first to discover it. She in her zeal and alarm committed a hundred extravagances; and in her vexation tore her hair, beat her children, her servants, and some of the prisoners who chanced to come in her way. Her rage that anyone should have had the audacity to break the dauphinal prison of Vienne, of which her husband was custodier, was such, that she even ran the risk of her life by clambering to the roof of a neighbouring house, in her eagerness to find traces of the fugitive. The authorities, informed of what had happened, did all that became them, ordering the gates of the town to be shut and more carefully guarded than usual through the next few days and nights. Proclamation was made by sound of trumpet and beat of drum, and almost every house not only of the town, but of the neighbouring villages, was visited. The magistrates of Lyons and other towns, in which it was thought probable their late prisoner might have taken refuge, were written to by the Vienne authorities and inquiries made whether or not he had money in the bank, or had drawn out any he might have had there. His apartments were again visited, and all his papers, furniture and effects inventoried and put under the seal of justice.
- 48. In the town of Vienne it was generally thought that the Vibailly De la Cour had been the active party in favouring the evasion of Villeneuve. He was known to be intimate with the doctor, who had lately carried his daughter successfully through a long and dangerous illness, and had been loud in praise of the skill and devotion that had been shown with so happy a result. Chorier,66 the historian of Dauphiny, hints guardedly at something of the kind when he speaks of the imprisonment of M. Villeneuve on religious grounds. ‘It fell out,’ says Chorier, ‘that by his own ingenuity and the assistance of his friends, M. Villeneuve escaped from confinement.’ In the record of proceedings after the flight the only thing mentioned is the fact of the gaoler having given the prisoner the key of the garden; on all else there is absolute silence; whence, as D’Artigny says, we may infer that there is mystery of some sort connected with the escape. We, for our part, should have no difficulty in finding a key to the mystery, had there been fewer grounds for the presumption of friendly connivance than there undoubtedly were in the business. John Calvin, arch-heretic in the eyes of the Gallic Church and its heads, could not, we must presume, have been held in the highest possible esteem by the Cardinal Archbishop of Lyons, to say nothing of brother Mathias Ory, Inquisitor of the king of France and all the Gauls. But the arrest of Villeneuve and the proceedings against him thus far, had depended entirely on information supplied by the Reformer of Geneva. The managers of the process against Servetus were men much too astute, much too clear-sighted not to see that it was John Calvin who was writing under the mask of William Trie; and one among them at least may have known that the state of feeling between the Reformer of Geneva and the Physician of Vienne had long been such that he of Geneva might not be indisposed to make use of them to wreak his vengeance against a personal enemy under the guise of a common heretic. The Judges indeed must all have seen from the letters of Villeneuve to Calvin that the two men were at daggers- drawn, and that the provocation on either part was neither new nor
- 49. slight, but of long standing, and, judging by his present attitude, on Calvin’s side deadly. We can fancy brother Mathias Ory chuckling over the sweet simplicity of the Viennese mediciner’s sorry subterfuge in pretending to enact the part of ‘Servetus the Spaniard, though he was no such personage, and knew nothing of the place in Spain where he was born!’ The authorities of Vienne, however, had no desire to have their friend Villeneuve burned alive for heresy on testimony gratuitously supplied by the arch-heretic of Geneva, and thereby give him, whom they hated and feared far more than a thousand lay schismatics, a triumph not only over an enemy, but over themselves, for their lack of insight and zeal as guardians of the only saving faith. And then, and in addition to all this, there was Monseigneur Paumier to be considered—Paumier, under whose patronage Villeneuve had settled at Vienne and lived so long in the very shadow of the archiepiscopal palace, on terms of intimacy with its distinguished occupant. How should the great man escape suspicion of heresy himself if it were known that he had been living as a friend with one who held all the most holy mysteries of the Roman Religion as mere vanities or inventions of the Devil! The man had lived, it is true, long and peaceably among them, respected in his life and trusted in his calling; and if Calvin found heresy and to spare in his writings against the tenets which he as well as they held in common, they discovered outpourings enough there against Predestination and Election by the Grace of God, Effectual calling, Justification by Faith, and the rest, that formed the groundwork of the objectionable doctrines both of Luther and Calvin. If M. the Vibailly De la Cour connived at the escape of Villeneuve, and that he did there can hardly be a doubt, we may be well assured that he acted with the concurrence of his more immediate associates in the administration of justice—lay and clerical. The Vibailly remained unchallenged in his office; the gaoler was not dismissed, and Arnoullet the printer, for the present at least, was set at liberty. Nothing of all this could have happened had Justice not consented to be hoodwinked. The gaoler’s
- 50. wife, in fact, seems to have been the only person in downright earnest in the business of the escape.
- 51. CHAPTER XXI. DISCOVERY OF ARNOULLET’S PRIVATE PRINTING ESTABLISHMENT —SEIZURE AND BURNING OF THE ‘CHRISTIANISMI RESTITUTIO’ ALONG WITH THE EFFIGY OF ITS AUTHOR. The remainder of the month of April was spent in making a renewed and more particular examination of the books, papers, and letters of Villeneuve, and in having copies made of the letters addressed to Calvin, the originals of which were placed for safe custody under the official seals. And here, if our surmises be well founded: that the authorities of Vienne had really no wish, on testimony supplied by Calvin, to convict of heresy a man who had always comported himself as a good Catholic and still professed himself a true son of the Church, every way disposed to receive instruction and bow to the decisions of those who must know so much better than himself what was the true saving faith—the matter would probably have ended, in so far as those of Vienne were concerned. But Ory, the Inquisitor, nowise anxious like the others to hush up so promising an affair, had by some means been informed in the beginning of the month of May that there had been a couple of presses kept at work away from the proper printing establishment of Arnoullet. Of this significant fact, no mention had been made either by Villeneuve or Arnoullet on their examination, and whence Ory had the intimation we are left to conjecture. There seems hardly room for doubt, however, that it reached him through the old channel, viz., Arneys; that Arneys had the news he gave to Ory from Trie, and that Trie had the tale he told from Calvin. Frelon, as we have seen, must have been in the secret of Servetus, and Frelon was also the friend of Calvin; from Frelon alone could Calvin have had the particular
- 52. information he shows he possessed concerning the terms on which the ‘Christianismi Restitutio’ was printed; and it was only from Calvin that Trie could have obtained intelligence of the kind he communicates to his relative Arneys of Lyons. The process against Servetus, as we know, began from Lyons; and from Lyons was it now resuscitated. But who living there was so likely to have heard of a printing press worked privately at Vienne, twelve miles away, as he who had all he knew about the heretic Villeneuve from Geneva, and had been the instrument in setting on foot the movement that was now to proceed to more disastrous issues? With the new and important hint but just received, Ory sped off to Vienne from Lyons, his head-quarters; and he may possibly have used even greater diligence on this occasion than he did before when he is said to have spurred his steed so vigorously. Summoning the Vibailly and Grand Vicar to his side, the three proceeded immediately to the premises that had been indicated as the private printing place of the publisher Arnoullet; and entering, sure enough, they found three compositors at work, Straton, Du Bois, and Papillon by name. It is not difficult to imagine the terror of these men at the sight of such visitors. Before proceeding to interrogate them severally, the Inquisitor took care to address them generally on the enormity of the crime of which he assumed they had been guilty, and to say that they deserved the severest punishment for having withheld the important information they could have supplied. When proceedings were commenced against their master and M. Villeneuve, he said, they must be aware that it had been specially enjoined upon all and sundry, under pain of being dealt with as heretics, to communicate whatever they knew about the book, which he declared they must have known to be written by Villeneuve and printed by their master Arnoullet. Stretching a point, as we may imagine, he told the men further, that he had proofs in his hands that they were the very parties who had worked at the composition and printing of the book in question. He now, therefore, exhorted them to speak the truth and to ask pardon if they had been guilty or
- 53. hoped for favour, the authorities he added, indeed, intending correction, not punishment. The workmen, terribly alarmed, fell as with one accord upon their knees, and Straton, speaking for himself and the others, owned that they had printed an octavo volume entitled ‘Christianismi Restitutio,’ but were not aware that it contained heretical doctrines, being ignorant of the Latin language in which it was written, and never having heard that it did, until after the prosecution had been set on foot. He informed his questioner further that he and his associates had been steadily engaged on the book from the feast of St. Michael to January 3 last—over three months—when the printing was completed; yet more, that they had not dared to give information of their part in the business for fear of being burned alive; and to conclude, they now sought forgiveness, and threw themselves on the mercy of the authorities. More particularly questioned, Straton said that Michel de Villeneuve had had the book in question printed at his own expense, and had corrected the proofs in person. To end the tale, and he may have thought to make amends for his past silence, he said further that on January 13 he had despatched five bales of the book to the care of Pierre Merrin, typefounder, of Lyons. Delighted with the great discovery just made, inasmuch as they would now have grounds of their own to proceed upon, the three associates hastened to communicate the information they had acquired to the Archbishop of Vienne, who in turn imparted it to Cardinal Tournon. Next day the Inquisitor Ory and the Grand Vicar Arzelier set off for Lyons. Proceeding at once to the establishment of Pierre Merrin, they questioned him as to what he knew of the business, and particularly about certain bales, five in number, that had lately come into his possession and were believed to contain heretical books. Merrin, having no motive for concealment, informed his visitors that about four months back he had received by the canal boat of Vienne five bales with the following address: From M. Michel de Villeneuve, doctor in medicine, these five bales, to be delivered to Pierre Merrin, typefounder, near Notre Dame de Confort,
- 54. Lyons. On the day the bales were received, he added, a priest of Vienne, Jacques Charmier by name, had come to him and requested him to keep the bales until called for, saying that they contained nothing but printing-paper. From the time named, however, he had heard nothing from the sender, neither had anyone called to enquire after the bales or to take them away; and for his part he knew not whether they contained white paper for printing as said, or printed books as now alleged. Having finished their interrogatory and seen the bales, the Inquisitor and Vicar made no scruple about seizing them in the name of the public authorities. Carrying them off at once, they were taken to Vienne and deposited in a room of the Archiepiscopal palace. The priest Charmier was of course the next person visited and questioned. He persistently denied all knowledge of the contents of the bales which he, as he was proceeding to Lyons, recommended to the care of Merrin, at the request of M. Villeneuve. The mere act of the poor priest, however, and his known intimacy with Villeneuve, were held to have compromised him to such an extent that he was put on his trial some time afterwards, and sentenced to imprisonment for three years! The bales once safe in the Archiepiscopal palace of Vienne, were speedily undone, and there, sure enough, as Straton had said, five hundred copies of the ‘Christianismi Restitutio,’ complete, were displayed to the eager eyes of the lookers-on. A single copy was abstracted and given to Ory, to enable him at his leisure to extract and take exception to such passages as he might deem heretical; the rest were left in safe custody under the palace roof. Every information up to June 17—for so long had it taken to get at the facts as they have been stated—having now been acquired, and the proofs in the process being held complete, the Vibailly of Vienne, in a session of the Court duly summoned, and in the absence of Michel de Villeneuve, proceeded to pass sentence on him, finding
- 55. him attainted and convicted of the crimes and misdemeanours laid to his charge, viz., Scandalous Heresy and Dogmatisation; Invention of New Doctrines; Writing heretical books; Disturbance of the public peace; Rebellion against the King; Disobedience of the ordinances touching heresy, and Breach of the Royal Prison of Vienne. ‘For reparation of the crimes and misdeeds set forth,’ said the Judge, ‘we condemn him, and he is hereby condemned, to pay a fine of 1000 livres Tournois to the King of Dauphiny; and further, as soon as he can be apprehended, to be taken, together with his books, on a tumbril or dust-cart to the place of public execution, and there burned alive by a slow fire until his body is reduced to ashes.’ The sentence now delivered, moreover, is ordered to be carried out forthwith on an effigy of the incriminated Villeneuve, which is to be publicly burned along with the five bales of the book in question, the fugitive being further condemned to pay the charges of justice, his goods and chattels being seized and confiscated, to the advantage of anyone showing just claims to the proceeds, the fine and expenses of the trial, as aforesaid, having been first duly discharged. On the same day about noon the effigy of Villeneuve, made by the executioner of the High Court of Justice, having been put upon a tumbril along with the bales of the book, was paraded through the streets of Vienne, brought to the place of public execution, hanged upon a gibbet erected for the purpose, and finally set fire to, and with the five bales burned to ashes. The matter, however, did not rest here; it was not yet concluded in all its parts. The secular arm had done what was required of it, having burned the criminal in effigy, failing his person, along with his heretical book; but the ecclesiastical authorities must also have their say in the case. When the utterance came, and it came not until six months after the civil trial and sham execution, it was in every particular confirmatory of the sentence already delivered, the grounds of the decision however being gone into with greater minuteness than before. Among other matters particularly mentioned now, are the marginal notes in the handwriting of the
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