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ISBN-13: 978-1-119-40181-0
The inside back cover will contain printing identification and country of origin if omitted from this
page. In addition, if the ISBN on the back cover differs from the ISBN on this page, the one on the
back cover is correct.
Printed in America.
10 9 8 7 6 5 4 3 2 1

Brief Contents
1
Introduction and Overview of Audit and Assurance 1-1
2 Professionalism and Professional Responsibilities 2-1
3
Risk Assessment Part I: Audit Risk and Audit Strategy 3-1
4 Risk Assessment Part II: Understanding the Client 4-1
5 Audit Evidence 5-1
6
Gaining an Understanding of the Client’s System of Internal
Control 6-1
7 Audit Data Analytics 7-1
8 Risk Response: Performing Tests of Controls 8-1
9
Risk Response: Performing Substantive Procedures 9-1
10
Risk Response: Evaluating Audit Data Analytics and Audit
Sampling for Substantive Tests 10-1
11
Auditing the Revenue Process 11-1
12
Auditing the Purchasing and Payroll Processes 12-1
13
Auditing Various Balance Sheet Accounts (and Related Income
Statement Accounts) 13-1
14
Completing the Audit 14-1
15
Reporting on the Audit 15-1
Appendix A
Cloud 9 Inc. Audit A-1
GLOSSARY G-1
Index I-1
v

From the Authors
Auditing is about earning the public trust. Auditors serve that public trust by being indepen-
dent of the companies they audit—in mental attitude and in fact. You will find that auditing
is about developing an inquisitive mind and mastering decision-making; you must master an
audit logic (the audit risk model) and develop audit strategies. To help you develop both skills,
we have taken a very practical approach in this text, as follows:
•
Provided a variety of audit reasoning examples, which demonstrate
the practical application of auditing skills and concepts through brief
real-world scenarios, in each chapter.
• Included an audit decision-making example at the end of each
chapter. Each example illustrates a process of identifying the issue,
gathering information and evidence, analyzing and evaluating infor-
mation and evidence, and drawing conclusions.
•
Added professional environment examples that illustrate issues
that auditors deal with on a day-to-day basis.
•
Written the text in a conversational writing style that you should
enjoy.
In addition, you must also embrace an increasing variety of fascinating technologies being
used by auditors. To help you do this, we have:
• Included a separate chapter on audit data analytics, including an overview of the
most popular audit data analytics (ADA) software applications currently used.
• Integrated the use of audit data analytics into many chapters.
• Offered IDEA-based cases available in WileyPLUS.
The accounting and auditing skills you build in this course will serve you for the rest of your
life as you develop an independence of thought and action. Your journey of developing a
questioning mindset, developing an investigative intuitiveness, and learning how to recognize
accounting issues that do not pass the “smell test” will open many opportunities. If you keep
asking questions, continue to explore the application of new technologies, and stay true to the
importance of integrity and independent thought and actions that will earn the public trust,
you should have a rich and rewarding career.
We are excited and honored to lead you on this “auditing” journey. We hope you dive into the
material and explore the resources provided in this text and WileyPLUS. Above all else, we
wish you great success!
Raymond N. Johnson, PhD, CPA
Laura D. Wiley, PhD, CPA
vi
Auditing is about developing an inquisitive
mind and mastering decision-making. To help
you develop both skills, we have taken a very
practical approach in this text, as well as incor-
porated audit data analytics (ADA) to help you
embrace an increasing variety of fascinating
technologies being used by auditors.

About the Authors
Raymond N. Johnson
Raymond N. Johnson, PhD, CPA, has taught auditing con-
cepts and practices, financial statement analysis, and a case
course focused on developing students’ critical thinking skills
at Portland State University for 35 years. He was the first re-
cipient of Harry C. Visse Excellence in Teaching Fellowship
and is currently a professor emeritus from Portland State
University. He has also taught auditing and accounting at
Bond University, The University of Queensland, the Aus-
tralian National University, and Southampton University.
Dr. Johnson is Chair of the International Accounting
Education Standards Board’s Consultative Advisory Group.
Previously, he served on the NASBA board of directors for
seven years, and he previously chaired NASBA’s Education
Committee and the NASBA Ethics Committee. He also served
on an AACSB Task Force that was responsible for the most
recent update to AACSB Accounting Accreditation rules.
Dr. Johnsonservedathree-yeartermontheAICPAProfession-
al Ethics Executive Committee which sets ethical standards for
CPAs in the United States. He is a former member of NASBA’s
Standard Setting Advisory Committee and served for seven
years on the NASBA/AICPA International Qualifications
Appraisal Board. Previously, Dr. Johnson served on the Oregon
Board of Accountancy for seven years and was Chair of the
Board for two years. Dr. Johnson is a past president of the Oregon
Society of CPAs. He has previously served as staff to the U.S.
Auditing Standards Board, and he has written numerous
academic and professional articles.
Laura D. Wiley
Laura Wiley, PhD, CPA, is the Assistant Department Chair
and senior instructor in the Department of Accounting at
the E. J. Ourso College of Business, Louisiana State Uni-
versity (LSU). She came to LSU in 1996 and teaches finan-
cial accounting and auditing courses. She also leads a study-
abroad excursion in the Master of Accountancy program,
taking students on educational business trips to Central and
South American countries. Dr. Wiley is active in the Socie-
ty of Louisiana CPAs (LCPA) and has served as the chair
of the Accounting Education Issues committee since 2014.
She received the LCPA’s Distinguished Achievement in Ed-
ucation award in 2015 and the Outstanding Teacher Award
from the E. J. Ourso College of Business in 1999 and 2014.
Dr. Wiley has consulted with large and small companies on
accounting-related matters and conducted onsite training ses-
sions for company employees. Over her career, she has also
been a presenter at numerous CPE events and published in
the Journal of Accounting Education. Prior to coming to LSU,
she was an auditor with PricewaterhouseCoopers in Atlanta,
Georgia. She earned her bachelor’s degree in accounting from
The University of Alabama, her master’s degree in accounting
from LSU, and her doctorate in human resource education
and workforce development from LSU. Her research interests
are accounting education and financial literacy. She is an
active licensed CPA in the state of Louisiana.
vii
©The
National
Association
of
State
Boards
of
Accountancy
©Aaron
Hogan,
Eye
Wander
Photo

viii
Unique Pedagogical Framework
Auditing provides key learning aids to help students master the content and prepare them for
a successful career in accounting.
7-1
Audit Data Analytics
ChApter 7
Audit
Data
Analytics
(Chapter
7)
Audit
Evidence
(Chapter
5)
Client Acceptance/Continuance and Risk Assessment
(Chapters 3 and 4)
Develop Responses to Risk and an Audit Strategy
Gaining an
Understanding of
the Client
Identify Significant
Accounts and
Transactions
Set Planning
Materiality
Make Preliminary Risk
Assessments
Gaining an Understanding
of the System of Internal Control
(Chapter 6)
The Audit Process
Overview of Audit and Assurance
(Chapter 1)
Completing and Reporting on the Audit
(Chapters 14 and 15)
Reporting
Drawing Audit
Conclusions
Procedures Performed Near
the End of the Audit
Auditing the Balance Sheet
and Related Income Accounts
(Chapter 13)
Auditing the Purchasing
and Payroll Processes
(Chapter 12)
Auditing the
Revenue Process
(Chapter 11)
Performing Tests of Controls
(Chapter 8)
Performing Substantive Procedures
(Chapter 9)
Audit Sampling for Substantive Tests
(Chapter 10)
Professionalism and Professional Responsibilities
(Chapter 2)
Special thanks to Dr. Adrian Gepp of Bond University, Queensland, Australia, for his invaluable
assistance in co-authoring this chapter.
c07AuditDataAnalytics.indd Page 1 06/03/19 3:36 PM F-0590 /208/WB02435/9781119401810/ch07/text_s
Each chapter begins with a flowchart de-
tailing exactly what section of the audit
process students are about to learn. The
chart helps students see the big picture of
the audit process.
A Cloud 9 Continuing Case exercise
applies concepts introduced in each
chapter, concludes each chapter, and is
available as an assessment question.
3-40 CHAPTER 3 Risk Assessment Part I
Cloud 9 - Continuing Case
WS Partners has just won the January 31, 2023, audit for
Cloud 9. The audit team assigned to this client is:
• Partner, Jo Wadley
• Audit Manager, Sharon Gallagher
• Audit Senior, Josh Thomas
• IT Audit Manager, Mark Batten
• Experienced staff, Suzie Pickering
• First-year staff, Ian Harper
As a part of the risk assessment phase for the new audit, the
audit team needs to gain an understanding of Cloud 9’s structure
and its business environment, determine materiality, and assess
the risk of material misstatement. This will assist the team in de-
veloping an audit strategy and designing the nature, extent, and
timing of audit procedures.
One task during the planning phase is to consider the con-
cept of materiality as it applies to the client. Auditors will de-
sign procedures to identify and correct errors or irregularities
that would have a material effect on the financial statements
and affect the decision-making of the users of the financial
statements. Materiality is used in determining audit procedures
and sample selections, and evaluating differences from client
records to audit results. Materiality is the maximum amount of
misstatement, individually or in aggregate, that can be accepted
in the financial statements. In selecting the base figure to be
used to calculate materiality, the auditors should consider the
key drivers of the business. They should ask, “What are the end
users (that is, stockholders, banks, etc.) of the accounts going
to be looking at?” For example, will stockholders be interested
in profit figures that can be used to pay dividends and increase
share price?
WS Partners’ audit methodology dictates that one plan-
ning materiality (PM) amount is to be used for the financial
statements as a whole. The basis selected for determining
materiality is the one determined to be the key driver of the
business.
WS Partners use the following percentages as starting
points for the various bases:
Base Threshold (%)
Income before tax 5.0
Total revenue 0.5
Gross profit 2.0
Total assets 0.5
Equity 1.0
These starting points can be increased or decreased by taking
into account qualitative client factors, which could be:
• The nature of the client’s business and industry (for example,
rapidly changing, either through growth or downsizing, or
an unstable environment).
• Whether the client is a public company (or subsidiary of)
subject to regulations.
• The knowledge of or high risk of fraud.
Typically, income before tax is used; however, it cannot be used
if reporting a loss for the year or if profitability is not consistent.
When calculating PM based on interim figures, it may be nec-
essary to annualize the results. This allows the auditors to plan
the audit properly based on an approximate projected year-end
balance. Then, at year-end, the figure is adjusted, if necessary, to
reflect the actual results.
Required
Answer the following questions based on the information pre-
sented for Cloud 9 in the appendix to this text and in the current
chapter and previous chapters.
a. Using the October 31, 2022, trial balance (in the appendix to
this text), calculate planning materiality and include the justi-
fication for the basis that you have used for your calculation.
b. Discuss how the planning materiality would be used to deter-
mine performance materiality.
c. If the planning materiality amount is subsequently increased or
decreased later in the audit, how would that impact the audit?
c03RiskAssessmentPartI.indd Page 3-40 24/01/19 9:35 PM F-0590 /208/WB02435/9781119401810/ch03/text_s
5-6 CHAPTER 5 Audit Evidence
• An auditor verifies that equipment used in operations has been appropriately marked
down if it is impaired (risk of overstatement).
Ian and Suzie have already talked in general terms about the
errors that could occur in Cloud 9’s accounts receivable. For
example, basic mathematical mistakes and other clerical errors
could affect the customer’s total in either direction. Suzie em-
phasizes that Cloud 9’s management asserts this error did not
exist when they prepared the financial statements—i.e., they
assert that accounts receivable are valued correctly. Auditors
must gather evidence about each assertion for each transaction
class, account, and note in the financial statements. Now that
Ian understands this idea better, he can identify the assertions
that relate to the potential errors in accounts receivable that
they discussed earlier:
• No mathematical mistakes or other clerical errors exist that
could affect the total receivables in either direction—valua-
tion and allocation.
• No accounts receivables were omitted when calculating the
total—completeness.
• Accounts receivables included in the total do exist at year-
end—existence.
• Accounts receivables belong to Cloud 9 and have not been
sold or factored—rights and obligations.
• Bad debts have been provided for—valuation and allocation.
• Sales from the next period are not included in the earlier
period—cutoff. Ian is a bit confused about this because cut-
off is an assertion for transactions, not assets. Suzie agrees
it is a special sort of assertion that relates to transactions or
events, but also gives evidence about balance sheet accounts
(e.g., an overstatement of revenue is also an overstatement
of receivables).
The last category of assertions focuses on presentation and disclosure in the financial
statements and the notes. You’ve probably noticed that most of the assertions in this category
are also listed in one or both of the other categories. That makes sense considering the note
disclosures and presentation in the financial statements are inherently tied with a client’s
transactions and year-end balances. Auditors gather evidence that disclosed items represent
events and transactions that occurred and pertain to the entity, (10) occurrence and rights
and obligations, and that all items that should have been disclosed are included in the fi-
nancial statements, which is (11) completeness. Auditors ensure items included in the finan-
cial statements are appropriately presented and disclosures are clearly expressed, which is
c05AuditEvidence.indd Page 5-6 1/15/19 9:44 PM f-1241 /208/WB02435/9781119401810/ch05/text_s
Learning Objectives have been carefully craft-
ed to reflect the Bloom’s Taxonomy framework,
as well as reinforce the practical auditing skills
that students will develop.
5-2 Chapter 5 audit evidence
Auditing and Assurance Standards
PCAOB
AS 1105 audit evidence
AS 1205 part of the audit performed by Other
Independent auditors
AS 1210 Using the Work of a Specialist
AS 1215 audit Documentation
AS 2110 Identifying and assessing risks of Material
Misstatement
AS 2310 the Confirmation process
AS 2605 Consideration of the Internal audit Function
Auditing StAndArdS BOArd
Au-C 230 audit Documentation
Au-C 315 Understanding the entity and Its environment
and assessing the risks of Material Misstatement
Au-C 500 audit evidence
Au-C 505 external Confirmations
Au-C 600 Special Considerations—audits of Group
Financial Statements (Including the Work of Component
auditors)
Au-C 610 Using the Work of Internal auditors
Au-C 620 Using the Work of an auditor’s Specialist
At the next planning meeting for the Cloud 9 audit, Suzie Pickering
presents the results of the analytical procedures performed so far
and a working draft of the audit program. The audit manager,
Sharon Gallagher, and the audit senior, Josh Thomas, are also in-
volved in the planning, with special responsibility for the internal
control assessment.
The meeting’s agenda is to discuss the available sources of ev-
idence at Cloud 9 and specify these in the detailed audit program.
The team members also must ensure they have enough evidence
to conduct the audit. Two specific issues worry members of the
team. First, there are three very large asset balances on Cloud 9’s
trial balance that have particular valuation issues. Josh suggests
that a specialist will be required for the derivatives, but they can
handle the accounts receivable and inventory themselves. Second,
Sharon is worried about how they will gather evidence regarding a
subsidiary of Cloud 9 located in Vietnam. WS Partners does not
have an office in Vietnam, so they must determine the most effec-
tive and efficient way to gather evidence regarding the subsidiary.
In the planning meeting, the team considers the following
questions:
• What evidence is available?
• What criteria will the team use to choose among alternative
sources of evidence?
• What are the implications of using the work of specialists
and other auditors?
Chapter Preview—Audit Process in Focus
In Chapters 3 and 4, we considered audit risk and risk assessment. Those chapters focused
on the importance of risk identification to help ensure the auditor’s desired level of risk is
Learning Objectives
LO 1 Define management assertions about classes of
transactions, account balances, and presentation and
disclosure.
LO 2 Discuss the characteristics of audit evidence.
LO 3 apply the procedures for gathering audit evidence,
including the use of audit data analytics.
LO 4 evaluate when it is appropriate for auditors to use
the work of others.
LO 5 Document the details of evidence gathered in
working papers.
c05AuditEvidence.indd Page 2 04/03/19 8:37 PM F-0590 /208/WB02435/9781119401810/ch05/text_s
Sharon and Josh have already discussed some specific client accep-
tance issues, such as independence threats and safeguards. Sharon
explains they also must consider the overall integrity of the client
(that is, management of Cloud 9). This means they need to perform
and document procedures that are likely to provide information
about the client’s integrity. Josh is a little skeptical. “Do you mean
that we should ask them if they are honest?” Sharon suggests it is
probably more useful to ask others, and the key people to ask are
the existing auditors. Josh is still skeptical. “The existing auditors
are Ellis Associates. Are they going to help us take one of their
clients from them?” Sharon says the client must give permission
first, and, if that is given, the existing auditor will usually state
whether or not there were any issues that the new auditor should
be aware of before accepting the work. This type of communica-
tion is covered by AS 2610 (AU-C 210 for private company clients)
and is part of professional ethics. Sharon also gives Josh the task
of researching Cloud 9’s press coverage, with special focus on any-
thing that may indicate poor management integrity.
Sharon emphasizes they must perform and document proce-
dures to determine whether WS Partners is competent to per-
form the engagement and has the capabilities, time, and resources
to do so. For example, they must make sure they have audit team
members who understand the clothing and footwear business.
They also must have enough staff to complete the audit on time.
In addition, Sharon and Josh must perform and document
procedures to show that WS Partners can comply with all parts
of the code of professional conduct, not just those that focus on
independence threats and safeguards. Finally, they can draft the
engagement letter to cover the contractual relationship between
WS Partners and Cloud 9.
Auditing and Assurance Standards
PCAOB
AS 1015 Due Professional Care in the Performance of Work
AS 1101 Audit Risk
AS 1301 Communications with Audit Committees
AS 2101 Audit Planning
AS 2105 Consideration of Materiality in Planning and
Performing an Audit
AS 2110 Identifying and Assessing Risk of Material
Misstatement
AS 2301 The Auditor’s Responses to the Risks of
Material Misstatement
AS 2401 Consideration of Fraud in a Financial
Statement Audit
AS 2610 Initial Audits—Communication Between
Predecessor and Successor Auditors
AUDITING STANDARDS BOARD
AU-C 200 Overall Objectives of the Independent
Auditor and the Conduct of an Audit in Accordance With
Generally Accepted Auditing Standards
AU-C 210 Terms of Engagement
AU-C 240 Consideration of Fraud in a Financial
Statement Audit
AU-C 300 Planning an Audit
AU-C 315 Understanding the Entity and Its Environment
and Assessing the Risks of Material Misstatement
AU-C 320 Materiality in Planning and Performing an
Audit
AU-C 330 Performing Audit Procedures in Response to
Assessed Risks and Evaluating Audit Evidence Obtained
QC10 A Firm’s System of Quality Control
Learning Objectives
LO 1 Evaluate client acceptance and continuance
decisions.
LO 2 Identify the different phases of an audit.
LO 3 Explain and apply the concept of materiality.
LO 4 Explain professional skepticism and apply the
audit risk model.
LO 5 Explain how auditors determine their audit
strategy and how audit strategy affects audit decisions.
LO 6 Explain the fraud risk assessment process and
analyze fraud risk.
Auditing and Assurance Standards that are dis-
cussed are listed at the beginning of each chapter
for quick reference. A complete overview of all
standards is available at the front of the text.

UNIQUE PEDAGOGICAL FRAMEWORK ix
Detailed illustrations help students visualize
complex processes and important concepts.
Illustration 3.12 provides a diagram of the process used when developing the audit strat-
egy for an account or assertion. Notice that the left side of the diagram provides an overview
of the reliance on controls approach described in this section.
controls continue to be strong, she will also perform substantive procedures on the existence of
inventory at an interim date.
Determine whether an internal control(s) can
mitigate the risk factor
Identify inherent risks at the account or assertion level
Test the
control(s)
Substantive
Approach
Reliance
on
Controls
Approach
Is the control(s)
effective? Does it work?
Increase extent of detailed
substantive procedures
performed at year-end
Does the control(s)
exist?
NO
NO
NO
Perform less extensive
detailed substantive
procedures at interim
YES
YES
YES
ILLUSTRATION 3.12
Process used when developing
an audit strategy at the
account or assertion level
6-4 Chapter 6 Gaining an Understanding of the Client’s System of Internal Control
the COSO Framework
The COSO framework has global acceptance and is the most commonly recognized frame-
work for understanding and evaluating a system of internal control. It has three dimensions,
as shown in Illustration 6.1. First, the COSO framework discusses the objectives of internal
control. Second, the COSO framework discusses important components of internal control.
Third, the COSO framework discusses how these objectives and components fit into an orga-
nizational structure.
Control activities
Entity
Division
Operating
unit
Function
Organizational
structure
Components
Objectives
Information and communication
Monitoring activities
O
p
e
r
a
t
i
o
n
s
R
e
p
o
r
t
i
n
g
C
o
m
p
l
i
a
n
c
e
Risk assessment
Control environment
iLLuStrAtiOn 6.1
The relationship among the
three dimensions of internal
control: objectives, components,
and organizational structure
Objectives of Internal Control
The COSO framework depicted in Illustration 6.1 identifies three objectives of internal control
that allow organizations to focus on the differing purposes of internal control. These three
objectives are:
• Operations objectives. These pertain to the effectiveness and efficiency of the entity’s op-
erations, including operational and financial performance goals, and safeguarding assets
against loss.
• Reporting objectives. These pertain to internal and external financial and nonfinancial
reporting and may encompass reliability, timeliness, transparency, or other terms as set
forth by regulators, recognized standard setters, or the entity’s policies.
• Compliance objectives. These pertain to adherence to laws and regulations to which the
entity is subject.
(COSO, Internal Control—Integrated Framework, 2013)
These three objectives of internal control help the auditor understand why the controls are
important and the problems they are designed to prevent. Without understanding the in-
tention of management in implementing internal controls, it is harder to understand how
controls prevent, or detect and correct, financial statement misstatements. Management
and those charged with governance are concerned about adequately controlling the entity’s
operations, its financial reporting, and its compliance with laws and regulations. The exter-
nal auditor, on the other hand, is primarily concerned with the reporting objectives and the
operations objectives related to safeguarding of assets.
Components of Internal Control
The second dimension of the COSO framework depicted in Illustration 6.1 identifies five
integrated components of internal control:
• Control environment.
• Risk assessment.
• Control activities.
c06GainingAnUnderstandingOfTheClientsSystemOfInternalControl.indd Page 4 04/03/19 5:48 PM F-0590 /208/WB02435/9781119401810/ch06/text_s
Professional Environment boxes
provide in-depth discussions of
how concepts in a chapter are ap-
plied in the business world.
5-20 CHAPTER 5 Audit Evidence
Using the Work of Internal Auditors
The role of the internal audit function was introduced in Chapter 1. Internal auditors are
employees of the client who perform assurance and consulting activities designed to evaluate
and improve the effectiveness of the entity’s governance, risk management, and internal con-
trol processes. Not every client will have an internal audit function. For example, small and
medium-sized companies, especially private companies, may not have the resources to staff
an internal audit function. But if the client does have an internal audit function, what role,
if any, do the internal auditors play in the financial statement audit? According to AU-C 610
internal auditors employees
of the client who perform assur-
ance and consulting activities
designed to evaluate and improve
the effectiveness of the entity’s
governance, risk management,
and internal control processes
Josh will take responsibility for obtaining a specialist’s opinion on
the derivatives. He knows that WS Partners has other staff (who
are not part of the audit team) who can provide additional expertise.
However, because he believes the accounts are so material to the
audit and derivatives have become such a big issue in audits in recent
years, he deems an external specialist’s opinion is also required. He
has some experience of using a derivatives specialist on prior audits,
and he also plans to ask Jo Wadley (the partner) to recommend a
suitable specialist.
Josh plans to investigate any possible connections between
the specialist and Cloud 9 that could adversely impact the special-
ist’s objectivity before engaging him for this audit.
Professional Environment Working with IT Auditors
Specialist IT auditors are often used in audits of clients with com-
plex information technology (IT) environments because the effec-
tive audit of the IT systems contributes to overall audit quality.
Large audit firms usually have such specialists within the firm, but
smaller audit firms could engage external IT consultants for this
part of the financial statement audit. In general, reliance on an
IT specialist is appropriate when the financial statement auditor
complies with the conditions of AU-C 620.
If the IT expert and the financial statement auditor do not
work well together, audit quality can be impaired. For this rea-
son, researchers have investigated the factors that affect the way
that financial statement auditors work with specialist IT auditors.
Brazel12
reviewed this research evidence and drew the following
conclusions. First, responses from financial statement auditors in
the United States who were surveyed about their experiences with
IT auditors indicated that they believe IT auditors’ competence
levels vary in practice. Financial statement auditors also said that
IT auditors appear to be overconfident in their abilities in some
settings, and questioned the value provided by IT auditors to the
financial statement audit.
Second, Brazel suggests the research shows that both finan-
cial statement auditors’ IT ability and experience and the IT audi-
tor’s competence affect how these two professions interact on an
audit engagement. This indicates that audit firms need to ensure
that staff training and scheduling produce appropriate combi-
nations of financial statement auditors and IT auditors on an
engagement.
Finally, Brazel argues that the research findings demon-
strated that auditors need to consider the implications of finding
a balance between greater software-assisted audit techniques
training for financial statement auditors and greater use of IT
specialists for overall audit efficiency and effectiveness.
The role of IT audit specialists could grow to become even
more than a support function for auditors. Some researchers
suggest that in e-businesses, the external financial statement
auditor’s authority will be challenged by IT audit specialists be-
cause of technological change and its impact on auditing.13
In
e-businesses, economic transactions are captured, measured,
and reported on a real-time basis without either internal human
intervention or paper documentation.14
Auditing is likely to be-
come more real-time and continuous to reflect the pattern of the
transactions. If traditional auditors are unwilling or unable to
adapt to the new environment, their role could be taken over by
IT specialists.
Other developments such as reporting using XBRL (eXten-
sible Business Reporting Language) provide challenges for au-
ditors as they have to adapt their techniques and approaches to
audit financial information that is disaggregated and tagged. Us-
ers can extract and analyze XBRL data directly without re-entry
and the tag provides additional information about the calculation
and source of the data. This means auditors have to recognize that
their clients are reporting financial data with different levels of
information and users might have greater expectations of the data.
Learn more about XBRL at www.xbrl.org.
12
J. F. Brazel. “How do financial statement auditors and IT auditors work together?” The CPA Journal,
November, 2008, pages 38–41.
13
A. Kotb, C. Roberts, S. Sian. “E-business Audit: Advisory Jurisdiction or Occupational Invasion?” Critical
Perspectives on Accounting 23, no. 6 (2012), pages 468–82.
14
Kotb et al., 2012.
Each chapter concludes with an Audit
Decision-Making Example that takes students
through specific steps of the audit process
while offering solutions to issues presented
throughout the example.
Audit Decision-Making Example
Background Information
You have been assigned to the audit of inventory for a private
company that owns and operates a chain of retail jewelers. The
company’s sales revenue has grown by 300% in the last two years,
primarily by acquisitions. Seventy-eight percent of the value of the
company’s inventory is in wedding rings, diamonds, gold neck-
laces, and high-end watches. Because the company has grown
through acquisition, the company has not yet brought two ac-
quired companies (representing 35% of sales) under the company’s
inventory system. As a result, the company is currently operating
with three different inventory-control systems. The core inventory
system being used by retail stores represents 65% of sales. Sixty
percent of inventory was tested in the prior year and controls over
the existence of inventory were effective.
The CFO’s top priority is to put all retail operations under this
one inventory-control system by the end of the fiscal year (Janu-
ary 31). He is particularly concerned about lower than expected
gross margins at some of the acquired stores, and he expects that
better inventory control will improve this situation. In addition,
gold prices have risen 15% in the last 12 months, and the company
is making sure it is not selling “conflict diamonds” illegally traded
to fund conflict in war-torn areas of Africa. Your responsibility is
to develop an audit strategy for testing the existence of inventory.
Identify the Audit Issue
The focus of attention in this instance is to develop an audit strat-
egy for testing the existence of inventory. The auditor may develop
a different audit strategy for testing the valuation of that inventory.
Gather Information and Evidence
Important information includes:
• A significant portion of the inventory is high in value, small
in size, and susceptible to theft.
• A good system of internal controls may not be operating
effectively and uniformly.
• The weak gross margins in some stores may be evidence of
inventory shrinkage or theft.
• Fraud risk may be high in some locations due to the opportu-
nity offered by weak internal controls.
• The auditor needs to determine how internal controls affect
audit strategy, and whether the auditor wants one audit strat-
egy for part of the inventory and another audit strategy for
another part of the inventory.
Analysis and Evaluation of Alternatives
Analysis of risk:
• Inherent risk factors include valuable inventory that is sub-
ject to theft and misappropriation.
• Internal controls are not uniform. Based on prior year’s evi-
dence and a preliminary understanding of the system in the
current year, strong internal controls appear to operate over
only 60% of the inventory.
• It may be more efficient to physically inspect inventory as of
one date and use one audit strategy for all inventory testing.
• Fraud risk is considered to be high at locations where inven-
tory controls are not strong.
Conclusions Regarding Audit Strategy for the Existence
of Inventory
• Inherent risk is set at the maximum because inventory is
high in value and susceptible to theft and misappropriation.
• Control risk is set at high, as 40% of inventory may not have
sufficient internal controls.
• Fraud risk is considered high due to the opportunity offered
by weak internal controls.
• This results in setting detection risk at low.
• Low detection risk impacts the nature, timing, and extent of
substantive testing. For example, the auditor will plan test-
ing of the physical existence of inventory at year-end, select
a larger number of locations to visit, and vary the extent of
inventory testing at each location depending on internal con-
trols over the counting of inventory at each location.
CPAexcel
CPAexcel questions and other resources are available in WileyPLUS.
Many illustrations, such as work-
ing papers and confirmations,
present documents that students
will encounter in a real-world
audit.
Documentation—Audit Working Papers 5-27
alternative for environmentally conscientious customers. NME operates from three locations
and produces a wide range of household products that it sells to supermarkets and specialty
stores.
At the front of every audit file is a copy of the client’s trial balance that supports the fi-
nancial statements. The trial balance is then referenced into the appropriate lead and support-
ing schedules in the audit file where audit work is documented for each account in the trial
balance. At Bell Bowerman, LLP, the trial balance is referenced using the letter “A”; cash
and cash equivalents in various banks are referenced into the C Lead; accounts receivable are
referenced into the E Lead; inventory accounts are referenced into the F Lead; property, plant
and equipment are referenced into the K Lead; and so on.
The first working paper example is the cash and cash equivalents lead schedule
(see Illustration 5.8). The purpose of this lead is to summarize all general ledger accounts
that are combined into the cash and cash equivalents account on the financial statements.
The lead schedule also has adjusting journal entries, if any, that are proposed by the auditor.
In the top-left corner of the lead schedule are the client name, period-end, and currency
unit (in this example, balances are rounded to the nearest thousand dollars). In the top
center of the lead schedule is section identification (C). In the top-right corner, details of
the working paper preparer and reviewers are documented. Next, details of the cash and
cash equivalents balance are listed. For each item listed in the lead schedule, the following
are noted:
• General ledger account number, per the client records.
• General ledger account name, per the client records.
• Preadjusted balance, any adjustments, and the audit-adjusted current-year balance per
the client’s trial balance (TB).
• The prior-year balance, per the prior-year audit file (PY).
Bell Bowerman, LLP
Client: New Millennium Ecoproducts
Period-end: 12/31/2022
Currency unit: $000
C–LEAD
Reference: C-Lead
Prepared by: KM 1/21/2023
Reviewed by: SO 1/22/2023
Reviewed by: MM 1/24/2023
Lead schedule:
Account
no. Account name
Pre-
adjusted
balance
12/31/2022 Adjustments
Adjusted
current-year
balance
12/31/2022
Prior-year
balance
12/31/2021 Variance
%
Variance Ref
Cash in Bank: Wells Fargo $ 11,000 $0 $ 11,000 TB PY 5% C01
Cash in Bank: U.S. Bank 134 0 134 TB PY 0% C02
Cash in Bank: Barclays 126 0 126 TB PY 0% C03
Cash in Bank: Citigroup 56 0 56 TB PY 12% C04
10400
10500
10100
10200
10300
Short-Term Deposits 5,796 0 5,796 TB PY 4% C05
Total Cash and Cash
Equivalents
$17,112 $0 $17,112
$ 10,500
134
126
50
5,600
$16,410
$500
0
0
6
196
$702 4%
Key to audit tick marks (TM):
TB Agrees to client’s trial balance.
PY Agrees to prior-year audit file.
Background: No significant changes in banks or bank accounts from the prior period. Note: Analytical review on movements in the cash flows has
been performed on the cash flow schedule — see A1.1.
Comments: Cash and cash equivalents: In line with budget and change consistent with level of activity for the period (see also our review of the
statement of cash flows referenced in A1.1). Short-term deposits: Although the balance is very consistent with previous period, inclusion of
short-term deposits within cash and cash equivalents is acceptable (refer to C5).
ILLUSTRATION 5.8 Working paper example: Cash lead schedule
Audit Reasoning Examples apply chapter
concepts in brief real-world scenarios that
students might encounter in a professional
environment. They also provide real-world
company examples of chapter concepts.
Professional Skepticism and Audit Risk 3-15
Professional Skepticism
Auditors have a responsibility to plan and perform an audit with professional skepticism.
Professional skepticism is an attitude adopted by auditors when conducting all phases of the
audit. It means that auditors remain independent of the entity, its management, and its staff
when completing the audit work. In a practical sense, professional skepticism means au-
ditors maintain a questioning mind and thoroughly investigate all evidence presented by the
client (AS 1015.07). For example, AU-C 200.A22 states auditors should be skeptical if any of
the following arise during the audit:
• Audit evidence recently gathered that is contradictory to other evidence previously gathered.
• New information that brings into question the reliability of client documents or responses
to auditor inquiries.
• Conditions that may provide evidence of possible fraud.
• Situations that indicate the need for additional audit procedures beyond what is required
by generally accepted auditing standards.
Does maintaining professional skepticism mean auditors should assume client manage-
ment is being dishonest? The answer is no. Auditors should not assume management is dis-
honest, but at the same time, auditors should not assume management is always honest or
correct. Using professional skepticism means that even if auditors believe management and
those charged with governance are being honest, they should gather reliable evidence to sup-
port management’s responses to auditor inquiries and to support amounts and disclosures
in the financial statements. Throughout all phases of the audit, auditors should keep these
questions in mind when gathering audit evidence: Is this information reliable? Do we need to
perform more audit procedures? When auditors exercise professional skepticism during the
risk assessment phase, it helps to ensure they are using appropriate assumptions when devel-
oping their audit strategy that will be used in the risk response phase. In the reporting phase,
auditors use professional skepticism when evaluating the evidence gathered and forming an
opinion that the financial statements are presented fairly.
professional skepticism an
attitude that includes a question-
ing mind, being alert to condi-
tions that may indicate possible
misstatement due to fraud or
error, and a critical assessment of
audit evidence
Audit Reasoning Example Professional Skepticism
An auditor was auditing a recreational vehicle (RV) dealership. The auditor had obtained some
initial financial information from the client showing unaudited results for the end of the third
quarter. Sales were up and profit margins were up, making it the best year so far for the client.
Interim records showed that inventory was also up, and the client’s inventory records showed over
300 RVs on hand at the end of the third quarter. The audit senior went to talk to the audit man-
ager about the good news and the client’s performance. The audit manager asked the senior a key
question. “You did the inventory observation last year. How many RVs did the client have then?”
“I think it was about 210,” the senior replied. Then the audit manager asked, “How full was the lot
last year?” The senior replied that it was “almost overflowing” the year before. The manager then
said, “Let’s look at this more skeptically. I don’t think they have storage capacity for another 90
RVs even though sales are up. There could be an error in the inventory records. This information
makes me believe that the existence of inventory is a very high inherent risk.”
Audit Risk
Audit risk is the risk that an auditor expresses an inappropriate audit opinion when financial
statements are materially misstated (AU-C 200 Overall Objectives of the Independent Auditor
and the Conduct of an Audit in Accordance With Generally Accepted Auditing Standards and
AS 1101 Audit Risk). This means the audit report states the financial statements are presented
fairly, in all material respects, when in actuality the financial statements contain a material
error or fraud. While it is impossible to eliminate audit risk, auditors aim to reduce it to an
• Ongoing losses.
• Rapid growth.
• Poor cash flows combined with high earnings.
• Pressure to meet market expectations and profit targets.
• Planning to list on a stock exchange.
• Planning to raise debt or renegotiate a loan.
• The client being about to enter into a significant new contract.
• A significant proportion of remuneration tied to earnings (that is, bonuses or stock options).
Audit Reasoning Example Fraud at Toshiba: Part I
You may be familiar with Toshiba Corporation, a publicly traded Japanese company headquar-
tered in Tokyo that makes consumer electronics, household electronics, office equipment, and
more. In July 2015, the CEO of Toshiba announced he was resigning amid an accounting scandal
in which profits had been overstated for the past seven years by approximately $1.9 billion (224.8
billion yen). What incentives and pressures were involved that led to the fraud? The technology
industry is extremely competitive and Toshiba’s upper management set aggressive profit targets.
The home electronics and appliances division was showing losses and the memory chip division
was feeling pressure because of decreasing demand from Chinese electronics companies.6
As an
example, in September 2012, the head of the digital products and service division was told by the
CEO to improve a 24.8 billion yen loss into a 12 billion yen profit in just three days!7
Think about
how the external auditor would learn about the incentives given to lower-level management. How
might an internal auditor learn about these incentives?
Opportunities to Perpetrate a Fraud
After identifying one or more incentives or pressures to commit a fraud, auditors assess
whether a client’s employees have an opportunity to perpetrate a fraud. Auditors utilize their
knowledge of how other frauds have been perpetrated to assess whether the same opportuni-
ties exist at the client. While the examples below of opportunities to commit a fraud suggest
a fraud may have been committed, their existence does not mean a fraud has definitely oc-
curred. Auditors must use professional judgment to assess each opportunity in the context of
other risk indicators and consider available evidence thoroughly.
Examples of opportunities that increase the risk that a fraud may have been perpetrated
include:
• Accounts that rely on estimates and judgment (discussed further in Chapter 9).
• A high volume of transactions close to year-end.
• Significant adjusting entries and reversals after year-end.
• Significant related-party transactions (discussed further in Chapter 4).
• Poor corporate governance mechanisms.
• Poor system of internal control (discussed further in Chapters 6 and 8).
• A high turnover of staff with accounting or internal control responsibilities.
6
E. Pfanner and M. Fujikawa, M. “Toshiba Slashes Earnings for Past Seven Years,” The Wall Street Journal,
September 7, 2015. https://www.wsj.com/articles/toshiba-slashes-earnings-for-past-7-years-1441589473
7
K. Nagata. “Pressure to show a profit led to Toshiba’s accounting scandal,” The Japan Times, September 18,
2015. http://www.japantimes.co.jp/news/2015/09/18/business/corporate-business/pressure-to-show-a-profit-
led-to-toshibas-accounting-scandal/#.WNJjNmQrLjA

x
Tableau Homework
Assignments
Tableau visualizations accompa-
nied by questions are available
with most chapters. Tableau vi-
sualizations allow students to in-
terpret visualizations and think
critically about data.
Engaging Students with WileyPLUS
IDEA Cases
Select chapters include IDEA cases that allow stu-
dents to use IDEA software to analyze data. An IDEA
casebook and accompanying data sets, provided by
Audimation Data Analytic Software and Services, is
also available.
Student Practice
Each chapter includes practice questions
for each learning objective that students
can review to assess their understanding
of chapter topics.
Auditing is completely integrated with WileyPLUS, featuring a suite of teaching and learning
resources developed under the close review of the authors. Driven by the same basic beliefs
as the text, WileyPLUS allows students to practice their understanding of concepts and access
the content and resources needed to master the material. Features of the WileyPLUS course
include the following:
Real-World Videos

Bloomberg videos accompany each chapter,
providing students with relevant examples of
auditing practices in the professional world.

ENGAGING STUDENTS WITH WILEYPLUS xi
Relevant Accounting
Articles
Up-to-date accounting articles are post-
ed to the Wiley accounting update site,
www.wileyaccountingupdates.com.
Many of these news updates direct
students to news-related videos and
articles that address auditing-related
topics.
Adaptive Practice
Adaptive practice is a tool students can use to
understand the essentials of auditing. Students
can answer a multiple-choice question and,
based on their response, the adaptive practice
software will recommend another question
to help students assess their understanding
of a topic. Detailed reports also help students
identify where they need to focus their studies.
There are hundreds of adaptive questions for
students to answer in the Auditing course.

Preparing for the CPA Exam
For each chapter in the WileyPLUS course, students can access CPAexcel videos, CPA Exam
Practice Questions in the PrometricTM
Testing Interface, and Task-Based Simulations (TBSs),
which are the primary form of assessment used by the American Institute of Certified Public
Accountants (AICPA). These resources:
1. Reinforce understanding of course topics.
2.
Demonstrate relevance to show students how the auditing content they are learning will be
assessed on the CPA exam.
3. Build student confidence with early exposure to CPA exam questions.
xii
CPA Exam Practice Questions in
the Prometric™ Testing Interface
Wiley partners with CPAexcel to provide pre-created
CPA exam practice questions for each chapter that
recreate the environment students will encounter on
the CPA exam.
CPA Exam Assignment
Each chapter includes one pre-created CPA
exam assignment that allows instructors to
assign multiple-choice questions adapted
from prior CPA exams. Student performance
is tied to the WileyPLUS gradebook.
Task-Based Simulation in the
Prometric™ Testing Interface
CPA simulations recreate the simulation envi-
ronment students will see on the CPA exam.
Similar to the CPAexcel multiple-choice home-
work questions, instructors can assign a simu-
lation as a gradable assignment.
CPA Exam Video Lessons
Each chapter includes CPA exam text discus-
sions and videos that provide students with
insight into auditing topics commonly ad-
dressed on the CPA exams.

xiii
Each chapter of Auditing in WileyPLUS has over 300 assessment questions that can help keep
your students engaged and on track.
End-of-Chapter Assessment
Questions and Problems
Each Auditing text chapter concludes with over 40 gradable assessment questions and problems
you can use to gauge students’ understanding and ability to apply auditing concepts, as follows:
•
Multiple-Choice Questions—Available to quickly and effectively test students’ under-
standing of the chapter material.
•
Short Answer Questions—Open-ended questions that require students to begin
thinking critically about the auditing process.
•
Analysis Problems—Designed after scenarios students might encounter as auditors in
the business world, analysis problems assess how well students understand specific topics
in a chapter.
Cases
Because no two audits are alike, Auditing uses a practical, case-based approach to help stu-
dents develop professional judgment, think critically about the auditing process, and develop
the decision-making skills necessary to perform a real-world audit. The best way for a student
to learn auditing is to actually do auditing. To help provide real-world application, we have
developed the following cases:
•
Audit Decision Cases—Three cases run through most of the text chapters and provide
a broad review of the audit process (King Companies, Inc., Mobile Security, Inc., and
Brookwood Pines Hospital). In addition, chapter-specific cases help you assess students’
understanding of topics that are the focus of a particular chapter.
•
Cloud 9 Continuing Case—Requires students to apply chapter concepts to the ongoing
Cloud 9 case that is highlighted in the chapter.
To help you more easily identify what questions you want to assign, questions are tagged
with learning objectives, professional AICPA and AACSB outcome standards, Bloom’s
Taxonomy, level-of-difficulty, and a recommended time of completion. You can track student
performance in the WileyPLUS gradebook.
Test Bank
Each chapter of the test bank has between 130–175 questions that you can assign to students
in an exam or as graded practice. Question types include true/false, multiple-choice, fill-in-
the blank, and short answer questions. To help you more easily identify what questions you
want to assign, questions are tagged with learning objectives, professional AICPA and AACSB
outcome standards, Bloom’s Taxonomy, level-of-difficulty, and a recommended time of com-
pletion. You can track student performance in the WileyPLUS gradebook.
Student Assessment

xiv
Acknowledgments
Auditing has benefited tremendously from the input of students who have used this text’s ma-
terial in class, manuscript reviewers, and those who have supported the writing. We are very
appreciative of all the suggestions and comments received. The thoughts, ideas, and recom-
mendations of reviewers, editorial staff, and ancillary authors is deeply appreciated.
Anne Albrecht
Texas Christian University
Matthew Anderson
Michigan State University
Marie Blouin
Ithaca College
A. Faye Borthick
Georgia State University
Billy Brewster
Texas State University
Jeffrey R. Cohen
Boston College
Laurence DeGaetano
Montclair State University
Kristina Demek
University of Central Florida
Lisa Derouin
Wisconsin Lutheran College
Raymond Elson
Valdosta State University
Reza Espahbodi
Washburn University of Topeka
Magdy Farag
California Polytechnic University—Pomona
Dale Flesher
University of Mississippi
Scott Fulkerson
University of California—Santa Barbara
Lori Fuller
West Chester University
Abo-El-Yazeed Habib
Minnesota State University—Manka
James Hansen
Weber State University
Julia Higgs
Florida Atlantic University
Karen Hooks
Florida Atlantic University
Carol Jessup
University of Illinois—Springfield
Bill Joyce
Bemidji State University
Walied Keshk
California State University—Fullerton
Katherine Kinkela
Iona College
Milton Krivokuca
California State University—Dominguez Hills
Ellen L. Landgraf
Loyola University—Chicago
Betsy Lin
Montclair State University
Cathy Liu
University of Houston—Downtown
Joe Looney
Hofstra University
Roger Martin
University of Virginia
Linda McCann
Metropolitan State University
Karen McDougal
Pennsylvania State University—Brandywine
Linda McKeag
University of Dubuque
Mary Mindak
DePaul University
Paula Mooney
Savannah State University
Grace Mubako
California Stata University—Sacramento
Christine Noel
Metropolitan State University of Denver
Connie O’Brien
Minnesota State University—Mankato
Aimee Pernsteiner
University of Wisconsin—Eau Claire
Rossen Petkov
Lehman College
Lincoln Pinto
Concordia University Chicago
Marshall Pitman
University of Texas—San Antonio
Dwayne Powell
Arkansas State University
Matthew Reidenbach
Pace University—New York
Gary Schneider
California State University—Monterey Bay
Dan Schrag
Baldwin Wallace University
Edward B. Seibert
Wesley College
Jamie L. Seitz
University of Southern Indiana
Suzanne Seymoure
Saint Leo University, University Campus
Philip Slater
Forsyth Technical Community College
Vicki Stewart
Texas AM University—Commerce
Paula Thomas
Middle Tennessee State University
Andrea Tietjen
Caldwell College
Patricia Timm
Northwood University—Michigan
Madeline Trimble
Illinois State University
Richard Turpen
University of North Carolina—Asheville
Lisa Victoravich
University of Denver
Jim Vogt
University of Colorado—Denver
Rick Warne
University of Cincinnati
Amanda Warren
University of Tennessee—Knoxville
Barrett Wheeler
Tulane University
Fengyun Wu
Manhattan College

Acknowledgments xv
Ancillary Authors,
Contributors, Proofreaders,
and Accuracy Checkers
Sanaz Aghazadeh
Louisiana State University
LuAnn Bean
Florida Institute of Technology
Joe Brazel
North Carolina State University
Rich Brody
The University of New Mexico
Emily Cokeley
Rochester Institute of Technology
Sheila Coomes
Kansas State University
Kel-Ann Eyler
Georgia College and State University
Paul Franklin
Purdue Global
Amber Gray
Adrian College
Frederick Harmon
University of Bridgeport
Eric Johnson
University of Wyoming
Joe Johnston
Illinois State University
Brett Kawada
San Diego State University
Jason MacGregor
Baylor University
Linda McKeag
University of Dubuque
Anita Morgan
Indiana University
Byron Pike
Minnesota State University—Mankato
Sridhar Ramamoorti
University of Dayton—Ohio
Matthew Sargent
University of Texas—Arlington
Edward Seibert
Wesley College
Tim Seidel
Brigham Young University
Jamie Seitz
University of Southern Indiana
Margaret B. Shackell-Dowell
Ithaca College
Philip J. Slater
Forsyth Technical Community College
Vicki Stewart
Texas A M University—Commerce
Jaclyn Strauss
Purdue Global
Floran Syler
Azusa Pacific University
Andrea Tietjen
Caldwell College
Jim Vogt
San Diego State University
Rick Warne
University of Cincinnati
Gail E. Wright
Ally Zimmerman
Northern Illinois University
We also want to thank several individuals for their help in
moving this text from concept to publication. This work would
not have come to fruition without the extensive support and
guidance of Emily Marcoux, Michael McDonald, Joel Hollen-
beck, Ed Brislin, Matt Origoni, Valerie Vargas, Sandra Rigby,
Kirsten Loose, Terry Ann Tatro, Nicola Smith, and Jackie Henry
at Aptara.
We appreciate suggestions and comments from users—
instructors and students alike. Please send us your thoughts
and ideas about the text.
Raymond Johnson Laura Wiley
Portland, Oregon Baton Rouge, Louisiana

Table of Contents
1
Introduction and Overview of Audit
and Assurance 1-1
Assurance, Attestation, and Audit Services 1-3
Different Assurance Services 1-6
Financial Statement Audits 1-6
Compliance Audits 1-7
Operational (Performance) Audits 1-7
Internal Audits 1-8
Demand for Audit and Assurance Services 1-8
Financial Statement Users 1-9
Sources of Demand for Audit and Assurance Services 1-10
Preparers and Auditors 1-11
Preparer Responsibility 1-11
Auditor Responsibility 1-11
Assurance Providers 1-12
The Role of Regulators and Regulations 1-13
Securities and Exchange Commission (SEC) 1-13
Public Company Accounting Oversight Board (PCAOB) 1-13
American Institute of Certified Public Accountants
(AICPA) 1-15
Financial Accounting Standards Board (FASB) 1-17
Committee on Sponsoring Organizations of the Treadway
Commission (COSO) 1-18
National Association of State Boards of Accountancy
(NASBA) and State Boards of Accountancy 1-18
Audit Report on Financial Statements 1-19
Reasonable Assurance and the Financial Statements 1-19
Materiality and the Financial Statements 1-20
The Auditorʼs Report on Financial Statements 1-20
Audit Report on Internal Controls over
Financial Reporting 1-25
Reasonable Assurance and Internal Controls 1-25
The Auditor’s Report on Internal Control over Financial
Reporting 1-26
The Audit Expectation Gap 1-28
2
Professionalism and Professional
Responsibilities 2-1
Professionalism and Accounting 2-3
The Structure of the AICPA Code of Professional
Conduct 2-5
Conceptual Framework for Members
in Public Practice 2-7
Integrity and Objectivity 2-11
Independence 2-12
Key Individuals and Independence Requirements 2-13
Employment or Association with an Attest Client 2-17
Nonattest Services 2-18
SEC and PCAOB Independence Rules 2-20
General Standards 2-23
Other Rules of Conduct for Members in
Public Practice 2-24
Accounting Principles Rule 2-25
Fees and Other Types of Remuneration 2-25
Confidential Information 2-26
Auditor Liability Under Common Law 2-26
Liability to Clients 2-27
Contract Law 2-27
Tort Law 2-28
Cases Illustrating Liability to Clients 2-28
Liability to Third Parties 2-29
Burden of Proof and Common Law Defenses 2-32
Auditor Liability Under Statutory Law 2-33
The Securities Act of 1933 2-34
The Securities Act of 1934 2-35
The Foreign Corrupt Practices Act of 1977 2-36
The Private Securities Litigation Reform Acts of 1995 and
1998 2-36
The Sarbanes-Oxley Act of 2002 2-37
Criminal Liability 2-39
3
Risk Assessment Part I: Audit Risk
and Audit Strategy 3-1
Client Acceptance and Continuance Decisions 3-3
Phases of an Audit 3-8
Risk Assessment Phase 3-9
Risk Response Phase 3-9
Concluding and Reporting on an Audit 3-10
Materiality 3-10
Qualitative and Quantitative Materiality 3-11
Setting Materiality 3-11
Professional Skepticism and Audit Risk 3-14
Professional Skepticism 3-15
Audit Risk 3-15
The Audit Risk Model and Its Components 3-17
Audit Strategy 3-21
Reliance on Controls Approach 3-22
Substantive Approach 3-24
Fraud Risk 3-25
Incentives and Pressures to Commit a Fraud 3-27
xvi

Opportunities to Perpetrate a Fraud 3-28
Attitudes and Rationalization to Justify a Fraud 3-29
Fraud Risk Assessment Process 3-30
4
Risk Assessment Part II:
Understanding the Client 4-1
Understanding the Client 4-3
Gain an Understanding of the Entity 4-3
Gain an Understanding of the Industry and Business
Environment 4-8
Compliance with Laws and Regulations 4-10
Client Approaches to Measuring Performance 4-12
Profitability 4-12
Liquidity, Solvency, and Cash Flow 4-13
Analytical Procedures 4-14
Comparisons 4-14
Trend Analysis 4-15
Common-Size Analysis 4-15
Ratio Analysis 4-16
Audit Data Analytics 4-20
Factors to Consider When Conducting
Related Parties 4-22
Corporate Governance 4-23
Internal Control and Information Technology 4-26
Closing Procedures 4-27
5 Audit Evidence 5-1
Management Assertions 5-3
Characteristics of Audit Evidence 5-7
Sufficient Audit Evidence 5-7
Appropriate Audit Evidence 5-8
Audit Risk and Sufficient Appropriate Audit Evidence 5-9
Procedures for Gathering Audit Evidence 5-10
Inspection of Documents and Assets 5-11
Observation 5-12
Inquiry 5-12
Confirmation 5-13
Recalculation 5-15
Reperformance 5-16
Scanning 5-16
Audit Data Analytics (ADA) 5-16
Using the Work of Others 5-18
Using the Work of a Specialist 5-18
Using the Work of Internal Auditors 5-20
Using the Work of Another Auditor 5-23
Documentation—Audit Working Papers 5-24
Permanent File 5-25
Current File 5-26
6
Gaining an Understanding of
the Client’s System of Internal
Control 6-1
Internal Control Defined 6-3
The COSO Framework 6-4
Inherent Limitations 6-6
Entity-Level Internal Controls 6-7
The Control Environment 6-7
Risk Assessment 6-10
Control Activities 6-11
Information and Communication 6-14
Monitoring Activities 6-16
Internal Control in Small Entities 6-17
Transaction-Level Internal Controls 6-19
Example Transaction Flows—Sales Process 6-19
Example Transaction Flows—Cash Receipts 6-21
Information Technology (IT) Controls 6-23
Benefits and Risks of IT Systems 6-23
IT General Controls 6-24
IT Application Controls 6-25
IT-Dependent Manual Controls 6-27
Documenting Internal Controls 6-29
Identifying Strengths and Weaknesses in a
System of Internal Controls 6-31
Management Letters 6-33
7
Steps in Performing Audit Data Analytics 7-3
Step 1: Plan the Audit Data Analytics 7-5
Step 2: Access and Prepare the Data for Audit Data
Analytics 7-6
Step 3: Consider the Relevance and Reliability of the
Data Used 7-6
Step 4: Perform the Audit Data Analytics 7-7
Step 5: Evaluate the Results and Draw Conclusions 7-8
Audit Documentation 7-9
Steps Associated with Accessing and Preparing Data for
Is the Data Complete? 7-11
Does the Data Need to Be Cleaned? 7-11
Key Questions to Be Addressed in Evaluating the Relevance
and Reliability of Data Used in Audit Data Analytics 7-12
Using Audit Data Analytics as a Risk Assessment
Procedure 7-13
Understanding the Risk Analysis Decision Tree 7-14
What Do We Mean by Notable Items? 7-15
Tools for Searching for Notable Items 7-15
What to Do When ADA Identifies a Large Number of Items
for Further Consideration 7-16
Table of Contents xvii

xviii Table of Contents
Applying Audit Data Analytics as a Risk Assessment
Procedure 7-17
Cluster Analysis 7-18
Matching Information in Key Data Fields 7-25
Regression Analysis 7-30
Visualization 7-34
Using Audit Data Analytics as a Substantive Test 7-37
Applying Audit Data Analytics as a Substantive Test 7-38
Validating Sales Revenue and Accounts Receivable with
Subsequent Cash Receipts 7-38
8
Risk Response: Performing Tests
of Controls 8-1
Steps in Assessing Control Risk 8-3
Understand Entity-Level Controls 8-3
Understand the Flow of Transactions 8-3
Identify What Can Go Wrong (WCGW) 8-4
Identify Relevant Controls to Test 8-5
Determine Preliminary Audit Strategy 8-5
Perform Tests of Controls 8-5
Evaluate Evidence and Assess Control Risk 8-5
Reporting Findings 8-5
Types of Controls 8-7
Preventive and Detective Controls 8-7
Manual and Automated Controls 8-10
Procedures for Testing Controls 8-13
Inquiry 8-13
Observation 8-14
Inspection of Physical Evidence 8-14
Reperformance 8-14
Software-Based Audit Techniques 8-14
Selecting and Designing Tests of Controls 8-15
Which Controls Should Be Selected for Testing? 8-16
The Extent of Tests of Controls 8-17
Timing of Tests of Controls 8-21
Benchmarking 8-22
Selecting and Designing Tests of Controls—A Summary 8-23
Results of the Auditor’s Testing 8-26
Documenting Conclusions 8-29
9
Risk Response: Performing
Substantive Procedures 9-1
Audit Risk and Substantive Procedures 9-3
Risk Response at the Financial Statement Level 9-5
Nature of Substantive Procedures 9-7
Initial Procedures 9-8
Substantive Analytical Procedures 9-9
Tests of Details 9-13
ADA and Substantive Procedures 9-13
Timing of Substantive Procedures 9-14
Extent of Substantive Procedures 9-16
Auditing Accounting Estimates 9-19
Nature of Accounting Estimates 9-19
Risk Assessment Procedures for
Accounting Estimates 9-21
Risk Response Procedures for Accounting Estimates 9-22
Example of Auditing Accounting Estimates 9-24
Documenting Results of Substantive Procedures 9-26
10
Risk Response: Evaluating Audit
Data Analytics and Audit Sampling
for Substantive Tests 10-1
Using Audit Data Analytics versus Audit Sampling 10-3
When to Use Audit Data Analytics 10-3
When to Use Audit Sampling 10-3
Audit Sampling Defined 10-5
Sampling Risk and Nonsampling Risk 10-6
Statistical and Nonstatistical Sampling 10-8
Sampling Methods 10-9
Random Selection 10-9
Systematic Selection 10-10
Haphazard Selection 10-11
Professional Judgment in Selecting and Evaluating
Sample Items 10-11
Factors That Influence the Sample Size—Substantive
Testing 10-11
A Basic Framework for Audit Sampling 10-14
Step 1: Determine the Objectives of the Substantive
Test 10-14
Step 2: Determine the Substantive Audit Procedures to
Perform 10-14
Step 3: Determine Whether to Audit a Sample
or the Entire Population 10-15
Step 4: Define the Population and Sampling Unit 10-16
Applying Probability-Proportionate-to-Size Sampling
for Substantive Testing 10-16
Step 5: Choose the Audit Sampling Technique 10-17
Step 6: Determine Sample Size Using Professional
Judgment 10-18
Step 7: Select a Representative Sample 10-21
Step 8: Apply Audit Procedures 10-22
Step 9: Evaluate Sample Results 10-22
Applying Nonstatistical Sampling for Substantive
Testing 10-28
Step 5: Choose the Audit Sampling Technique 10-28
Step 6: Determine Sample Size Using
Professional Judgment 10-29
Step 7: Select a Representative Sample 10-29
Step 9: Evaluate Sample Results 10-30
Step 10: Document Conclusions 10-32

Table of Contents xix
Appendix 10A: Applying Classical Variables
Sampling for Substantive Testing 10-33
Step 5: Apply Classical Variables Sampling 10-33
Step 6: Determine the Sample Size 10-34
Step 7: Select a Random Sample 10-37
Step 9: Evaluate the Sample Results 10-38
Step 10: Document Results 10-39
11
Auditing the Revenue Process 11-1
Nature of the Revenue Process 11-3
Understanding the Entity and Its Environment 11-4
Understanding the Client’s Revenue Process 11-4
Other Considerations Regarding the Entity
and Its Environment 11-8
Inherent Risks in the Revenue Process 11-9
Control Activities for Credit Sales 11-12
Example Transaction Flows—Sales Process 11-13
Identify What Can Go Wrong (WCGW) and Identify
Key Controls—Credit Sales and Accounts
Receivable 11-16
Control Activities for Cash Receipts 11-18
Example Transaction Flows—Cash Receipts 11-19
Identify WCGW and Identify Key Controls—Cash
Receipts 11-21
Control Activities for Sales Adjustments
and Revenue Process Disclosures 11-23
Granting Sales Returns and Allowances 11-23
Determining Uncollectible Accounts 11-24
Other Controls in the Revenue Process 11-24
Tests of Controls in the Revenue Process and
Audit Strategy 11-25
Tests of Controls in the Revenue Process 11-25
Fraud Risk Assessment 11-26
Audit Data Analytics as a Risk Assessment Procedure 11-27
The Risk of Material Misstatement and Audit Strategy 11-27
Substantive Tests for the Revenue Process 11-28
Audit Data Analytics as a Substantive Test 11-31
Tests of Details of Transactions 11-32
Tests of Details of Balances 11-33
Tests of Details of Presentation and Disclosure 11-38
12
Auditing the Purchasing and
Payroll Processes 12-1
Nature of Purchase Transactions and Balances 12-3
Understanding the Client’s Purchasing Process 12-4
Other Considerations Regarding the Entity
and Its Environment 12-7
Inherent Risks in the Purchasing Process 12-8
Control Activities for Purchases 12-11
Example Transaction Flows—Credit Purchases 12-12
Identify What Can Go Wrong (WCGW) and Identify Key
Controls—Purchases and Accounts Payable 12-15
Control Activities for Cash Disbursements 12-18
Example Transaction Flows—Cash Disbursements 12-18
Identify What Can Go Wrong (WCGW) and
Identify Key Controls—Cash Disbursements 12-19
Evaluated Receipt Settlement (ERS) 12-21
Initiating an ERS Transaction 12-21
Receiving Goods 12-22
Recording Payables 12-22
Electronic Payment 12-22
Internal Controls in an ERS System 12-23
Control Activities for Purchase Adjustments and
Purchasing Process Disclosures 12-24
Purchase Returns and Allowances 12-24
Other Controls in the Purchasing Process 12-25
Tests of Controls in the Purchasing Process and
Audit Strategy 12-26
Tests of Controls in the Purchasing Process 12-26
Audit Data Analytics as a Risk Assessment Procedure 12-27
The Risk of Material Misstatement and Audit
Strategy 12-28
Substantive Procedures for the Purchasing
Process 12-28
Tests of Details of Presentation and Disclosure 12-33
Appendix 12A: Auditing Payroll 12-34
Explain the Nature of Payroll Transactions and
Balances 12-34
Understanding the Client’s Payroll Process 12-35
Other Considerations Regarding the Entity and Its
Environment 12-36
Inherent Risks Related to Payroll 12-37
Control Activities for Payroll 12-38
Example Transaction Flows—Payroll 12-38
Identify What Can Go Wrong (WCGW) and Identify Key
Controls—Payroll 12-40
Tests of Controls in the Payroll Process and Audit
Strategy 12-42
Tests of Controls for Payroll 12-43
Audit Data Analytics Used in Fraud Risk Assessment 12-44

xx Table of Contents
The Risk of Material Misstatement and Audit
Strategy 12-44
Substantive Tests for the Payroll Process 12-45
Tests of Disclosures 12-48
13
Auditing Various Balance Sheet
Accounts (and Related Income
Statement Accounts) 13-1
Auditing Cash and Cash Equivalents 13-3
Understanding the Flow of Transactions 13-3
Understanding the Results of Analytical Procedures 13-4
Assessing Inherent Risk 13-4
Assessing Control Risk and Fraud Risk 13-4
Determining an Audit Strategy 13-4
Substantive Tests of Cash Balances 13-5
Auditing Inventory on the Balance Sheet 13-11
Understanding the Results of Analytical
Procedures 13-13
Substantive Tests of Inventory 13-19
Auditing Property, Plant, and Equipment 13-28
Understanding the Results of Analytical Procedures 13-30
Substantive Tests for Property, Plant, and Equipment 13-32
Auditing Financing Activities 13-37
Understanding the Results of Analytical
Procedures 13-39
Substantive Tests of Long-Term Debt 13-41
Substantive Tests of Stockholders’ Equity 13-44
14
Completing the Audit 14-1
Audit Procedures for Loss Contingencies 14-3
Subsequent Events 14-7
Engagement Wrap-Up 14-10
Final Analytical Procedures 14-11
Final Evaluation of Audit Findings 14-11
Completion of Working Paper Review 14-16
Engagement Quality Review 14-17
Completion of Documentation 14-17
Going Concern 14-18
Management Representation and Communication
with Those Charged with Governance 14-21
Management Representation Letter 14-21
Communication with Those Charged with Governance 14-24
15
Reporting on the Audit 15-1
Standard Unmodified/Unqualified Audit Report 15-3
Additional Paragraph for the Standard Unmodified
Report 15-7
Going Concern Paragraph 15-7
Consistency of Financial Statements 15-8
Emphasis Added at Discretion of the Auditor 15-10
Opinion Based in Part on the Report of Another
Auditor 15-12
Modifying the Audit Opinion 15-14
Departure from Applicable Financial Reporting
Framework 15-15
Scope Limitation 15-17
Subsequently Discovered Facts 15-22
Subsequently Discovered Facts That Become Known
Before the Report Release Date 15-22
Subsequently Discovered Facts That Become Known After
the Report Release Date 15-24
Reports on the Audit of icfr 15-26
Standard Unqualified Opinion on ICFR 15-26
Modified Opinion on ICFR 15-27
Compilation and Review Engagements 15-30
Compilation of Financial Statements 15-30
Review of Financial Statements 15-32
Appendix A
Cloud 9 Inc. Audit A-1
Cloud 9 Inc. Company Background A-1
Personnel A-2
Financial Information A-2
Transcript of Meeting with David Collier A-4
Glossary G-1
Index I-1

1-1
Introduction and
Overview of Audit
and Assurance
Chapter 1
Audit
Data
Analytics
(Chapter
7)
Audit
Evidence
(Chapter
5)
Client Acceptance/Continuance and Risk Assessment
(Chapters 3 and 4)
Develop Responses to Risk and an Audit Strategy
Gaining an
Understanding of
the Client
Identify Significant
Accounts and
Transactions
Set Planning
Materiality
Make Preliminary
Risk Assessments
The Audit Process
Overview of Audit and Assurance
(Chapter 1)
Completing and Reporting on the Audit
(Chapters 14 and 15)
Reporting
Drawing Audit
Conclusions
Procedures Performed Near
the End of the Audit
Auditing the Balance Sheet
and Related Income Accounts
(Chapter 13)
Auditing the Purchasing
and Payroll Processes
(Chapter 12)
Auditing the
Revenue Process
(Chapter 11)
Performing Tests of Controls
(Chapter 8)
Performing Substantive Procedures
(Chapter 9)
Audit Sampling for Substantive Tests
(Chapter 10)
Professionalism and Professional Responsibilities
(Chapter 2)
Gaining an Understanding
of the System of Internal Control
(Chapter 6)

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After life’s endless babble they sleep well.
Now the word endless here is extremely awkward; for if the
babble never ends, how can anything come after it?
To digress for a moment, I may observe that this line gives a
good illustration of the process by which what is called Latin verse is
often constructed. Every person sees that the line is formed out of
Shakspere’s “After life’s fitful fever he sleeps well.” The ingenuity of
the transference may be admired, but it seems to me that it is easy
to give more than a due amount of admiration; and, as the instance
shows, the adaptation may issue in something bordering on the
absurd.
The language of the shop and the market must not be expected
to be very exact: we may be content to be amused by some of its
peculiarities. I can not say that I have seen the statement which is
said to have appeared in the following form: “Dead pigs are looking
up.” We find very frequently advertised, “Digestive biscuits”—
perhaps digestible biscuits are meant. In a catalogue of books an
“Encyclopædia of Mental Science” is advertised; and after the names
of the authors we read, “invaluable, 5s. 6d.;” this is a curious
explanation of invaluable.
The title of a book recently advertised is, “Thoughts for those
who are Thoughtful.” It might seem superfluous, not to say
impossible, to supply thoughts to those who are already full of
thought.
The word limited is at present very popular in the domain of
commerce. Thus we read, “Although the space given to us was
limited.” This we can readily suppose; for in a finite building there
can not be unlimited space. Booksellers can perhaps say, without
impropriety, that a “limited number will be printed,” as this may only
imply that the type will be broken up; but they sometimes tell us
that “a limited number was printed,” and this is an obvious truism.

Some pills used to be advertised for the use of the “possessor of
pains in the back,” the advertisement being accompanied with a
large picture representing the unhappy capitalist tormented by his
property.
Pronouns, which are troublesome to all writers of English, are
especially embarrassing to the authors of prospectuses and
advertisements. A wine company return thanks to their friends,
“and, at the same time, they would assure them that it is their
constant study not only to find improvements for their
convenience.…” Observe how the pronouns oscillate in their
application between the company and their friends.
In selecting titles of books there is room for improvement. Thus,
a Quarterly Journal is not uncommon; the words strictly are
suggestive of a Quarterly Daily publication. I remember, some years
since, observing a notice that a certain obscure society proposed to
celebrate its triennial anniversary.
A few words may be given to some popular misquotations.
“He that runs may read” is often supposed to be a quotation from
the Bible; the words really are, “He may run that readeth,” and it is
not certain that the sense conveyed by the popular misquotation is
correct.
A proverb which correctly runs thus: “The road to hell is paved
with good intentions,” is often quoted in the far less expressive form,
“Hell is paved with good intentions.”
“Knowledge is power” is frequently attributed to Bacon, in spite of
Lord Lytton’s challenge that the words can not be found in Bacon’s
writings.
It seems impossible to prevent writers from using cui bono? in the
unclassical sense. The correct meaning is known to be of this
nature: suppose that a crime has been committed; then inquire who
has gained by the crime—cui bono? for obviously there is a

probability that the person benefited was the criminal. The usual
sense implied by the quotation is this: What is the good? the
question being applied to whatever is for the moment the object of
depreciation. Those who use the words incorrectly may, however,
shelter themselves under the great name of Leibnitz, for he takes
them in the popular sense; see his works, vol. v., p. 206.
The Times, commenting on the slovenly composition of the
queen’s speeches to Parliament, proposed the cause of the fact as a
fit subject for the investigation of our professional thinkers. The
phrase suggests a delicate reproof to those who assume for
themselves the title of thinker, implying that any person may engage
in this occupation just as he might, if he pleased, become a dentist,
or a stockbroker, or a civil engineer. The word thinker is very
common as a name of respect in the works of a modern
distinguished philosopher. I am afraid, however, that it is employed
by him principally as synonymous with a Comtist.
The Times, in advocating the claims of a literary man for a
pension, said, “He has constructed several useful schoolbooks.” The
word construct suggests with great neatness the nature of the
process by which schoolbooks are sometimes evolved, implying the
presence of the bricklayer and mason rather than of the architect.
[Dr. Todhunter might have added feature to the list of words
abusively used by newspaper writers. In one number of a magazine
two examples occur: “A feature which had been well taken up by
local and other manufacturers was the exhibition of honey in various
applied forms.” “A new feature in the social arrangements of the
Central Radical Club took place the other evening.”]—Macmillan’s
Magazine.

THE CHAUTAUQUA SCHOOL OF
LIBERAL ARTS.
BY CHANCELLOR J. H. VINCENT, D.D.
Beyond the “Inner Circle,” which leads to the “Upper
Chautauqua,” we come to the Uppermost Chautauqua—the
University proper, with its “School of Liberal Arts,” and its “School of
Theology.” Here we find provision made for college training of a
thorough sort. Students all over the world may turn their homes into
dormitories, refectories, and study rooms, in connection with the
great University which has its local habitation at Chautauqua. Thus
“hearers” and “recipients” in the Assembly, “readers” in the C. L. S.
C., “student readers” in the “inner circle”—the “League of the
Round-Table,” may go beyond, even to the School of Liberal Arts, the
bona fide College of Chautauqua.
Chautauqua exalts the college. She believes that the benefits of a
college training are manifold.
1. The action by which a youth becomes a college student—the
simple going forth—leaving one set of circumstances and voluntarily
entering another, with a specific purpose—is an action which has
educating influence in it. It is a distinct recognition of an object and
a deliberate effort to secure it. The judgment is convinced, the will
makes a decision, and corresponding action follows. We have the
thought, the aim, the standards, the resolve, the surrender, and the
embodiment of all in an actual physical movement. There must
follow these activities a reflex influence on the youth himself. It
becomes a “new birth” in his life. He has gone to another plane. His
everyday conduct is modified by it. He looks up and on. According to

the standard he has set, the idea he entertains of education, and the
motives which impel him will be the subjective effects of his action—
the real power of his new life.
2. There is educating power in the complete plan of study
provided in the college curriculum, covering as it does the wide
world of thought, distributed over the years, with subdivisions into
terms, with specific assignments of subjects, with a beginning and
an ending of each division, and many beginnings and endings, with
promotions according to merit, and final reviews, recognitions, and
honors. There is great value in the enforced system of the college. It
tends to sustain and confirm new life, begun when the student made
his first movement toward an institution.
3. The association of students in college life is another educating
factor. Mind meets mind in a fellowship of aim, purpose, and
experience. They have left the same world; they now together enter
another world. They look up to the heights and to the shining of
crowns which await the gifted and faithful. They are brothers now—
one “alma mater” to nourish them. They sing their songs—songs
which, although without much sense, have power to awake and
foster sympathy. Even a man of sense loves to listen to them. He
laughs at the folly, and, though himself a sage, wishes he were one
of the company of singers. The laws of affinity work out. Soul
inspires soul. Memories grow apace. Attachments that endure,
adventures seasoned with fun or touched with sadness, absurdities,
failures, heroisms, triumphs, are crowded into the four years, and
like fruitage of bloom and fragrance from a conservatory may go
forth to bless many an hour of wandering, of sorrow, of reunion, of
remembrance, in the later years. There was something pathetic in
the return of the famous Yale College class of 1853 to their alma
mater two summers ago. As they wandered about the scenes of
their youth, under the old elms, through recitation rooms and
chapel, singing the old songs, reviving the old friendships, recalling
faces to be seen no more, no wonder that tears fell down furrowed
cheeks from eyes unused to weep. Is there any stronger or sweeter

friendship than that born under the ivied towers and spreading elms
of college hall and campus?
In college mind meets mind in the severe competition of
recitation and annual examination. The bright boy—one of a small
class at home, who had it all his own way there—now finds a score
or more of leaders whose unvoiced challenge he is compelled to
accept, and how he does knit his brow, close his eyes, summon his
strength, school his will, force his flagging energies, and grapple
problems that he may hold his own, outstrip his rivals, and win prize
and place for the sake of his family’s fame and for his personal
satisfaction!
There is nothing that so discovers to a youth the weak points of
his character as the association of college life. There are no wasted
courtesies among students. Folly is soon detected, and by blunt
speech, bold caricature, and merciless satire exposed. Sensitiveness
is cured by ridicule, cowardice never condoned, and meanness
branded beyond the possibility of concealment or pardon. College
associations stimulate the best elements in a man, expose weak and
wicked ones, and tend to the pruning and strengthening of
character.
4. Then there is in college life association with professors and
tutors, and this is, I confess, sometimes of little value, as when
teachers are mere machines, but in it, at its best, are distinguishing
benefits. When teachers are full men, apt men, and enthusiastic
men—as college professors, and for that matter all teachers ought to
be—the place of recitation soon becomes a center of power. Tact
tests attainment, exposes ignorance, foils deceit, develops strength,
indicates lines of discovery, and inspires courage. A living teacher
supplies at once model and motive. He has gone on among the
labyrinths, and up the steeps of knowledge; has tried and toiled and
triumphed. He sought and he is. And now by wise questioning, by
judicious revelation, by skillful concealment, by ingenious
supposition, by generous raillery, by banter, by jest, by argument
and by magnetic energies, the teacher stirs the student into

supreme conditions of receptivity and activity. Such teachers make
the college. As President Garfield said: “Give me an old school
house, and a log for a bench. Put Mark Hopkins on one end, and let
me, as student, sit on the other, and I have all the college I need.”
When an institution is able to employ men of superior knowledge,
power, and tact, students must be trained, and all their after lives
affected by the influence. For memory magnifies the worth of a true
teacher, and the hero of the college quadrennium becomes a
demigod through the post-graduate years. A dozen men of this
mold, if once they could be gotten together, would make a college
the like of which has not yet been seen on the planet. Shall
Chautauqua one of these days find them?
5. The college life promotes mental discipline. It drills, and drills,
and draws out. It compels effort, and effort strengthens. It provides
a system of mental gymnastics. What was difficult at first, soon
becomes easy, until severer tests are sought from the very delight
the student finds in concentration and persistency. Thus
development takes place in the varied faculties of the soul. The
student acquires power to observe with scientific exactness, to
generalize wisely from accumulated data, to project hypotheses, to
watch psychical processes, to reason with accuracy, to distinguish
between the false and the true, both in the inner and the outer
world; to grasp protracted and complicated processes of
mathematical thought; to trace linguistic evolutions—remembering,
analyzing, philosophizing; to study the students of the ages, and the
products of their genius in art, poetry, jurisprudence, and discovery,
in the facts of history and the great principles of sociology. All the
powers employed in this manifold work during the college term are
trained and thus prepared for work after the college term is ended.
It is not so much the amount of knowledge acquired during the four
years, as it is the power at will ever after to acquire knowledge, that
marks the benefits of the college course.
6. With discipline comes the comprehensive survey of the
universe. The college outlook takes the student backward along the

line of historical development. It shows him the heights and the
depths, the manifold varieties and inter-relations of knowledge. It
gives him tools and the training to use them, and a glance at the
material on which he is to use them. The student through college is
a traveler, sometimes examining in detail, sometimes superficially.
He gives a glance and remembers; he takes notes and thinks closely.
He sees the all-surrounding regions of knowledge, and although he
may make but slight researches in particular lines, he knows where
to return in the after years for deeper research and ampler
knowledge.
7. College life leads to self-discovery. It tests a man’s powers, and
reveals to him his weakness. It shows him what he is best fitted to
do, and the showing may not be in harmony either with his
ambitions or his preconceived notions. A boy born for mercantile
pursuits, who comes out of college a lawyer or preacher, proves that
the college failed to do its legitimate and most important work for
him. Professors who merely glorify intellectual attainment, and who
neglect to show students their true place in the world, are little
better than cranks or hobbyists. College life is the whole of life
packed into a brief period, with the elements that make life
magnified and intensified, so that tests of character may easily be
made. It is a laboratory of experiment, where natural laws and
conditions are pressed into rapid though normal operation, and
processes otherwise extending over long periods of time are
crowded to speedy consummation. Twenty years of ordinary life, so
far as they constitute a testing period of character are, by college
life, crowded into four years. A boy who is a failure then, would, for
the same reasons, be a failure through the longer probation, unless
the early discovery of peculiar weakness may be a protection against
the perils which this weakness involves. Therefore it is a good thing
for a youth to subject himself thus early to a testing, for from it may
come self-discovery, when latent powers may be developed, and
impending evils avoided.

Of other advantages of educational institutions I shall not now
speak. They are manifold. Our youth of both sexes, whatever their
callings in life, would do well to seek these advantages. Therefore
parents, primary teachers, and older persons who influence youth,
should constantly place before them the benefits of college
education, and inspire them to reach after and attain it. Arguments
should be used, appeals made, assistance proffered, that a larger
percentage of American youth may aspire after college privileges, or
at least remain for a longer term in the best schools of a higher
grade. Haste to be rich, restiveness under restraint during the age of
unwisdom, inability to regulate by authority at home the eager and
ambitious life of our youth, together with false, mercenary notions of
parents, who “can not afford to have so much time spent by the
young folks in studying, because they must be doing something for
themselves”—these are some of the causes of the depreciation and
neglect of the American college—a neglect lamentable enough, and
fraught with harm to the nation.
Chautauqua lifts up her voice in favor of liberal education for a
larger number of people. She would pack existing institutions until
wings must be added to old buildings, and new buildings be put up
to accommodate young men and maidens who are determined to be
educated.
Chautauqua would exalt the profession of the teacher until the
highest genius, the richest scholarship, and the broadest manhood
and womanhood of the nation would be consecrated to this service.
Chautauqua would give munificent salaries and put a premium on
merit, sense, tact, and culture in the teacher’s office. She would turn
the eyes of all the people—poor and rich, mechanics and men of
other, if not higher degree, toward the high school and the college,
urging house builders, house owners, house keepers, farmers,
blacksmiths, bankers, millionaires, to prepare themselves by a true
culture, whatever niche they fill in life, to be men and women,
citizens, parents, members of society, members of the church,
candidates for immortal progress.

To promote these ends the Chautauqua Literary and Scientific
Circle was organized. By its courses of popular reading it gives a
college outlook to the uncultivated, and exalts the higher learning. It
is, as I have elsewhere said, a John the Baptist preparing the way
for seminary and university.
The managers of the Chautauqua movement, however, recognize
the fact that there are thousands of full-grown men and women who
are at their best intellectually, and who, with some leisure and much
longing, believe they could do more than read. They want to study;
to study in downright earnest; to develop mental power; to cultivate
taste; to increase knowledge, to make use of it by tongue and pen
and life. There are tens of thousands of young people out of school
by necessities commercial and filial, who are awakened to the power
within and the possibilities beyond. They believe they could learn a
language, and enjoy the literature of it. They believe they could
think and grow, speak and write. They are willing, and eager to try.
Out of minutes they could construct college terms. They have will
enough, heart enough, brain enough to begin, to go on, to go
through, and all this, while the everyday life continues with its duty
for this hour and for that. They believe that into the closely woven
texture of everyday, home and business life, there may be drawn
threads of scarlet, crimson, blue and gold, until their homespun
walls become radiant with form and color worthy to decorate the
royal chamber—the chamber of their king, God the Father of earnest
souls.
Chautauqua denounces the talk of certain rich men about the
“poor having their place,” and that it would be “better for working
people to confine themselves to work, or at best to understand
subjects bearing entirely on their everyday duties in field or shop,
and let science and literature alone.” Chautauqua would make
working men cultivated, and give them recreation from manual toil
in realms of wonder, taste, science, literature and art. Chautauqua
would spread out over the lot of the toiler a dome, vast, radiant, rich
and inspiring.

Therefore the Chautauqua School of Liberal Arts has been
organized, and chartered with full university powers, for non-
resident pupils, who, by correspondence with competent instructors,
may study what they please, when they please, and as they please,
eliciting suggestion, and giving answer and thesis, taking all the time
they need, passing final examination in writing in the presence of
witnesses, and having their examination papers subjected to the
scrutiny of competent and impartial critics. When, after the required
standard in the several departments which constitute the college
course has been attained, whether in four, or ten, or fourteen years,
the successful candidate shall have his diploma and his degree; and
through this window he has constructed out of all these fragments
of time—fragments picked up from dusty floor and pavement, from
mine, and field, and shop—through this window the light shall shine
in its beauty, and people shall see what genius, industry and
persistent will can do with the cast away fragments of spare
moments and random opportunities.
I have thus described the “Upper Chautauqua.” By reason of the
action of the Board of Managers, elsewhere reported, the plan of
gradation is slightly changed from that laid down in the previous
article on the “Upper Chautauqua,” and the following successive
steps are found in the scheme of the Chautauqua University:
1. The Assembly, including the summer meetings, the “Platform,”
“the American Church Sunday-school Normal Course,” the “School of
Languages,” and the “Teachers’ Retreat.”
2. The Circle, embracing the “C. L. S. C.”
3. The “Inner Circle,” to which they belong who, having seven
seals on their diploma, are members of the “League of the Round-
Table.”
4. The “University Circle,” with its “School of Liberal Arts,” and the
“School of Theology.”
New Haven, Conn., February 6, 1885.

OUTLINE OF REQUIRED READINGS.
MARCH, 1885.
First Week (ending March 8).—1. “College Greek Course,” from
page 187 to 216.
2. “Chemistry,” chapters IX and X.
3. “The Circle of the Sciences,” in The Chautauquan.
4. Sunday Readings for March 1 and 8, in The Chautauquan.
Second Week (ending March 16).—1. “College Greek Course,”
from page 216 to 239.
2. “Chemistry,” chapters XI, XII and XIII.
3. “Temperance Teachings of Science,” in The Chautauquan.
4. Sunday Readings for March 15, in The Chautauquan.
Third Week (ending March 24).—1. “College Greek Course,” from
page 239 to 260.
2. “Chemistry,” chapters XIV and XV.
3. “Home Studies in Chemistry and Physics,” in The Chautauquan.
Fourth Week (ending March 31).—1. “College Greek Course,” from
page 260 to 284.

2. “Chemistry,” chapters XVI and XVII.
3. “Studies in Kitchen Science and Art,” in The Chautauquan.

PROGRAMS FOR LOCAL CIRCLE
WORK.
FIRST WEEK IN MARCH.
1. Blackboard illustration and full explanation of the Greek theater,
special attention being given to the arrangement of the stage. If
preferred, charts or pictures can be substituted for the blackboard.
As aids to this work Donaldson’s “Greek Theater,” containing charts
and illustrations, and Mahaffy’s “Classical Greek Literature” will be
found very helpful.
2. Essay—George W. Cable and his Works.
Music.
3. Selection—“The Gorgon’s Head,” found in Hawthorne’s “Wonder
Book.” This story can be read “turn about” by the members.
Reference is made to the headless Gorgon, on page 210 of “College
Greek Course.”
4. Essay—Shrove Tuesday, or Mardi Gras, as observed in New
Orleans.
5. A Paper on Great Salt Mines and Springs.
6. Critic’s Report.
SECOND WEEK IN MARCH.
1. Essay—Sir Humphrey Davy.

2. Selection—“An Account of Sappho.” By Addison.
3. A Paper on Canadian Winter Sports.
Music.
4. A Half-hour’s Quiz on the Readings of the Month.
5. Essay—The Life of Euripides.
6. Question Box.
THIRD WEEK IN MARCH.
1. Fifteen Minutes’ Talk on Balloons and their Uses.
2. Selection—“On Great Natural Geniuses.” By Addison.
3. Character Sketch—Ignatius Loyola.
4. A Paper on the Athenian Orators.
Music.
5. General Conversation on the News of the Day.
6. The Questions and Answers for the Month in The Chautauquan.
MONTHLY PARLOR MEETING.
Music.
1. Roll call—Quotations from Greek Authors.
2. A Map Exercise. Trace Philip’s conquering march, as indicated
by Demosthenes in his third Olynthiac oration.
3. Essay—Demosthenes.

Music.
4. An Analysis of Tennyson’s “Princess.”
5. A Paper on the Famous Women of Greece.
Music.
6. Debate—Resolved, that the effects of the modern theater
compare unfavorably with those of the ancient.
Music.
It may not be amiss to follow our programs—which are intended
to be merely suggestive—with a very short exposition of our
program-philosophy. It is not a heavy philosophy; indeed, it is so
simple that we half suspect we may be laughed at for calling it a
philosophy at all, but its principles, we believe, are true and useful;
as such we offer them. According to our ideas there are four
subjects which should be represented on each C. L. S. C. program;
first in the list and in importance is the week’s or month’s reading, its
prominent features, its suggestions, its facts, its practical lessons;
second, the world’s work of to-day, not merely its events of public
interest, its schemes and disasters, but its science, invention, art,
literature, morals, social life, civilization, its men and its manners; to
follow both exercises and clinch what has been suggested, “good
talk” ought to be an invariable part of each evening’s work. Take
care that talk, free, genial, interested talk, follows every
performance, or every program, and be sure that always
“Music dwells
Lingering and wandering on as loth to die.”
These are the four elements necessary to a good program. As to
how they shall be treated we have also a theory. Its first principle is
let everything be well done; while thorough, do not go astray in

dates and statistics, but go to the point which you desire to make.
Then be bright and interesting, the third essential in each
performance. Withal, suit your theme and your treatment of it to
your audience. Let the subject be of common interest, the matter
neither so commonplace as to seem puerile nor so technical as to be
“over the heads” of your auditors. Such is our program-philosophy. A
better you will undoubtedly formulate by practicing this.

LOCAL CIRCLES.
C. L. S. C. MOTTOES.
“We Study the Word and the Works of God.”—“Let us keep our
Heavenly Father in the Midst.”—“Never be Discouraged.”
C. L. S. C. MEMORIAL DAYS.
1. Opening Day—October 1.
2. Bryant Day—November 3.
3. Special Sunday—November, second Sunday.
4. Milton Day—December 9.
5. College Day—January, last Thursday.
6. Special Sunday—February, second Sunday.
7. Founder’s Day—February 23.
8. Longfellow Day—February 27.
9. Shakspere Day—April 23.
10. Addison Day—May 1.
11. Special Sunday—May, second Sunday.
12. Special Sunday—July, second Sunday.

13. Inauguration Day—August, first Saturday after first
Tuesday; anniversary of C. L. S. C. at Chautauqua.
14. St. Paul’s Day—August, second Saturday after first
Tuesday; anniversary of the dedication of St. Paul’s Grove
at Chautauqua.
15. Commencement Day—August, third Tuesday.
16. Garfield Day—September 19.
Regularity is necessary to permanency. Whatever undertaking we
desire to make a permanent success, we must make regular;
whatever we wish to do successfully, we must do regularly. A
tiresome, prosaic quality we are apt to consider it, and one which
restricts our freedom. The regular return of small duties often makes
them annoying, yet in large affairs regularity adds dignity and
strength. It is essential for the establishment of any institution. A
trite truth this may be, but trite truths are not always applied, and it
is for the application of this homily to local circles that we sue.
It is most desirable that your local circle should become durable.
Not a club, to which you can run in as you have leisure, or which can
be adjourned for other engagements; which shall run this winter,
and “perhaps,” “if nothing happens,” go on next winter. Not at all.
There is a higher idea embodied in the plan. The true ambition of
each member of a circle should be to make it the literary association
of the community, the leader in practical ideas, clear thinking,
intelligent talk and refined manners; but to reach this goal the circle
meeting must be considered too valuable to be omitted for any
occasion whatever. Its object is equal to that of any institution in the
town. If you wish to develop this idea, to establish your circle, to
secure for it recognition as a well founded organization, regularity in
meeting and attendance must be secured. It is true that a social or
religious event sometimes happens for which courtesy seems to
demand an adjournment. In such a case it is quite possible to select
another night. The one idea upon which we would insist is that the

circle be considered and conducted as a permanent institution, that
it be made the intellectual center of your life. How wonderful an
impetus to thought and culture is such an organization, only those
who lack its influence can tell. Some of the earnest letters which
come to us from time to time give a suggestion of what a circle
might be to lone readers. Is there not, indeed, in this delightful letter
from Bulgaria, a hint of the real value of a circle, a value which we so
often fail to appreciate? It comes from an old Chautauqua friend—
Miss Lenna A. Schenck, now a missionary at Loftcha, Bulgaria: “How
gladly would we report to you from this out-of-the-way corner of the
earth the organization of a flourishing local circle. But, alas! alas! we
can not boast of even a triangle or a straight line, only a point, a
mere dot, but a thoroughly loyal one, keenly enjoying the good
things of The Chautauquan, that most welcome and highly prized of all
the white-winged friends that come to us by mail. Though so few in
number, we keep the vesper hours and the memorial days, and
begin each day happily by devoting the time from six to seven in the
morning to Chautauqua reading, and so we are inspired by glimpses
of charming circles away in the homeland, and by memories of
delightful summers with our blessed alma mater, Chautauqua
herself. Before another year rolls round, we hope to have at least a
local triangle here at Loftcha, and perhaps a Bulgarian translation of
some of Chautauqua’s best ‘ideas.’ Many things might be said of our
new home and new work, but we remember the delicate suggestion
given in the November ‘Local Circle,’ that ‘no one could stay very
long,’ so with heartful greetings to the class of ’83 and to all good
Chautauquans the world over, we bid you adieu.”
Are not such friends of Chautauqua the prophecy of a time when
the work shall encircle the earth? Each month brings signs of its
growth. Particularly do we notice this month the spread of the work
in Canada. The press is particularly friendly to the movement in the
Provinces; for example, the Educational Weekly, of Toronto, quotes
the Globe of that city as saying: “The Chautauqua Literary and
Scientific Circle is now pretty well known. It has been in operation
since 1878, and has done a great deal of good. The yearly reunions

at Chautauqua have come to be very pleasant and very profitable.
We understand that a similar summer resort is to be instituted in
Canada, in connection with the reading circles already established in
the Dominion. We wish the enterprise all success.” Much of the
interest in Toronto is undoubtedly due to the hearty work of Mr. E.
Gurney, and Mr. Lewis Peake, president and secretary of the
“Central” circle. This circle has recently had the pleasure of hearing a
lecture on “Athenian Literature” from Professor Hutton, of the
University College. London has also a very flourishing circle, dating
from the fall of 1883, when it was organized with a membership of
about forty. It is a most healthy sign of growth, when reorganization
finds a circle larger than when it disbanded. The “Central” circle had
this fortune. They began the present year with a membership of
forty eight. Their plans have been most happy; the vesper services
in the Chautauqua song books are used at every meeting, and
quotations as responses to roll call; chemical experiments are
performed for them by a professor of practical chemistry, who is a
member of the circle, and their programs are full of variety. So
important to them is their circle that they made Christmas the
occasion of a special meeting, at which they used the Christmas
vesper and praise service which appeared in The Chautauquan for
December. The service was followed by an address and several
entertaining exercises. This is exactly the work which enhances the
value of the circle, both for the members and for the community. It
raises a circle to the point where it becomes the medium through
which all extra social occasions may be observed. It makes it not
only a reading club, but a factor in the social, religious and
intellectual life of a community.
At Dartmouth, Nova Scotia, we learn from a local paper, there is
also an energetic circle. They have done good work in introducing
the C. L. S. C. to the public, securing a notice of a public vesper
service, an explanation of the work they are doing, mention of the
circles in the vicinity, and following their information by announcing
their next meeting with a cordial invitation to the public to be
present.

In November last two new circles were formed in Maine. A “Pine
Tree” circle, of twenty-seven members, coming from Dover and
Foxcroft. These beautiful villages are closely connected by covered
bridges—the Piscataquis river flowing between, though it is a hard
matter for a stranger to see where one begins or the other ends, so
much like one village are they. A friendly way to live, is it not? These
classmates have evidently learned what Thackeray found out in
London long ago—that “A man ought to like his neighbors, to be
popular with his neighbors. It is a friendly heart that has plenty of
friends.” But we all learn that in the C. L. S. C. The second is the
“Simpson” circle at Auburn, where the Rev. G. D. Lindsay is president.
Sixteen enthusiasts make up the circle which, so far, finds the work
suggested in The Chautauquan sufficient for its needs.
One of the most interesting and prosperous, though not largest of
Chautauqua circles, is the “Baketel” circle, at Greenland, N. H. It is
named in honor of its founder and leader, Rev. O. S. Baketel, an old
Chautauquan of the class of ’82. The organization is very simple.
The leader prepares the program for each evening, and the
members come promptly. No inflexible rule is adhered to, but as
much variety given as possible. That the plan is most successful we
know from a recent letter from a friend, in which he says of the
work: “Our members vary in age from eighteen years to fifty-three,
and none are more enthusiastic than the oldest ones. It makes one
of the most interesting gatherings ever brought together in the
community, and is furnishing help to some whose advantages in
early life were very limited. Every member feels like exclaiming ‘All
hail C. L. S. C.’”——The “Webster” C. L. S. C., of Franklin, N. H., is
enjoying its second year of existence. A good interest was
maintained throughout last year, and they began this year’s work
promptly in October, with twenty-two active members. To them the
dining room table has revealed its wonderful power to stimulate
sociability and “good talk.” They have discovered its genial ways,
how it will always stretch to make room for more and still more, and
how it seems to be always saying: “Stretch out your arms; don’t
mind just how you sit. I shield your position, I am here to help you

all, to bring you close together, to hold your books, to forbid your
parting, to compel you to be a circle.” Indeed, we are glad the
“Webster” circle has learned the virtues of a dining room for study
and for friendliness. Maybe if they but analyzed their devotion to
their circle that stout, wooden friend would deserve not a little of the
honor, and perhaps, too, it has helped not a little in bringing in the
children, which, they write, are crowding into the Chautauqua work
until the circle boasts even grandchildren.
The “Clio” club of twenty members at Newport, Vt., kindly
remembers The Chautauquan with one of the programs used at a
recent public meeting. The dainty, tasseled souvenir they send us
bears a list of exercises of unusual richness and variety.
Massachusetts is getting her circles into the press. Scarcely a paper
from within her borders comes to our sanctum which does not
contain at least one item of Chautauqua import. The Melrose Journal
of Melrose reports the organization of a circle of fifteen members in
that city.——The Woburn Journal notices the work of the circle there
in a very appreciative notice: “The fortnightly meetings of the First
Woburn Chautauqua Literary and Scientific Circle are being well
attended and the exercises are very profitable intellectually and the
students are doing good work. Two weeks ago the Rev. Charles
Anderson gave a very interesting talk on Prof. Schliemann’s recent
explorations in Mycenæ, and Hissarlik, the supposed site of ancient
Troy. At some meeting in the near future the Rev. A. E. Winship, a
true Chautauquan, connected with the ‘New West Education
Commission,’ a thorough scholar and a very interesting speaker, will
lecture on ‘Literary Clubs’ before the members of the circle.”——The
Saturday Union, of Lynn, speaks of the thorough work their circle is
doing in chemistry.——The Ipswich Chronicle highly commends the
Milton memorial held by the “Masconomo” circle of that city. By the
way, the name of this circle brings back an interesting bit of early
Massachusetts history. It was the Indian Masconomo, or
Masconnomet—from whom the circle is named—who, in 1638, “sold
his fee in the soil of Ipswich” for £20, to John Winthrop, Jr. And here

was established the town which the Indians called Agawan (“fishing
station”), and to which the white men gave the name of Ipswich.——
The Salem Gazette, too, gives notices of two branches of the C. L. S.
C. in that city. About forty members are in each of these societies.
——Several new circles we have the pleasure of adding to our
visiting book. At Merrimac a circle of seventeen members has been
formed, with the happy title of the “Hale” circle. The first circle, so
far as we know, which has honored itself by assuming the name of
our esteemed counselor. They should be glad they waited; so good a
name does honor to anybody, and ought to be an omen of future
prosperity.——The “Eaton” circle, named in honor of the Rev. G. F.
Eaton, begins life with seventy members. Its home is Waltham—city
of watches. If the spirit of the town is to be the spirit of the circle,
wonderful results will certainly be forthcoming.——Last October a
few of the many students in the C. L. S. C. in Worcester organized a
local circle. By the perseverance of these few, others have been
persuaded to take the course, until the circle numbers about sixteen.
They have taken the name of the “Warren” local circle, in honor of
Bishop Warren.——At Provincetown a company of ten, five ladies and
five gentlemen, met on the evening of the sixteenth of December
last, to form a local circle. The meetings have occurred every week
since; the circle has adopted the name of “Mayflower.” The meetings
are full of interest, and the members are busy trying to make up the
reading of the past months. All are members of the class of ’88
except one, who belongs to the class of ’85.——South Garden reports
a circle organized a year ago, but which has never been noticed in
The Chautauquan before. It is a “Pansy” class—all the fifteen members
belonging to the class of ’87.——“Not Chautauquans for four years
only, but Chautauquans for life,” the friends at Holbrook subscribe
themselves. Their motto grew out of the ardor of a lady member of
the circle who, when at a recent meeting something was said about
a four years’ course, said: “I shall not consider that I have finished
the course at the end of four years. I for one am going to be a
Chautauquan as long as I live.” A right royal motto, is it not?——The
Wakefield circle sends a program of a meeting in which we are glad
to notice that present affairs go side by side with discussions of

Grecian history and art and literature. The subjects for essays
include a “Review of Current Affairs in Massachusetts,” “The Pension
Problem,” etc. The history that is making certainly deserves our
attention, as well as the history of the past.——North Cambridge also
sends the program which they prepared for the January meetings of
the “Longfellow” circle. In addition to their regular work, they added
the novel feature of a talk on newspaper work, from a practical
newspaper man.——The last of this month’s Massachusetts reports
contains a most capital hint. Auburndale is the home of a flourishing
circle, which among its other good features has a constitution. One
of the articles of this constitution is the suggestion which it will
please us to have you all ponder. It reads: “A short report of the
condition of our society shall be forwarded twice a year to The
Chautauquan.” Do you all take the hint? Perhaps one secret of this
energetic article is the nearness of Auburndale to Framingham—so
near is it that all the members of the circle went to the Assembly last
year. To Massachusetts, too, belongs the honor of the following
merry Chautauqua feast, of which a friend from Providence, R. I.,
has written us: “Spending a few days in Rockland, Mass., I was
invited to visit the ‘Sherwin’ Chautauqua Circle, and being a true-
blue member of the ‘Clio’ C. L. S. C. of Providence, I was joyful in
accepting. The exercises were of a most novel and interesting kind,
and unusually pleasing to me, as I was an old acquaintance of Prof.
Sherwin. Since this society was instituted, some two years ago, but
one representative of the posterity of the circle has been born, and
the members of this enterprising circle showed their appreciation of
Prof. Sherwin’s noble work in the good cause by naming this gift
after him. An elegant gold lace pin had been made to order, with the
initials C. L. S. C. neatly engraved upon it, and that evening the
presentation was made. After Chautauqua greetings had been
exchanged, the baby Sherwin was called for, and made his
appearance, riding on his mother’s arm, as wise and dignified in
behavior as a youthful Solon. One of the frolicsome Chautauqua
dames then read the following formal rhyme:

“‘There were some fair dames of Chautauqua,
Their possessions were lovely to see,
Between you and me;
They had jewels of gold,
Of value untold,
These elegant dames of Chautauqua;
But children were few,
You scarce find one or two
In the homes of these dames of Chautauqua.
And sad were the dames of Chautauqua
When they read of the Gracchus,
Of Cupid and Bacchus,
The lesson seemed filled up with mocking.
They longed for a son,
So the gods sent them one,
Full of frolic and fun,
Sent a son to these dames of Chautauqua.
Then what joy in the circle Chautauqua!
What pæans were sung,
And Chautauqua bells rung,
To welcome the lad of Chautauqua!
Straight they gave him a name,
Sherwin Burrill the same—
These frolicsome dames of Chautauqua!
Now, they badge him with gold,
So that when he is old,
They can still claim their son of Chautauqua.’”
At South Manchester, Conn., a most encouraging increase of
members has taken place. Last year the circle numbered twenty, this
year forty-eight. Such growth is full of promise for the future, and
yet it is the inevitable result of enthusiastic members and carefully
prepared programs.——The new circle at Mansfield Center, Conn.,
numbers ten members. They are expecting a lecture on chemistry

soon, from Prof. Washburn, of the North Mansfield Agricultural
College.——The “Newfield” C. L. S. C. of West Stratford, Conn., has
recently received the following pleasant letter from “Pansy:”
Carbondale, Pa., January 6, 1885.
Dear Friends of ’87:
My word of greeting to you must commence with an
apology. The letter from your secretary found me
immersed in work. The holiday season brings upon me a
heavy pressure of care, in addition to the usual routine.
From the almost hopeless mass of unanswered letters
which I have just overturned on my study table, that of
your secretary emerges, so I seize it and make a
beginning. What shall I say? I might congratulate you on
being members of that great literary circle, which verily
seems destined to reach out its long arms and encircle the
world—but to what purpose would this be?
You already know by experience all, and more than I
could tell you of its advantages, and its far reaching
influences.
What then, shall I, in this moment of time, say to you
who are classmates of mine? Shall I hope that you may be
able to pass the Golden Gate and join in the class song of
the ’87s, and receive your diploma from the hands of the
Chautauqua chief, and enjoy all the delights of
Commencement day? That indeed I heartily wish. I hope
to be there and to clasp hands with you, and give and
receive greeting.
But I am conscious while I write, of a higher, stronger,
holier hope than that, even that every member of your
circle and of all the great Chautauqua Circle may finally
pass the Golden Gate that leads to the palace of the King,
and receive from him the greeting “well done, good and

faithful servants,” and receive from his hands the crowns
laid up for those who are “called, and chosen, and
faithful.”
Oh, to be sure of passing safely through the ordeal of
examination by the Judge!
When I think of the immense enthusiasm of the C. L. S.
C., I am glad. I believe in enthusiasm. I believe in the
Chautauqua Literary and Scientific Circle. Yet I wonder,
often, whether we, as Christians, can not learn something
from the eagerness of many scholars who are not of the
royal family, and yet are eager to learn all they can, about
our Father’s handiwork in earth and air and sky.
I am writing longer than I meant. I only wanted to say
this: Let us make sure of clasping hands at last in our
Father’s house.
Yours in His name,
Mrs. G. R. Alden.—“Pansy.”
Desiring to promote the interests of the C. L. S. C., the
Chautauqua circles of Rhode Island, numbering about twenty-five,
have united and formed the “Rhode Island Chautauqua Union,” with
the following officers: President, Prof. John H. Appleton, A.M., of
Brown University; first vice president, the Rev. J. Hall McIlvaine,
pastor of the Union Congregational Church; second vice president,
Hon. Thos. B. Stockwell, A.M., Rhode Island State Commissioner of
Public Schools; third vice president, Levi W. Russell, A.M., Principal of
Bridgham School; secretary and treasurer, Wm. D. Porter, D.D.S., all
of Providence. There have been three new circles formed this year in
Providence, R. I., one of them bearing the popular name of “Vincent.”
“Hope” circle, formed in 1882, is still in a flourishing condition. They
were favored last month with a very interesting and instructive
address by Prof. Appleton, on “The Value of the Study of the Natural
Sciences.” The executive committee arrange the order of exercises

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