N/A. Yes. Students are expected to review and understand all areas of the course outline.

Transcription

1 Course Outline School: Department: Business Accounting Course Title: Auditing 1 Course Code: ACCT 331 Course Hours/Credits: 56 Prerequisites: ACCT 255, ACCT 256, ACCT 257 Co-requisites: Eligible for Prior Learning, Assessment and Recognition: Originated by: N/A Yes Joe Toste Creation : Summer 2014 Revised by: Joe Toste, S.Lamarre Revision : Winter 2015 Current Semester: Summer 2015 Approved by: Chairperson/Dean Students are expected to review and understand all areas of the course outline. Retain this course outline for future transfer credit applications. A fee may be charged for additional copies. This course outline is available in alternative formats upon request.

2 Course Description This course is part of the curriculum for the three year Accounting diploma program. It is also of interest to continuing education students. Through a major case study and lectures, the student will develop skills in working paper preparation as well as the ability to identify various auditing reports attached to financial statements. Emphasis will be placed on file preparation, evaluation of audit evidence and the documentation of internal control. Through individual work, each student will produce various sections of an audit file. Specific topics include: the role of auditors in the economy, generally accepted auditing standards, audit reports, unaudited engagements, professional ethics and rules of conduct, audit evidence, legal liability and internal control, as well as the audit of the transaction cycles of an organization. Program Outcomes Successful completion of this and other courses in the program culminates in the achievement of the Vocational Learning Outcomes (program outcomes) set by the Ministry of Training, Colleges and Universities in the Program Standard. The VLOs express the learning a student must reliably demonstrate before graduation. To ensure a meaningful learning experience and to better understand how this course and program prepare graduates for success, students are encouraged to review the Program Standard by visiting For apprenticeship-based programs, visit Course Learning Outcomes The student will reliably demonstrate the ability to: Understand the role of auditors in the economy. Recognize the different audit reports attached to financial statements. Understand ethics and rules of conduct as they apply to the accounting profession. Prepare simple working papers for accounting analysis. Understand the services performed by professional accountants. Essential Employability Skills (EES) The student will reliably demonstrate the ability to*: 4. Apply a systematic approach to solve problems. 7. Analyze, evaluate, and apply relevant information from a variety of sources. *There are 11 Essential Employability Skills outcomes as per the Ministry Program Standard. Of these 11 outcomes, the following will be assessed in this course. Global Citizenship and Equity (GC&E) Outcomes The student will reliably demonstrate the ability to*: 2. Identify beliefs, values and behaviours that form individual and community identities and the basis for respectful relationships. *There are 6 institutional Global Citizenship & Equity outcomes. Of these 6 outcomes, the following will be assessed in this course. THIS COURSE ADHERES TO ALL COLLEGE POLICIES (See College Calendar) 2

3 Text and other Instructional/Learning Materials Text Book(s): Auditing: An International Approach, 6th edition Smieliauskas and Bewley RECOMMENDED Reference: CPA HANDBOOK (latest available edition) Scheme Assignments, Quizzes and participation: Six quizzes worth 5% each. Test 1: Covers chapters up to week 5 GC&E Assignment: Hand-in assignment for 5%. Test 2: Covers all chapters after Test 1 Final Exam: Comprehensive CLO(s) EES GCE Outcome(s) Outcome(s) Weight/100 Assignments, Quizzes and participation 1, 2, 3, 4, Test 1 1, 2, GC&E Assignment Test 2 1, 2, 3, 4, 5 4, 7 15 Final Exam 1, 2, 3, 4, 5 4, 7 40 Total 100% If students are unable to write a test they should immediately contact their professor or program Chair for advice. In exceptional and well documented circumstances (e.g. unforeseen family problems, serious illness, or death of a close family member), students may be able to write a make-up test. All submitted work may be reviewed for authenticity and originality utilizing Turnitin. Students who do not wish to have their work submitted to Turnitin must, by the end of the second week of class, communicate this in writing to the instructor and make mutually agreeable alternate arrangements. When writing tests, students must be able to produce official College photo identification or they may be refused the right to take the test or test results will be void. Student Accommodation It is College Policy to provide accommodation based on grounds defined in the Ontario Human Rights Code. Accommodation may include modifications to standard practices. Students with disabilities who require academic accommodations must register with the Centre for Students with Disabilities. Students requiring accommodation based on other human rights grounds should talk with their professors as early as possible. Please see the Student Accommodation Policy. Use of Dictionaries Dictionaries may be used in tests and examinations, or in portions of tests and examinations, as long as they are non-electronic (not capable of storing information) and hard copy (reviewed by the invigilator to ensure notes are not incorporated that would affect test or examination integrity). THIS COURSE ADHERES TO ALL COLLEGE POLICIES (See College Calendar) 3

4 Program or School Policies N/A Course Policies N/A College Policies Students should familiarize themselves with all College Policies that cover academic matters and student conduct. All students and employees have the right to study and work in an environment that is free from discrimination and harassment and promotes respect and equity. Centennial policies ensure all incidents of harassment, discrimination, bullying and violence will be addressed and responded to accordingly. Academic honesty is integral to the learning process and a necessary ingredient of academic integrity. Academic dishonesty includes cheating, plagiarism, and impersonation. All of these occur when the work of others is presented by a student as their own and/or without citing sources of information. Breaches of academic honesty may result in a failing grade on the assignment/course, suspension or expulsion from the college. For more information on these and other policies, please visit Students enrolled in a joint or collaborative program are subject to the partner institution's academic policies. PLAR Process This course is eligible for Prior Learning Assessment and Recognition (PLAR). PLAR is a process by which course credit may be granted for past learning acquired through work or other life experiences. The PLAR process involves completing an assessment (portfolio, test, assignment, etc.) that reliably demonstrates achievement of the course learning outcomes. Contact the academic school to obtain information on the PLAR process and the required assessment. This course outline and its associated weekly topical(s) may not be reproduced, in whole or in part, without the prior permission of Centennial College. THIS COURSE ADHERES TO ALL COLLEGE POLICIES (See College Calendar) 4

5 Topical Outline (subject to change): 1 Introduction to Chapter 1 Explain the importance of auditing. auditing Distinguish auditing from accounting and user demand for reliable information. 2 Auditors' Professional Roles and Responsibilities Chapter 2 Explain the role of auditing in information risk reduction. Discuss the objectives and purpose of the audit vis-a-vis the expectations gap Describe the other major types of audits and auditors (Internal and Operational Auditing, Public Sector/ Governmental Auditing) and Fraud Auditing and Regulatory auditors Provide an overview of international auditing and its impact on Canadian auditing standards. Describe the current audit environment, including developments in regulatory oversight and provincial regulation of public accountants in Canada including the Canadian Public Accountability Board(CPAB). Identify the key aspects of regulation and oversight of public accounting in Canada (e.g.cpab, Canadian Securities Administrators Rule and the role of the Ontario Securities Commission and the Securities and Exchange Commission) Understand the structure, role and mandate of the Canadian Securities Administrators (CSA) List the various practice standards for independent audits of financial statements. Outline the ethical, examination, and reporting standards that make up generally accepted Reference: CAS 220 Quality Control For An Audit of Financial Statements CSA: Exhibit 2-5 Elements of Quality Control (IFAC and ISCQ-1) THIS COURSE ADHERES TO ALL COLLEGE POLICIES (See College Calendar) 5

6 auditing standards (GAAS) as set out in the CICA's Canadian Auditing Standards (CAS). Explain the importance of general assurance standards, using examples of assurance matters. Explain how requirements of quality control standards are monitored for PA firms (Practice inspection, Peer Reviews and Quality Inspections) 3 Auditors' Ethical and Legal Responsibilities Chapter 3 Introduce the concept of auditor responsibilities. Explain the importance of the study of ethics in helping define auditor responsibilities. Lecture, discussion Quiz Outline the characteristics of professional skepticism and critical thinking. Describe the purpose and contents of the codes of professional ethics established by the various professional accounting associations. Explain the importance of an independence framework for auditors. Outline auditor legal responsibilities. Outline the various types of common law liability for PAs, citing specific case precedents 4 Reports on Audited Financial Statements Chapter 4 Describe the association framework Determine whether a public accountant (PA) is associated with financial statements (Association 5020). Describe the three levels of assurance. THIS COURSE ADHERES TO ALL COLLEGE POLICIES (See College Calendar) 6

7 Compare and contrast the scope and opinion paragraphs in an independent auditor's report. For a given set of accounting facts and audit circumstances, analyze qualified, adverse, and disclaimer audit reports. 5 Preliminary Audit Planning: Understanding the Auditee's Business Chapter 5 Determine the effects of materiality and uncertainty on audit report choices. Summarize the financial statement audit process. Explain the main characteristics of an independent audit engagement. Describe the activities auditors undertake to decide whether to accept a financial statement audit engagement (including preliminary risk assessment, engagement acceptance and planning). Explain why auditors need to understand the auditee organization's business and environment and its risks and controls at the start of a financial statement audit. Use preliminary analytical procedures on management's draft financial statements to identify areas where misstatements are most likely. Explain the materiality levels used for planning the audit and how these amounts are determined. Identify the principal assertions in management's financial statements and the related risks of material misstatement. List the preliminary planning decisions set out in the overall audit strategy. THIS COURSE ADHERES TO ALL COLLEGE POLICIES (See College Calendar) 7

8 6 Test One:- 15% Test:Covers all Describe the conceptual audit risk model and 15% previous chapters. its components. Assessing Risks and Internal Control Chapter 6 Explain the usefulness and limitations of the audit risk model in conducting the audit. Explain how auditors assess the auditee's business risk through strategic analysis and business process analysis. Outline the relationships among the business processes and accounting processes (or cycles) that comprise an organization's information system and management's general purpose financial statements. Illustrate how business risk analysis is used to assess the risk of material misstatement at the financial statement level and at the assertion level. Describe the five components of the internal control framework: the control environment, management's risk assessment process, information systems and communication, control activities, and monitoring. 7 Assessing Risks and Internal Control Chapter 6 Explain how the auditor's understanding of an organization's internal control helps the auditor to assess and respond to the risk that its financial statements are misstated. Describe the conceptual audit risk model and its components. Explain the usefulness and limitations of the audit risk model in conducting the audit. Explain how auditors assess the auditee's business risk through strategic analysis and business process analysis. Outline the relationships among the business processes and accounting processes (or THIS COURSE ADHERES TO ALL COLLEGE POLICIES (See College Calendar) 8

9 cycles) that comprise an organization's information system and management's general purpose financial statements. Illustrate how business risk analysis is used to assess the risk of material misstatement at the financial statement level and at the assertion level. Describe the five components of the internal control framework: the control environment, management's risk assessment process, information systems and communication, control activities, and monitoring. 8 Fraud Risk Assessment Chapter 7 Explain how the auditor's understanding of an organization's internal control helps the auditor to assess and respond to the risk that its financial statements are misstated. Differentiate among frauds, errors, and illegal acts that might occur in an organization. Outline the auditing standards related to external, internal, and governmental auditors' responsibilities to detect and report frauds, errors, and illegal acts. Quiz Describe some of the conditions that lead to frauds. Explain the audit procedures for detecting common employee fraud schemes. Explain the audit procedures for detecting common fraudulent financial reporting. Describe documents that auditors use for fraud risk assessment and detection. 9 Audit Evidence and Assurance Chapter 8 Outline six general audit techniques for gathering evidence. Identify the procedures and sources of THIS COURSE ADHERES TO ALL COLLEGE POLICIES (See College Calendar) 9

10 information auditors can use to obtain evidence for understanding an auditee's business and industry, assessing risk, and responding to assessed risk. Explain audit evidence in terms of its appropriateness and relative strength of persuasiveness. Describe the content and purpose of the audit plan as well as the specific audit programs and detailed procedures it contains. Evaluate audit working paper documentation for proper form and content. 10 Test Two:- 15% Control Assessment and Testing Test: Covers chapters after Test One: Chapter 9 Appendix 9A: Internal Control Assessment Aids for Audit Planning Appendix 9B: Understanding Information Systems and Technology for Risk and Control Assessment (online) Distinguish between management and auditor's responsibilities regarding an auditee organization's internal controls. Explain why the auditor evaluates an auditee's internal controls. Define seven internal control objectives, relating them to the assertions in management's financial statements. Describe general and application control activities found in an accounting information system. Document an accounting system to identify key controls and weaknesses in order to assess control risk. 15% Write key control tests for an audit program. Outline the auditor's responsibility when internal control evaluation work detects or indicates a significant control deficiency or a high risk of fraudulent misstatement. Explain IT functions and controls (General THIS COURSE ADHERES TO ALL COLLEGE POLICIES (See College Calendar) 10

11 versus application controls, input, processing and output controls, and end user controls) Describe the use of computer-assisted-audit techniques (CAAT), where appropriate 11 Audit sampling Chapter 10 Explain the role of professional judgment in audit sampling decisions. Distinguish audit sampling work from nonsampling work. Compare and contrast statistical and nonstatistical sampling. Differentiate between beta risk, alpha risk, sampling and nonsampling risk. Develop a simple audit program for test of a client's internal control procedures. Specify objectives, deviation conditions, populations, and sampling units. Demonstrate some basic audit sampling calculations. Evaluate evidence from control testing. Develop a simple audit program for an account balance, considering the influences of risk and tolerable misstatement. Specify objectives and a population of data. Determine sample size and select sample units. Evaluate monetary error evidence from a balance audit sample. Lecture and discussion and case material. Case Study as assigned by Instructor 12 The Revenues, Receivables, and Receipts Process Chapter 11 Describe the revenues, receivables, and receipts process, including typical risks, transactions, account balances, source documents, and controls. Lecture and discussion and case material. Quiz THIS COURSE ADHERES TO ALL COLLEGE POLICIES (See College Calendar) 11

12 Describe the auditor's control risk assessment and control tests for auditing control over customer credit approval, delivery, accounts receivable, cash receipts, and bank statements. 13 Applying Professional Judgment to Form the Audit Opinion and Issue the Audit Report Chapter 16; Appendix 16A: Audit Completion Checklist (online) Explain how the auditor's risk assessment procedures and control testing link to the key assertions and audit objectives in designing a substantive audit program for the cash account balance. Describe the typical substantive procedures used to address the assessed risk of material misstatement in the main account balances and transactions in the revenues, receivables, and receipts process. Explain the importance of the existence assertion for the audit of cash and accounts receivable. Identify considerations for using confirmations when auditing cash and accounts receivable. Describe the audit of bank statement reconciliations and how auditors identify accounts receivable lapping and suspicious cash transactions. Describe the role of professional judgment in achieving the overall objectives of the independent auditor in conducting an audit of financial statements as set out in Canadian Auditing Standard (CAS) 200. Explain how accumulated misstatements are evaluated at the conclusion of an audit to form an opinion on the fair presentation of general purpose financial statements. Describe the different forms of audit opinion THIS COURSE ADHERES TO ALL COLLEGE POLICIES (See College Calendar) 12

13 and the decisions underlying the auditor's choice of form. Explain the purpose of emphasis of matter (EOM) and other matter (OM) paragraphs in an audit report. Summarize the auditor's communications throughout and at the conclusion of the engagement. 14 Final Exam - 40% Chapters after Test Two 40% - THIS COURSE ADHERES TO ALL COLLEGE POLICIES (See College Calendar) 13