ACCOUNTING DEPARTMENT Course: BAC 341 AUDITING WINTER 2012 Professor: Caroline Talbot, MSc, CA E-mail: caroline.talbot@ubishops.ca Office: J114a (extension # 2586) Office hours: MONDAY and WEDNESDAY : 10h00 11h30 COURSE OBJECTIVES: This course will introduce students to the concept of internal control and fundamentals of auditing. Topics include: legal and moral responsibilities of the auditor, controls required in principal accounting systems, selection of appropriate audit techniques and preparation of audit reports. GRADING SCHEME: NOTE: Midterm exam 30 % Case assignment in team (5% per section) 25 % Final examination 45 % 100 % Tests will cover all work completed to date; Case assignment is due at the start of the class indicated. Late work will not be accepted; all papers should be typed; You need at least 50 % in total in the final examination to pass the course; No supplemental (tests or examination). TEXT: Arens, A.A., Elder, R.J., Beasley, M.S., Splettstoesser-Hogeterp, I.B. Auditing: The art and science of assurance engagement, Canadian 11th Edition, Toronto: Pearson Canada, 2011. CICA Handbook and C-PEM. Course material on Moodle 1
CONTENTS I. INTRODUCTION (Jan 11, Jan 16 and Jan 18) Auditing: a definition User demand for reliable information Other kind of audits and auditors Practice standards Generally Accepted Auditing Standards Quality Control Standards References: Lecture notes: topic #1 and #2 Chapter 1 Chapter 2 CAS 200 Overall objectives of the independent auditor, and the conduct of an audit in accordance with CAS CAS 210 Agreeing the terms of audit CAS 220 Quality control for an audit of financial statements CSQC 1 Quality control for firms that perform audits and reviews of financial statements, and other assurance engagements CICA 5021 Authority of auditing and assurance standards and other guidance II. PROFESSIONAL ETHICS, INDEPENDENCE, RESPONSIBILITIES and OBJECTIVES (Jan 23, Jan 25 and Jan 30) The association framework What are ethics? Code of Professional Conduct Independence Auditor s Liability Audit responsibilities and objectives Overview of the audit process References: Lecture notes: topic #3, #4 and #5 Chapter 3,4 and 5 CICA, Guide to New Independence Standard, October 2003 Rules of Professional Conduct 204.1 and following CAS 210 Agreeing on the terms of audit engagements CAS 220 - Quality control for an audit of financial statements CAS 240 The auditor s responsibilities relating to fraud in an audit of financial statements CAS 250 Considerations of laws and regulations in an audit of financial statements CSQC 1 Quality control for firms that perform audits and reviews of financial statements, and other assurance engagements 2
CICA 5020 Association CICA 5090 Audit of financial statements an introduction CICA 7600 Reports on the application of accounting principles III. THE AUDITOR S REPORT (Feb 01 and Feb 06) The association framework The format of the report and CAS Types of audit reports Special circumstances References: Lecture notes: Topic #6 Chapter 22 CAS 560 Subsequent events CAS 620 Using the work of an auditor s expert CAS 700 Forming an opinion and reporting on financial statements CAS 705 Modifications to the opinion in the independent auditor s report CAS 706 Emphasis of matter paragraphs and other matter(s) paragraphs in the independent auditor s report CAS 710 Comparative information: corresponding figures and comparative financial statements CICA 5020 Association CICA 9200 Compilation engagements IV. AUDIT EVIDENCE (Feb 8 and Feb 13) Evidence accumulation: basic concepts Types of audit evidence Analytical procedures References: Topic #7 Chapter 6 CAS 330 The auditor s responses to assessed risks CAS 500 Audit evidence CAS 520 Analytical procedures CAS 505 External confirmations V. PRELIMINARY AUDIT PLANNING (Feb 15 and Feb 20) Components of the audit risk model Materiality levels for audit planning Developing the overall audit strategy 3
References: Lecture notes: Topic #8 Chapter 7 CAS 315 Identifying and assessing the risks of material misstatement through understanding the entity and its environment CAS 320 Materiality in planning and performing an audit CAS 450 Evaluation of misstatements identified during the audit CICA 5095 Reasonable assurance and audit risk VI. AUDIT PLANNING AND DOCUMENTATION (Feb 22 and Feb 27) Risk Assessment Assess Independence and Engagement Risk Understand the Entity and its Environment Assess Risk of Material Misstatement (RMM) Dual-purpose tests, evidence mix Communicate findings Documentation References: Lecture notes: Topic #9 Chapter 8 Chapter 12 CAS 230 Audit documentation CAS 240 The auditor s responsibilities relating to fraud in an audit of financial statements CAS 300 Planning an audit of financial statements CAS 315 Identifying and assessing the risks of material misstatement through understanding the entity and its environment CAS 330 The auditor s responses to assessed risks CAS 520 Analytical procedures VII. THE STUDY OF INTERNAL CONTROL, FRAUD AUDITING AND CORPORATE GOVERNANCE (March 12) Internal control: definition and elements Obtaining an understanding of internal control Assessing control risk Auditing in a computer environment Fraud auditing Enterprise Risk Management framework (ERM) References: Already covered in BAC 241 brief review Chapter 9 and 10 CAS 265 Communicating deficiencies in internal control to those charged with governance and management CAS 610 Using the work of internal auditors 4
VIII. AUDIT OF THE SALES AND COLLECTION CYCLE: TESTS OF CONTROLS AND TESTS OF BALANCE (March 14 and 19) Overview of the cycle I.C. procedures, control risk and tests of controls Controls in a computerized environment Using analytical procedures Tests of details of balances: A/R and AFDA Confirmation of Accounts Receivable References: Chapter 14 Chapter 15 CAS 505 External confirmations CICA 3020 Accounts and notes receivable CICA 3840 Related-party transactions IX. COMPLETING THE AUDIT (March 21 and 26) Contingent Liabilities Commitments Review for Subsequent Events Accumulating Final Evidence References: Chapter 21 CAS 450 Evaluation of misstatements identified during the audit CAS 501 Audit evidence: specific considerations for selected items CAS 520 Analytical procedures CAS 560 Subsequent events CAS 570 Going concern CAS 580 Written representations CAS 720 The auditor s responsibility relating to other information in documents containing audited financial statements X. CASES (Audit of other cycles: payroll and personnel, acquisition and payment, inventory and warehouse cycle) (March 28, April 2 and April 4) References: Chapters 16 to 20 XI. ATTEST ENGAGEMENTS (April 11) Review and Compilation Services Selected Attest Reports 5
References: -Chapter 23 CAS 800 Special considerations: audit of financial statements prepared in accordance with special purpose frameworks CICA 4250 Future-oriented financial information CICA 5025 Standards for assurance engagements CICA 5815 Special reports: audit reports on compliance with agreements, statutes, and regulations CICA 9200 Compilation engagements SELECTED WEB SITE REFERENCES CA Magazine- http://www.camagazine.com/cica/camagazine.nsf/public/index CGA Magazine- http://www.cga-canada.org/eng/magazine/ CMA Magazine- http://www.managementmag.com CICA- http://www.cica.ca 6
IMPORTANT DATES TO REMEMBER MID-TERM: February 29 ASSIGNMENTS: remittance dates to be determined 7