School of Administrative Studies
Faculty of Liberal Arts and Professional Studies
YORK UNIVERSITY
Winter 2015 Course Outline
AP/ADMS 4551.03 Sections M, N and O
Auditing and Other Assurance Services
REQUIRED COURSE TEXT / READINGS:
1. Alvin A. Arens, Randal J. Elder, Mark S. Beasley and Ingrid B. Splettstoesser, (2013), Auditing: The Art and Science of Assurance Engagements, Canadian Twelfth Edition, Pearson.
2. CPA Canada Handbook, Chartered Professional Accountants Canada Accounting and Assurance Handbooks [Part I and Part II] - Available on-line through York Library e-resources. Students must have a Passport York account to access the Handbook remotely.
3. CPA Ontario Member's Handbook, Chartered Professional Accountants of Ontario, most recent edition. This material is also available on the Internet at http://www.cpaontario.ca/
Any additional required reading materials will be posted on the course web site.
Warning: Photocopying more than 10% of a textbook is illegal, and may involve penalties. Do not duplicate textbooks or obtain these photocopies. Students are reminded of York University's policy regarding academic dishonesty as outlined in the York student calendars.
WEIGHTING OF COURSE:Course Work / Due Date / Weight
Class Attendance and Participation (See below for further information) / All classes / 5%
Individual Hand in Assignments / Session 3, Session 5, Session 8 and Session 12 / 10%
Individual Assignment – Audit Task / Session 10 / 5%
Group Assignment-I/C Assessment / Session 6 Feb. 9 (Sec O) Feb. 11( Sec M, N) / 5%
Midterm Exam
(covers Sessions 1 - 6) / Session 7, Sunday February 22, 10 am-12 noon (Sec M, N, O) Location: TBA / 20%
Group Risk Analysis Assignment / Session 11 Hand in Report –
Mar. 23 (Sec O), Mar. 25 (Sec M, N) / 15%
Final Exam / TBA - held during regular exam schedule April 8 - April 24) / 40%
Total / 100%
Reallocation of Marks if a Midterm Examination is missed for a Valid ReasonIf a midterm examination is missed due to a valid reason such as illness or other reason approved by the Course Director, the midterm mark allocation of 20% will be added to the final examination percentage.
The documentation required to support this reallocation are as follows:
1. For illness, a completed medical form (physician's statement) provided by the Registrar’s Office, http://www.yorku.ca/laps/council/students/documents/APS.pdf OR for another valid reason, the documentation requested by the Course Director, AND
2. A signed statement stating that you are aware that your final examination will be worth 60%. This signed statement is to be attached to the documentation provided in (1) above.
Physician statements need to be from the same day as the midterm or the day immediately after. Physician statements older than one day after the date of the midterm exam will not be accepted.
Class Attendance and Participation
This course is designed to encourage active participation. In each session we will be taking up questions from the text as well as an in class exercise in some sessions (to be posted to the course website). Participation marks of 3% will be assigned for participation in the take up of the questions from the text and the in class exercises. Attendance will be taken each week and is worth 2% in total.
Details about Assignments will be posted to Course Website
COURSE DIRECTOR / CONTACT:
Section M (Wednesdays: 7 pm-10 pm): Michael Yarmolinsky Email:
Section N (Wednesdays: 4 pm -7 pm): Larry Yarmolinsky E-mail:
Section O (Mondays: 11:30 am – 2:30 pm): Joanne Jones E-mail:
CALENDAR DESCRIPTION:
This course examines audit concepts and techniques. Coverage will include audit theory, the timing, nature and extent of audit testing, audit procedures and the application and interpretation of statistics in an audit context. Prerequisites: 1) For students in an Honours program, 78 credits including AP/ADMS 2511 3.00, AP/ADMS 3585 3.00, AP/ADMS 3595 3.00, AP/ECON 1000 3.00, or 2) for other students, these above-listed courses and an average grade of C+ or better in AP/ADMS 3585 3.00 and AP/ADMS 3595 3.00. AP/ADMS 4535 3.00 is not required, but strongly recommended. Course credit exclusions: None. PRIOR TO FALL 2009: Prerequisites: 1) For students in an Honours program, 78 credits including AK/ADMS 3585 3.00, AK/ECON 1000 3.00, or 2) for other students, these above-listed courses and an average grade of C+ or better in AK/ADMS 3585 3.00. Course credit exclusion: AK/ADMS 4551 3.00.
PREREQUISITES/CO-REQUISITES:
Prerequisites: 1) For students in an Honours program, 78 credits including AP/ADMS 2511 3.00, AP/ADMS 3585 3.00, AP/ADMS 3595 3.00, AP/ECON 1000 3.00, or 2) for other students, these above-listed courses and an average grade of C+ or better in AP/ADMS 3585 3.00 and AP/ADMS 3595 3.00. AP/ADMS 4535 3.00 is not required, but strongly recommended. Course credit exclusions: None. PRIOR TO FALL 2009: Prerequisites: 1) For students in an Honours program, 78 credits including AK/ADMS 3585 3.00, AK/ECON 1000 3.00, or 2) for other students, these above-listed courses and an average grade of C+ or better in AK/ADMS 3585 3.00. Course credit exclusion: AK/ADMS 4551 3.00.
Students are personally responsible to ensure that they have the required prerequisites as stated in the course outline or in the course calendar. Students who do not have the prerequisites are at risk of being dropped from the course at any time during the course. The department will not be responsible for refunds resulting from students being dropped from a course due to a lack of the appropriate prerequisites.
EXPANDED COURSE DESCRIPTION:
This course provides an introduction to auditing and other assurance services for students who have not had significant exposure to auditing concepts or significant auditing experience.
The primary emphasis of the course is on the auditor’s decision-making process and the nature and amount of audit evidence needed to render an opinion on the fairness of an organization’s financial statements. Topics include professional standards, rules of conduct, ethical considerations, legal liability, audit and review objectives, the audit risk model, audit evidence, development and execution of compliance and substantive audit strategies, sampling methods and audit reports.
NOTE:Students must submit their individual assigments and group assignments to turnitin.com using Moodle- instructions will be given at the first session- Students must also submit a hard copy to the course director for marking.
1
ORGANIZATION OF THE COURSE
Changes to this course outline may occur closer to the date of commencement of classes.
Session / Description / Assignments and Readings /Session 1
Section O:
Monday Jan 5
Sections M and N:
Wednesday Jan 7 / The Demand for Auditing, The Public Accounting Profession
Learning Objectives:
1. Identify the components of an audit and explain why there is a demand for audits
2. Distinguish between accounting and auditing
3. Explore the different types of auditors and what they do
4. Understand the responsibilities of public accountants
5. Explain generally accepted auditing standards (GAAS)
6. Examine the characteristics of quality control for public accounting firms. Explain how quality control is managed. / ASSIGNMENT AND CLASS WORK
Discussion/practice questions: Textbook
1-13, 1-18, 2-20
REQUIRED READING:
Chapter 1 – The Demand For An Auditing And Assurance Profession
Chapter 2 - The Public Accounting Profession
CPA Handbook:
CSQC 1
CAS 200
CAS 220
Session 2
Section O:
Monday Jan. 12
Sections M and N:
Wednesday Jan. 14
Session 2 cont’d / Overview of the Audit Process and the Standard Independent Audit Report
Learning Objectives:
1. Review the objective of conducting an audit of financial statements
2. Understand the purpose of the standard audit report
3. Distinguish between management’s and the auditor’s responsibilities for the financial statements
4. Understand the role of professional skepticism in fraud risk assessment and the conduct of the audit
5. Understand the importance of auditor independence and understand how to conduct an independence threat analysis
6. Understand how transactions are related within key financial statements cycles. Apply the cycle approach to planning the financial statement audit
7. Understand the role of entity-level controls in cycles and assessing risk in the audit
8. Understand and apply management assertions to develop audit objectives for classes of transaction- balances, and presentation and disclosure.
9. Describe the audit process. / Assignment and Class Work
Discussion/practice questions: Textbook 5-23, 5-25, 5-29 (c),
Kingston Company (web site)
Form Groups
REQUIRED READING:
Chapter 5 - Audit Responsibilities and Objectives (Omit Section 2 – Preplan Audit (covered in Week 3)
Chapter 3 – Professional Relationships, (Independence Section, p. 58-63)
Chapter 20 -Auditor Reporting, p. 596-599
CPA Handbook:
CAS 210
CAS 240
CAS 500
Session 3
Section O:
Monday Jan. 19
Sections M and N:
Wednesday Jan. 21
Session 3 cont’d / Preplanning and Developing Client Risk Profile
Learning Objectives:
1. Understand the purpose of preplanning the audit and the various steps to be performed
2. Conduct an Independence Threat Analysis
3. Explain the importance of an adequate audit planning process.
4. Develop a client risk profile to aid in planning the financial statement audit
5. Assess client’s business and industry to determine risk of material misstatement at the financial statement and account level
6. Understand the types of evidence that the auditor collects to develop the client risk profile and assess client business risk
7. Understand and develop analytical procedures at the planning stage to determine risk of material misstatement at the financial statement and account level / Assignment and Class Work
Discussion/practice questions: Textbook 6-25
In-class group exercise:
Epoch Jeans (parts a and b)
Individual Hand In- Assignment #1 due
(See Course Website)
REQUIRED READING:
Chapter 5 – Section 2 - Preplan Audit (p. 108-112)
Chapter 6 - Client risk profile (Omit Section 3 Nature of Audit Working Papers)
Chapter 8 – Purpose and timing of analytical procedures (p. 232-239) and Appendix 8A
CPA Handbook:
CAS 230
CAS 300
CAS 315
CAS 520
CAS 550
CAS 620
Session 4
Section O:
Monday Jan. 26
Sections M and N:
Wednesday Jan. 28 / Materiality and Risk
Learning Objectives:
1. Understand and apply the components of the audit risk model to assess achieved audit risk
2. Describe the factors the auditor considers when assessing inherent risks
3. Understand and apply quantitative and qualitative factors to determine the appropriate materiality for the overall financial statements,
4. Develop an appropriate allocation of materiality to segments and performance materiality
5. Understand the relevance of materiality in conducting the audit and the relationship between materiality and audit risk / Assignment and Class Work
Discussion/practice questions:
7-17, 7-23, Epoch Jeans (parts c and d)
Materiality – Who’s Right?,
Linking risk factors
REQUIRED READING:
Chapter 7 - Materiality And Risk
CPA Handbook:
CAS 200
CAS 315
CAS 320
CAS 450
Session 5
Section O
Monday Feb. 2
Section M and N:
Wednesday Feb. 4 / Corporate Governance, Internal Controls, and Control Risk Assessment
Learning Objectives:
1. State the three primary objectives of effective internal control.
2. Compare management’s concerns about internal control with those of the auditor.
3. Describe the inherent limitations of internal control.
4. Understand the fraud triangle and apply to analysis of risk of fraudulent financial reporting and misappropriation of assets.
5. Describe the COSO components of internal control and provide examples of each component.
6. Use the COSO model to assess internal control risk
7. Understand the two audit strategies of (i) a substantive approach and (ii) a combined approach and using risk assessment to determine when each approach is approach is appropriate
8. Understand auditor’s responsibility for reporting significant control weaknesses to management and those in charge of governance
9. Assess controls and develop recommendations for the management letter / Assignment and Class Work
Discussion/practice questions:
9-33, 9-34, Little City Payroll (course web site), Acco, Segregation of Duties
Individual Hand In- Assignment #2 due
(See Course Website)
REQUIRED READING:
Chapter 9-Internal Controls and Control Risk:
CPA Handbook
CAS 240
CAS 265
CAS 330
CAS 500
CAS 520
CAS 505
Session 6
Section O:
Monday Feb. 9
Sections M and N:
Wednesday Feb. 11
Session 6 cont’d / Audit Evidence, Documentation, Evidence Mix, and Audit Strategy
Learning Objectives:
1. Describe the nature of audit evidence and the five evidence decisions made during the audit process
2. Describe the seven general methods of evidence collection and provide examples of each
3. Evaluate the reliability of evidence in specific situations
4. Evaluate the appropriateness of evidence given the risk and relevant assertion
5. Describe three specific situations when collection of audit evidence is mandated and assess when this type of evidence-gathering is required
6. Understand and evaluate quality of working paper documentation
7. Review the nature of an audit strategy and the role of audit planning in the financial statement audit process.
8. Describe the purpose of an audit program and relate the five types of audit tests to the overall risk summary and to the audit strategy.
9. Describe the methodology for designing tests for controls and substantive tests in the audit program. Link the methodology to the selection of audit tests by assertion. / Assignment and Class Work
Discussion/practice questions:
6-24, 8-17, 8-18, 10-17, 10-22, Epoch Jeans Part 2
Group Assignment-Internal Control Assessment due
REQUIRED READING:
Chapter 8 – Audit Evidence (p. 213-232, 239-241)
Chapter 6 – Nature of Audit Working Papers (p. 168- 172)
Chapter 10 – Audit Strategy and Audit Program
CPA Handbook:
CAS 315
CAS 330
CAS 500
Sec. O Mon. Feb.16
Sec. M and N
Wed. Feb. 18 / No classes: Reading Week Feb.14-20
Session 7
All sections / Common Midterm Exam- Sunday February 22 from 10am-12 noon
(Covers Material from Sessions 1 - 6)
Location: TBA
No classes on Monday Feb. 23 (Sec O) or on Wednesday Feb. 25 ( Sec. M and N)
Session 8
Section O:
Monday Mar. 2
Sections M and N:
Wednesday Mar. 4 / Audit Sampling
Learning Objectives:
1. Explain why sampling is important in auditing
2. Distinguish between statistical and non statistical sampling and between probabilistic and non-probabilistic sample selection
3. Contrast the different types of nonstatistical methods used by auditors
4. Distinguish between a sampling error and a non-sampling error using sampling risk and non-sampling risk