School of Administrative Studies
Faculty of Liberal Arts and Professional Studies
YORK UNIVERSITY
Summer 2016 Course Outline
AP/ADMS 4553.03 Section A
Auditing: Advanced Topics
COURSE DIRECTOR/CONTACTSection A (Mondays 4-7 pm) Larry Yarmolinsky Email:
Class Location: HNE 401
EXPANDED COURSE DESCRIPTION:
The course is designed to enhance students’ analytical and critical thinking skills. The course will use a variety of cases and simulations to help students understand and apply the various audit concepts. Assignments and classes are structured so that students can develop their oral and written communication skills as well as their research skills.
The course builds upon concepts learned in introductory auditing and, through the use of interactive cases and simulations, examines the concepts in more depth. Coverage will include: audit risk, internal control concepts, corporate governance, standards for assurance engagements and various engagements that a public accountant may perform.
Specific Course Objectives
· To develop an advanced knowledge of the assurance concepts and practices relevant to selected special topics.
· To enhance critical thinking in the context of auditor’s professional judgment, scepticism, and analytical skills to support decision making.
· To develop ethical judgment and act within the requirements of the auditor’s role.
· To develop oral and written communication skills.
· To develop research skills.
· To develop team-building skills.
PREREQUISITES/CO-REQUISITES:
For students in an Honours program, 78 credits including AP/ADMS 3595 3.00, AP/ADMS 4551 3.00, or 2) or 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. Course credit exclusions: None.
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.
REQUIRED COURSE MATERIALS
1. CPA Canada Handbook - Available on-line through York Library e-resources. Students must have a Passport York account to access the Handbook. Details for access are on Library Resources section of the course Moodle site.
2. Alvin A. Arens, Randal J. Elder, Mark S. Beasley and Joanne C Jones, (2015), Auditing: The Art and Science of Assurance Engagements, Canadian Thirteenth Edition, Pearson
3. Beasley et al (Custom Textbook for ADMS 4553 –Obtain this from the York Bookstore) ISBN 132335526X
4. Additional required reading material – posted to course web site (CW).
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.
NOTE: Students must bring the relevant CPA Canada Handbook sections, and cases posted to the course website in order to facilitate their group discussions.
Weighting of the Course
Course Work / Description (See Also Class Web Site) / Weight
Individual Assignment / See below for further information / 5%
Pair Assignments / See below for further information / 10%
Group Assignment / See below for further information / 15%
Case preparation, group response and individual responses and participation / See below for further information / 15%
Midterm / Sessions 1 to 6 / 20%
Final / Cumulative: Covering Sessions 1 – 12 / 35%
Total / / 100%
OVERVIEW OF ASSIGNMENTS
Individual and Pair Assignments
These are three case-related assignments (highlighted in red) worth 5%. The first assignment is prepared on an individual basis, the other two you work in pairs. Each assignment, you will be asked to analyze particular issues in the case and prepare a memo.
Class Preparation, Group and Individual Participation
This course is designed to encourage active participation. In each session we will discuss specific auditing cases. Participation marks of up to 9% (2% allocated to attendance and 7% participation) will be assigned for participation in discussions and attendance. Every student is expected to contribute by actively engaging in both group and class discussions.
Students are expected to have read each assigned case and to be prepared to discuss the key concepts and issues raised by those cases. For the directive cases, students are expected to have prepared responses to the assigned questions and then discuss with their groups. While in class, the groups are expected to prepare a group response (GR) to assigned question(s). To demonstrate that the student has prepared in advance, before class students will be expected to submit an individual response to specific questions related to each case that will be covered in the week. The individual response (IR) is due online on Moodle before each class. Each group will be asked to lead at least one class discussion of a case (Each group will be advised in advance) – the quality of the analysis and presentation will be worth 6% of participation grade.
See document posted on the course website for a detailed list of required individual responses to cases
The participation grade will also include individual participation – students are expected to prepare for each session, attend classes regularly, and actively participate in class discussions.
Group Research Assignment
Details will be posted the first week of class.
NOTE: Students must submit their individual assignments, and group assignment to turnitin.com using Moodle – details will be given at the first session.
Reallocation of Marks if a Midterm Examination is missed for a Valid Reason
If 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 55%. 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.
Other Relevant Rules and Regulations
Refer to pages 9-11 of this course outline for relevant regulations regarding exam deferrals, academic honesty, graded feedback, in-class exams, and student accommodation policies.
1
TENTATIVE COURSE SCHEDULE
CAS: Canadian Audit Standards (CPA Handbook)
OCS: Other Canadian Standards (CPA Handbook)
CW: Posted on course website
Note: All readings, articles and cases will be either posted on the course website (moodle) or a link provided to the library website
Session / Topics/Learning Objectives / Readings and Simulations /1
May 9 / Understanding and Developing Professional Judgment in Auditing and Accounting
Learning Objectives:
· Understand what is professional judgment
· Understand the impact of judgment traps on judgment quality
· Understand the external pressures that new auditors face
· Practice and develop professional judgment / Required:
Beasley et al. –Introduction (Professional Judgment)
· Judgment Trap Discussion Cases (Beasley et al)
· Jones - How to perform an integrated analysis in the context of an audit engagement (CW)
· Jones-Professional Judgment: Auditor’s Contribution to the Quality and Integrity of Financial reporting (CW)
Case: A Day in the Life of Brent Dorsey (Beasley)
Optional:
Review Arens et al Chapter 4
2
May 16 / Professional Practice Management
· Ethics, Independence
· Client Acceptance/Continuance Issues
Learning Objectives:
· Analyze the relevant factors important to client acceptance/continuance
· Apply professional scepticism to the audit of the financial statements.
· Apply an ethical judgment framework to analyze independence issues.
· Understand the process of making and justifying a recommendation regarding client acceptance
· Analyze and apply case facts to develop a concise and professional memo / Required:
CAS: 200, 210, 220
CPA Ontario Rules of Professional Conduct (Independence)
Case: Ocean Manufacturing (Beasley et al)
Optional:
Review Arens et al – Independence & Ethical Decision Making (Chapter 4)
Monday May 23 / No Class- Victoria Day
3
May 30 / Risk Management & Planning
· Considering Different Business Models
· A closer look at materiality
Learning Objectives
· Evaluate client’s business model to identify audit risks
· Research relevant accounting standards to determine appropriate accounting treatment for internet transactions
· Evaluate IT risks associated with internet-based company (including privacy of data)
· Determine planning materiality and provide support for materiality decisions
· Determine performance materiality and specific materiality for financial statement elements
· Evaluate the pros and cons of being transparent about materiality and considering which users matter / Required:
CAS: 315, 320, 450, 510, 530,
Jones: Evaluating Engagement Risk (CW)
Cases:
Your 1040Return.com (Beasley et al.)
Anne Aylor Inc. (Beasley et al.)
Optional:
Review Arens Chapter 7
Individual Assignment 1 –Case: Your 1040 Return.com ( Required parts b), c) d) and g) only
4
June 6 / Evaluating Complex Transactions and Designing Effective Audit Procedures
Learning Objectives:
· Research relevant accounting standards to determine proper accounting treatment of complex revenue recognition transactions
· Evaluate fraud risk for revenue recognition
· Research relevant assurance standards to develop appropriate audit procedures for complex revenue recognition issues
· Design effective substantive analytical procedures and substantive tests
· Research relevant standards for substantive analytical procedures / Required:
IFRS 15, CAS 240
Jones: Notes on Auditing Revenue (CW)
PCAOB Staff Practice Alert 12 – (Revenue section)
Cases:
Burlingham Bees (Beasley et al)
CV Technologies (Cullinan et al, J of Accounting Education)
Optional:
Review Arens Chapter 12
5
June 13 / Integrating and Evaluating Audit Findings
Learning Objectives
· Integrate and evaluate findings from preliminary planning
· Identify key audit matters and develop an appropriate risk response
· Prepare an audit planning memo / Required:
CAS 315, 320,
Outline for Audit Planning Memo (CW)
Cases
Practice Case-TAL- (CW)
Case: Timber Log Homes- Previous midterm exam (CW)
6
June 20 / Assessing General Controls and Transaction Controls
Learning Objectives
· Evaluate the effectiveness of transaction controls
· Develop procedures to test transaction-related assertions in a paperless system
· Identify control deficiencies and apply professional judgement to assess whether deficiencies are material or significant
· Assess impact of control deficiencies on substantive testing / Required:
CAS
Cases:
· Henrico Retail Inc. (Beasley et al)
· Collins Harp Enterprises (Beasley et al)
Optional:
Review Arens et al Chapter 8
Case: Swim School (CW)
Pair Assignment 1 – Prepare the audit planning memo-
7
June 27 / Midterm exam ( Covers material from sessions 1 to 6)
8
July 4 / Applying and Assessing Professional Judgment for Complex Issues – Estimates and the Going Concern Assumption
Learning Objectives
· Identify and analyze audit risk related to Management Estimates
· Apply professional judgment in evaluating management estimates
· Research assurance standards to determine how to develop an effective audit strategy for Management Estimates
· Identify and analyze the risks related to Going Concern
· Evaluate the going concern assumption and determine how to adjust the audit strategy / Required:
CAS: 540, 620, 540, 570, 620
The Gray Area of Bias (Gunn, 2008) (CW)
Notes on Auditing the Going Concern Assumption (Jones) (CW)
Auditing Considerations in an Uncertain Economic Environment (Auditing and Assurance Bulletin, CPA Canada)
Jones: Notes on Auditing Estimates and Fair Value (CW)
Case: RedPack Beer Company (Beasley et al)
Trading Styles Inc. (Issues in Accounting Education) ( CW)
9
July 11 / Assessing Entity-Wide Controls and Corporate Governance
Learning Objectives:
· Understand the auditors’, management’s, and the audit committee’s responsibilities for internal control
· Assess entity-level controls over financial reporting
· Assess the audit committee and internal audit effectiveness in the context of the external audit
· Examine the implications for the financial statement audit when clients has outsourced key processes
· Identify control deficiencies and determine whether material, significant deficiency / Required:
CAS: 265, 550, 610,
OCS: 5925, CSAE 3416
Effective Corporate Governance (Jones) (CW)
Role of the Audit Committee (CPAB, 2013)
COSO Framework Executive Summary
Cases: Chocolate Factory ( CW)
Pair Assignment 2- Comptronix Corporation ( Beasley et al) Required #4, #5, #6 and #10.
Optional:
Review Arens Chapter 8
10
July 18 / Evaluating Audit results and the Upcoming New Auditor Reporting Model
· Evaluate audit differences and determine if material
· Integrate accounting and audit knowledge to evaluate audit work performed
· Perform engagement quality review and make recommendations
· Develop and draft key matter descriptions for audit report / Required:
CAS 450
Cases:
· EyeMax Corporation (Beasley et al)
11
July 25 / Other Engagements Related to Financial Statements
· Reviews
· Compilations
· Audit of Small Business
Learning Objectives:
· Understand and analyze the risks associated with conducting compilations and reviews
· Understand the reviews and compilations standards and determine when engagements are appropriate
· Apply professional scepticism in performing review procedures
· Develop appropriate review procedures based upon specific client circumstances
· Understand unique issues related to small business audits / Required:
OCS: CSAE 3000, 8500, 8600, 9200
Notes on Auditing A Small Business (Jones) (CW)
Treading the Thin Line (Cowperthwaite, 2012)
Minimize Risks (Cowperthwaite, 2013)
Arens et al – Chapter 20
Case:
Colourful World (adapted from School of Accountancy) ( CW)
Group Assignment Due
Group Presentations
Monday August 1 / No Class- Civic Holiday
12
August 8 / Assurance over Financial Information Other Than Historical Financial Statements
· Audit versus review
· Compliance with Agreement
· Agreed-upon Procedures
Learning Objectives: