YORKUNIVERSITY

Faculty of Liberal Arts and Professional Studies

School of Administrative Studies

AP/ADMS 4551 Auditing and Other Assurance Services

Fall 2011

COURSE OUTLINE
Section / Course Director / Date of week and time / Location
B / Bartosz Amerski / Monday
7:00 pm to 10:00 pm / ACW 303
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.
Prerequisites:
For Students in an Honours Program - 78 credits including AP/ADMS 3585 3.00, AP/ADMS 3595 3.00, and AP/ECON 1000 3.00
For Other Students - The above-listed courses and an average grade of C+ or better in AP/ADMS 3585 3.00 and AP/ADMS 3595 3.00.
Please Note - AP/ADMS 4535 3.00 is not required, but strongly recommended.
Course Credit Exclusions - None.
Students are personally responsible to ensure that they have the required prerequisites. Students who do not have the prerequisites are at risk of being dropped from the course at any time. 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 Text(s) and Academic Honesty Warning:
Alvin A. Arens, Randal J. Elder, Mark S. Beasley and Ingrid Splettstoesser-Hogeterp, (2010), Auditing: The Art and Science of Assurance Engagements, Canadian Eleventh Edition, Pearson /Prentice Hall.
C.I.C.A. Handbook, Canadian Institute of Chartered Accountants Accounting and Assurance Handbooks [Part I and Part II] - Available on-line through York Library e-resources. Students must have passport account to access the Handbook.
I.C.A.O. Member's Handbook, Institute of Chartered Accountants, most recent edition. This material is also available on the Internet at
Lecture slides, Hand In Assignments, Term Paper, Oral Presentation requirements and Solutions to In Class Discussion Questions will be posted on the course website.
WARNINGS -- Academic Honesty.
The instructor enforces all Faculty rules, especially those regarding academic honesty. There is zero tolerance in this area. Plagiarism is a violation of academic honesty. The use of another’s material without permission and without recognition is plagiarism. This applies to textbooks, study guides, solution manuals, a friend’s assignment, past assignments, Internet resources or any other material irrespective of the source. Any students handing in or providing material with plagiarism will be prosecuted. Students must be aware of YorkUniversity’s Academic Honesty standards, Section D Serious Offenses Against the Standards of Academic Honesty.
Course Learning Objectives:
  • To understand the purposes, benefits and disadvantages of auditing and assurance engagements, and the responsibilities of both management and the auditor.
  • Be able to explain the environment within which audit and assurance engagements are conducted, and the impact that the environment has upon such engagements; identify and discuss relevant standards and legislation that are part of this environment.
  • To describe and assess the processes involved in conducting a financial statement audit, including risk assessment, planning, execution and reporting.
  • To understand the objectives of the financial statement audit, and to design audit procedures for specific audit objectives, in the context of risks (analytical review, control procedures, tests of details, sampling).
  • To develop analytical and communication skills.

Organization of the Course:
This course outline will provide a broad overview of the content, structure and other aspects of the course. The course content and structure is, however, subject to change.
This course requires substantial group work. Groups will be formed and group work will start in the first class.
Learning Objectives and Required Readings / Assignments and Class Work
Session 1 – Sep 12
The Demand for Auditing / The Public Accounting Profession
Learning Objectives:
-Define and explain auditing
-Distinguish between accounting and auditing
-Identify the factors that affect the demand for audits
-Describe the types of auditors and types of audits
-Explain the various standards under generally accepted auditing standards (GAAS)
-Identify quality control standards
Read:
Chapter 1 – The Auditing Profession
Chapter 2- The Public Accounting Profession
CICA Handbook:
CAS 200 - Overall Objective of the Independent Auditor and the Conduct of an Audit in Accordance with Canadian Auditing Standards
CAS 220 - Quality Control for an Audit of Financial Statements / Discussion/practice questions: Textbook 1-13, 2-20
Form Groups
In-class group exercises:Textbook 1-16 (Consumers’ Union) Please bring questions posted to course website
Session 2 – Sep 19
Overview of the Audit Process
Learning Objectives:
- Understand the objective of conducting an audit of financial statements
- Understand the difference between management and auditor responsibilities relating to the financial statements
- Understand the financial statement cycles approach to segmenting the audit
- Understand the relationship among financial statements, management assertions, audit objectives, and audit procedures
- Identify the major phases of the audit process
- Grasp the basic elements of audit reporting
Read:
Chapter 5 - Audit Responsibilities and Objectives
Chapter 22 -Auditor Reporting, p. 714-720
CICA Handbook:
CAS 500 - Audit Evidence / Discussion/practice questions: Textbook 5-22, 5-24, 5-25
In-class group exercise:Kingston Company (Course Website)
Assignment of Companies for Group Projects
Session 3 – Sep 26
Materiality, Risk, and Developing the Client Risk Profile
Learning Objectives:
-Understand materiality and its purpose
-Explain the relationship between materiality, risk and audit evidence
-Identify the various bases for determining materiality
-Understand how to assess business risk and its relationship to the audit risk model
_ Understand the type of evidence used in developing a client risk profile
Understand how to develop and apply analytical review in developing the client risk profile
-Understand when need to rely on the work of a specialist
Read:
Chapter 7 - Materiality and Risk
Chapter 8 – Client Risk Profile and Documentation p. 239-253
Chapter 6 – Purpose and timing of analytical procedures (p. 182-189) and Appendix 6A
CICA Handbook:
CAS 200 (see Session 1)
CAS 315 - Identifying and Assessing the Risks of Material Misstatements through Understanding the Entity and its Environment
CAS 320 - Materiality in Planning and Performing an Audit
CAS 210 - Agreeing the Terms of audit Engagements
CAS 300 - Planning an Audit of Financial Statements
CAS 510 - Initial Engagements – Opening Balances
CAS 520 - Analytical Procedures
CAS 620 - Using the Work of an Auditor’s Expert / Discussion/practice questions: Textbook 7-18, 7-19, 7-20, 8-23, 8-24
In-class group exercises:
Materiality – Who’s Right? (Course Website)
HighTech Software & Games Inc. (Course Website)
Individual Hand-In Assignment #1 (Course Website)
Session 4 – Oct 3
Corporate Governance, Internal Controls, and Control Risk
Learning Objectives:
- Describe internal control and understand its role in developing the client risk profile
-Understand the importance of internal control for management and the auditor
-Understand the four components of internal control
-Identify the components of the control environment
-Understand how to assess control risk
-Understand the different approaches used to understand the client’s internal control
-Link internal control to audit objectives and audit procedures
-Discuss the purpose of a management letter
-Understand the relationship between corporate governance strategies and risk management.
Read
Chapter 9 Internal Controls and Control Risk
Chapter 10 – Corporate governance and entity level controls (pp. 311-323)
Chapter 14 -- Methodology for Designing Tests of Controls for Sales (pp. 455-468)
Chapter 18 -- Test of Controls, for the audit of the acquisition and payment cycle (pp. 600-605)
CICA Handbook:
CAS 265, Communicating Deficiencies in Internal Control to Those Charged with Governance and Management
CAS 260, Communications with Those Charged with governance / Discussion/practice questions:
Textbook 9-22, 9-24, Segregation of Duties (Course Website)
In-class group exercises:
Little City Payroll – Identifying Control Weaknesses (Course Website)
Group Assignment 1 Due
Reading week – October 8-October 12 – No Class
Session 5 – Oct 17
Audit Evidence, Evidence Mix, and Audit Strategy
Learning Objectives
Explain the purposes of working papers and identify the various types of working papers
Understand the factors that influence audit evidence decisions
Evaluate the quality of evidence
Understand the relationship between analytical procedures, test of controls and test of details
Understand how to develop an audit strategy that is efficient and effective
Read
Chapter 8 – The Nature of Working Papers (p. 253-260)
Chapter 6 – Audit Evidence
Chapter 12 – Overall Audit Plan and Audit Program
CICA Handbook:
CAS 230 - Audit Documentation
CAS 330 - The Auditor’s Responses to Assessed Risks
CAS 500 - Audit Evidence / Discussion/practice questions:Textbook, 6-22, 6-23, 6-26, 12-18, 12-22 and 12-23
In-class group exercises:
Epoch Jeans – cont’d (course website)
Individual Hand-in Assignment #2 – Course Website
Session 6 – October 24
Fraud Auditing
Learning Objectives
Understand the fraud and the fraud triangle
Understand the difference between fraudulent financial reporting and misappropriation of assets
Understand the features of corporate governance and of the control environment that that could reduce fraud risk
Understand the auditor’s responsibility for assessing and detecting fraud
Read
Chapter 11
CICA Handbook:
CAS 240-The auditor’s responsibilities relating to fraud in an audit of financial statements / Discussion/practice questions:
Textbook 11-23, 11-30
In-class group exercises:
Little City Payroll – Fraud Risk Assessment (course website)
Lola Whole Foods (course website)
Individual Hand-in Assignment # 3
Session 7 – October 31
Midterm Exam (to be held in class) – covers Session 1-6
Session 8 – November 7
Audit Sampling
Learning Objectives:
- Explain why sampling is important in auditing
-Explain the concept of representative sampling
-Distinguish between statistical and non statistical sampling
-List the advantages and disadvantages of statistical versus non statistical sampling
-Describe the steps in planning, selecting and evaluating a sample
-Identify the steps to conduct attribute sampling
Read:
Chapter 13 -- Audit Sampling Concepts
Chapter 14 -- Audit of the Sales and Collection Cycle – Tests of Controls Application of Attribute Sampling (pp. 481-486)
CICA Handbook:
· CAS 530, Audit Sampling / Discussion/practice questions: Textbook 13-22, and 13-26
In-Class Group Exercises:
Packet Corporation
Group Assignment 2 Due
Session 9 – November 14
Application of the Audit Process: The Sales/Receivable Cycle
Learning Objectives:
-Identify the typical records and transactions in the sales cycle
- Understand the relationship between overall audit planning risks and risks for sales and collections cycle assertions
- Identify and describe the processes for designing control tests and test of details for the sales and collection cycle
- Identify the various analytical procedures used in the audit of the sales and collection cycle
-Comparison of positive and negative confirmations
-Discuss the process for confirming accounts receivable confirmations and following up non replies
Read:
Chapter 14 - Audit of the Sales and Collection Cycle – Tests of Controls (p. 443-455 and 464-
Chapter 15 – Designing Tests of Details of Balances for Accounts Receivable / Discussion/practice questions: 15-29, 15-31, Adecco Employment Services (Course Website)
In-class group exercise
Fisher Boats (Course Website)
Verona Shoe (Course Website)
Individual Hand-in Assignment #4
Session 10 – November 21
Application of the Audit Process: The Inventory and Warehousing Cycle And Acquisition and Payment Cycle
Learning Objectives
- Explain the components of the inventory and warehousing cycle to the auditor
- Explain the components of the Acquisition and Payment cycle to the auditor
-Identify the various types of analytical procedures relating to the inventory and warehousing cycle
-Identify the various types of analytical procedures relating to the Acquisition and Payment cycle.
-Discuss the physical observation and pricing/compilation audit tests for inventory
- Understand the relationships among the tests of different cycles
Read:
Chapter 18, 19 / Discussion/practice questions: 19-18, Hillmart Retail (Course Website), Consumer Electronics (Course Website)
In-class group exercise
Harris and the Auditors (Course Website)
Session 11 – November 28
Professional Relationships and Legal Liability
Learning Objectives:
- Explain what ethics are and why they are important to auditors
-Understand the six fundamental statements of accepted conduct
-Understand the various facets of independence
-Understand confidentiality as it applies to a public accountant
-Understand advertising and solicitation from the perspective of a public accountant
-Discuss how public accountants become associated with information and their responsibilities
-Compare the auditor’s responsibilities with respect to errors, fraud, and other irregularities
-Distinguish between a business failure and an audit failure
-Describe the accountant’s liability to third parties under common law and the related defences
-Discuss the profession’s response to legal liability
-Examine the impact of Sarbanes Oxley and Bill 198
Readings:
Chapter 3 -- Professional Relationships: The role of ethics and independence
Chapter 4 –Legal Liability
CICA Handbook
Section 5020 - Association
CAS 240 - The Auditor’s Responsibilities Relating to Fraud in an Audit of Financial Statements
CAS 250 - Consideration of Laws and Regulations in an Audit of Financial Statements
· ICAO Handbook - Rules of Professional Conduct (available from Click on Site Map, scroll down to Resources and click on Member’s Handbook. Download the pdf file titled “Rules of Professional Conduct.”) / Discussion/practice questions: Textbook 3 -16, 3-17, 3-24, 4-13, 4-16, and 4-18
In-class group exercises:
Textbook 4-17
Group Assignment #3 Due
Session 12 – December 5
Contingent Liabilities, Audit Completion and Modifications to the Auditor’s Standard Report
Read:
Chapter 21 - Completing the Audit
Chapter 22 - Audit Reporting p.720-737
CAS 260 - Communications with Those Charged with governance
CAS 560 - Subsequent Events
CAS 570 - Going Concern
CAS 580 - Written Representations
CAS 450 - Evaluation of Misstatements Identified during the Audit
CAS 700 - listed in S1
CAS 705 - Modifications to the Opinion in the Independent Auditor’s Report
CAS 710 - Comparative Information – Corresponding Figures and Comparative Financial Statements
CAS 706 - Emphasis of Matter Paragraphs and Other Matter
CAS 720 - The auditor’s responsibility in relation to other information in documents containing audited financial statements / Discussion/practice questions: 21-17,
In-class group exercises:
Textbook 22-22, Report Qualifications (Course Website)
Individual Hand-in Assignment #5
Session 13 – FINAL EXAMINATION (covers the entire course-during regular examination schedule, Fall 2011 – Thursday, December 8-Thursday, December 22)

Weighting:

Class Attendance, Participation, and Hand in Assignments* / 15% / Various Sessions
Midterm Examination (Sessions 1-6) / 25% / Session 7
Group Assignment and Presentation** / 20% / Various Sessions
Final Examination / 40% / During exam schedule (Thursday December 8 – Thursday December 22 )
TOTAL / 100% /

* Class Attendance, Participation and Hand In Assignments – These Instructions will be posted on the course website.

** Group Assignments and Presentation - Groups will be given a Canadian public company (in session 2) that they must prepare an audit plan. Various components of that plan will be submitted throughout the semester and groups will present on those components throughout the semester. The written and the oral presentation requirements will be posted to the course website.

Missed Midterm

If a midterm examination is missed due to avalid reason such as illness or other reason approved by the Course Director, the student will be required to write a make-up midterm.

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, OR for another valid reason, the documentation requested by the Course Director,

An email notification of the missed midterm must be sent to the course director within 2 days of the missed midterm and the required documentation must be delivered to Room 282 Atkinson within 5 days of the missed midterm.

The rescheduled midterm will take place 7 to 10 business after the original midterm date.

Deferred Examination Policy
Deferred standing may be granted to students who are unable to write their final examination at the scheduled time or to submit their outstanding course work on the last day of classes. In order to apply for deferred standing, students must complete a Deferred Standing Agreement (DSA) form and submit their request no later than five (5) business days from the date of the exam. The request must be properly submitted with supporting documentation directly to the main office of the School of Administrative Studies (282 Atkinson), NOT to the Course Director. These requests will be considered on their merit and decisions will be communicated to the students by the main office.

Students with approved DSA will be able to write their deferred examination between January 20-22, 2012. No further extensions of deferred exams shall be granted. The format and covered content of the deferred examination may be different from that of the originally scheduled examination. The deferred exam may be closed book, cumulative and comprehensive and may include all subjects/topics of the textbook whether they have been covered in class or not. Any request for deferred standing on medical grounds must include an Attending Physician's Statement form; a “Doctor’s Note” will not be accepted.
DSA Form:

Attending Physician's Statement form: