COURSE SYNOPSIS
This is an introduction course in Auditing. The course will introduce
students to the basic concepts and principles of financial statements
auditing. Emphasis will be given on external and statutory audits. Students
will be exposed to the basic knowledge required to perform the auditing
task. The coverage of the course includes collection of evidence, internal
control evaluation, audit documentation until the issuance of an audit
report. Methodology and auditing financial statement cycles such as sales
and collection cycle; purchase and payment cycle; and cash and inventory
cycle will be discussed. The fundamental knowledge gained from this
course will be expanded in the Advance Auditing course.
UNIVERSITI SAINS MALAYSIA
School of Management
COURSE OBJECTIVES
Bachelor of Accounting Degree
1. To provide exposure on the need for an external audit and its statutory
nature.
2. To introduce several audit concepts and the relevant auditing
standards.
3. To demonstrate the procedures in respect of audit planning and the
audit of financial statement of non-complex entities.
4. To introduce the various types of audit reports.
COURSE OUTLINE
ACW 250 - AUDITING
Semester 1, Academic Session 2018/ 2019
LEARNING OUTCOME
After completing this course, students should be able to:
1. Explain the difference between auditing and accounting.
2. Describe the relevant regulators, authorities and professional bodies in
Malaysian auditing environment.
3. Distinguish the auditor’s and management’s responsibilities on audit
of the financial statement.
4. Incorporate the relevant accounting and auditing standards into the
audit of non-complex entities.
5. Apply and distinguish substantive testing and test of control.
6. Explain the relevant statutory and regulatory requirements.
7. Explain management assertions and the objectives of external auditing
and the responsibility of external auditors in relation to fraud.
Lecturer: Ali Nawari Bin Hasan
Room: No 1, 1st Floor, E47
Tel: 04-6532898 / 012-4529924
Email: alinawari@usm.my
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8. Analyze the internal control problems of a small company and suggest
possible solutions.
9. Explain the different types of audit files and working papers.
10. Differentiate the types and sources of audit evidence.
11. Apply the relevant audit procedures to the relevant audit cycles and
items of balance sheet and income statement.
12. Distinguish the types of audit reports in accordance to different
circumstances.
13. Perform a financial statement audit for non-complex entities.
Mid Term Exam (20%)
Week 8.
Final Exam (60%)
Five questions will be given at the end of the semester. Students will be
given three hours to answer the questions. Encompasses all types of
questions from memory recall until synthesis. Sample of questions include
to comment and discuss the types of audit report to be issued, the strengths
and weaknesses of an internal control system etc. Students may also be
asked to list the audit steps required to conduct an audit of a particular
transaction or item. Example of recall questions would be to discuss the
differences between management assertions and audit objectives.
COURSE EVALUATION
Coursework
Mid Term Exam
Project
Assignment
Quizzes
Final Exam
40%
20%
10%
5%
5%
DESCRIPTION OF TEACHING-LEARNING METHODS:
The usual mode will be through lectures, tutorials, case study, computer
labs, video tapes and library search.
60 %
STUDENT LEARNING TIME
TOTAL
100 %
SLT
Face to face
activities
DESCRIPTION OF ASSESSMENT
Assignment / Quizzes (10%)
Self-learning
activities
Exercises / Case study given in classes or during tutorials will be collected
at random and will be graded. Short answer / Multiple choice question
quizzes will be given in class with no prior anouncements that it will be
given.
Formal
assessment
Project (10%)
Students are required to submit a project paper / case study to complete
this report.
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Descriptions
 Lecture
 Tutorial
 Consultation
 Independent learning
 Revision
 Assessment Preparation
 Continuous
Assessment
(Mid-term/Quiz/Test)
 Final Exam
TOTAL SLT
Hours
28
12
14
33
14
14
4
3
122
COURSE CONTENT/OUTLINE
LEGEND: Learning Levels (Bloom’s Taxonomy)

1. Knowledge
2. Comprehension
3. Application
4. Analysis
5. Synthesis
6. Evaluation
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Audit Objectives and Scope of Financial
 Statement Audit
 Audit objectives and basic principles
governing an audit
 Auditor’s responsibility for detecting
 fraud
 Management assertions
1,2
4
Internal Control System
 Fundamental concepts
 Objectives, characteristics and
limitations
 Definition of internal control
(COSO, Cadbury and Auditing
Standards in Malaysia)
 Importance of internal control to
auditors
 Relationship of internal control and
audit evidence
 Review and documentation of internal
control system
 Internal control’s compliance test in
transaction cycle
 Strengths and weaknesses of internal
control
 Management letter
1,2,3
Learning
Levels
Week
Topic
1
An Introduction to Auditing
 Development of auditing
 Purpose of auditing
 Differences between auditing and
accounting
 Principles of stewardship, accounting
and agency
 Introduction to auditing standards and
its importance
 Statutory audit and Companies Act 1965
 Differences between types of audit
opinions issued
 Framework of auditing (IFAC, MIA,
Auditing Standards, professional bodies)
1,2
2
Statutory and Regulatory Requirements
 Companies Act Requirement
1,2
3
 Responsibility, power and rights of
auditor, appointment, resignation
and termination of auditors (S.9,
S.169, S.172-174)
Engagement/appointment letter
5
6
7-8
9
Audit Evidence and Auditing Procedure
 Types of audit evidence
 Quality and adequacy of audit evidence
 Auditing procedure used to collect
evidence
 Types of audit procedure and audit test
 Compliance and substantive test
 Test of transaction and balance
Audit Documentation
 Importance of audit working papers
 Types of working papers
 Indexing, audit cross-footing and
extension
 Types of audit file
 Confidentiality
1,2,3



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Audit of Purchase Cycle
 Overview of the accounts and classes of
transactions
 Business functions and documents
 Major internal control and related audit
procedures
 Substantive test for accounts payables
1,2,3,4,5,6
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Audit of Cash
 Kiting
 Bank transfer schedule
 Bank reconciliation
 Bank cut off statements
 Bank confirmation
 Substantive audit procedures for cash
1,2,3,4,5,6
1,2
Audit Planning
 Planning activities
 Understanding the client’s business and
accounting system
 Fundamental concepts of materiality
and risk in auditing
 Relationship between test and evidence
 Preparation of audit programme
 Determination of audit objectives
 Analytical procedures: Planning,
fieldwork and final stage
1,2,3,4,5,6
Audit of Revenue Cycle
 Overview of the accounts and classes of
1,2,3,4,5,6
transactions
Business functions and documents
Management assertions and audit
objectives for internal controls
Substantive tests for accounts
receivables
Audit of Inventory Cycle
 Classification of inventory
 Business functions and flow of
documents
 Components of the cycle
 Major controls and audit procedures
 Confirmation on existence and
evaluation including:
 Physical stock taking
4




 Price test and summary
12
13
14
Audit of Property Plant and Equipment
 Assessing inherent and control risks
 Difference with auditing of current
assets
 Tests:
 Confirming increase and decrease of
balances
 Physical examination, examining
depreciation
 Confirmation of repairs and
maintenance balances
1,2,3,4,5,6
Audit of Long Term Liabilities, Shareholder’s
Equity and Income Statement
 Auditing long term liabilities
 Auditing dividend
 Auditing share capital account
 Auditing reserves and retained profits
 Auditing income statement items
1,2,3,4,5,6
Audit of Payroll Cycle
 Inherent and control risk assessment
 Internal control procedures
 Test of control
 Substantive procedures
 Analytical procedures

The needs for an audit report
Unqualified report
Types of qualifies reports
Circumstances that lead to the issuance
of unqualified report
Disclaimer of responsibility
MAIN TEXT BOOK
Eilifsen, A., Messier, W.F., Glover, S.M., Prawitt, D.F., Mohd Abbas,
S.Z., Syed Mustapha Nazri, S.N.F., Salleh, K., Kasim, N., Jaffar, N.,
Ismail, A.H., & Johari, R.J. 2017. Principles of Auditing and Assurance
Services in Malaysia, McGraw Hill Education, Kuala Lumpur.
ATTENDANCE
Students have to attend at least 70% of the classes conducted, failing
which the student may not be able to sit for the final exam.
APPENDIX
Project Paper
1. Students will be required to prepare a report on the current issues
of auditing. The topic will be announced during the first or second
week of class and will pertain to one of the topics to be covered in
class.
2. The Project papers should be based on Accounting literature and
articles in leading journals of Accounting as well as websites,
where necessary. Every project must be supported by at least 12
articles on the subject (not inclusive of textbook).
3. The project papers are to be in black ink on white. They are to be
in Times New Roman typeface, point size 11 (minimum) for the
text, bold for any paragraph headings, section headings and the
front cover. Spacing is to be 1½ line. Other than this, no bold
1,2,3,4,5,6
Auditor’s Report
 Objectives and format of audit report
5
4.
5.
6.
7.
type or underlining is permitted in text or titles. The front cover is
to appear in point size 16, bold, indicating the title of the research,
your group’s name and the name and ID number of all the group
members. Maximum number of pages is 30 excluding the cover
page and Appendixes. Each page must be numbered.
The project papers must be submitted two days before the date of
presentation (a softcopy of the project paper should also be
submitted). Presentation time is 15 minutes plus 5 minutes for
Questions and Answers.
All group members will be allocated equal marks. There should be
a form included in the page signed by all group members stating
this fact.
If the group members do not agree that equal marks should be
allocated, the lecturer must be informed as soon as possible.
Due Date: Week 11 (during class)
Cooperation may be permitted by a tutor in certain circumstances, where
a joint study effort, class presentation or group project forms an
appropriate part of the overall assessment.
Plagiarism occurs when students use ideas, word sequences, diagrams and
other forms of work established prior to the particular student’s
submission, without acknowledging the source of the work used. This
will include work done by other students on previous occasions.
Students should be aware that plagiarism is a serious offence and
severe penalties may be imposed.
Disability
If you are a student with a documented disability on record at USM and
wish to have a reasonable accommodation made for you in this class,
please see me at the earliest.
Plagiarism, Copying or Cheating
Universiti Sains Malaysia (USM) will not tolerate cheating or assisting
others to cheat, and views cheating in coursework as a serious academic
offence. The work that a student submits for grading must be the student’s
own work, reflecting his or her learning. Where work from other sources
is used, it must be properly acknowledged and referenced. This
requirement also applies to sources on the world-wide web. A student’s
work may be reviewed against electronic source material using
computerised detection mechanisms. Upon reasonable request, students
may be required to provide an electronic version of their work for
computerised review.
Continuous feedback and development
I have a policy of continuous improvement for this course. I welcome
comments on the content of the course, on the way the sessions are
organized, or on any aspect of the course. Teaching assessment forms will
be handed out at the end of the course. You are also welcome to send me
your comments by email or to come and talk to me about how the course is
going.
If you are unsure at any time as to what is being covered or what is
expected of you, please feel free to see me to discuss your concerns. I
hope that you will find the course both rewarding and interesting.
Students are encouraged to examine the following definitions of
undesirable conduct and to discuss them with tutors (if necessary):
Collusion occurs when two or more individuals combine their efforts in
order to deceive the tutor as to who is responsible for a particular piece of
work.
All the best!
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