BISHOP’S UNIVERSITY WILLIAMS SCHOOL OF BUSINESS Course: Professor: Office: Email: Office hours: BAC 341- AUDITING / WINTER 2006 Camille Lessard, CA, M. fisc. H-217 (822-9600/ extension 2479) clessard@ubishops.ca M/W: 15:00 17:00 - 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: Tests (2) Cases and class participation Final examination 30 % 30 % 40 % 100 % NOTE: • Tests and examinations will cover all work completed to date; • Assignments are due at the start of the class indicated. Late assignments 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, Alvin J., Loebbecke, James, Lemon, Morely and Splettstoesser, Ingrid, Auditing and Other Assurance Services, Canadian 9th Edition, Toronto: Prentice Hall. • CICA Handbook. • Course material on the R-drive • Hand-outs. CONTENTS I. INTRODUCTION • Auditing: a definition • Practice standards for public accountants • Quality control References: Chapter 1; chapter 23 (p. 669 to 686) CICA Handbook sections 5020, 5025, 5090, 5100 - - - II. CA Magazine, December 2003 GSF-QC/ CICA 5030 on Quality Standards THE AUDITOR’S REPORT • The format of the report and GAAS • Types of audit reports • Special circumstances References: - - III. Chapter 2 CICA Handbook, sections 1300, 3290, 5400, 5405, 5510, 5600, 5701, 5049, 5365, 6930, 7500 PROFESSIONAL ETHICS • What are ethics? • Rules of Professional Conduct References: - Chapter 3 CICA Handbook 5751,5135 “A Principles-based Approach” CA Magazine (November 2003) CICA, Guide to New Independence Standard, October 2003 Rules of Professional Conduct 204.1 and following - - IV. AUDIT RESPONSIBILITIES AND OBJECTIVES • Audit responsibilities (error, illegal acts, fraud) • Audit objectives (the cycle approach; the strategic systems approach) References: V. - Chapter 5 CICA Handbook sections 5135, 5136, 5305, 5750, 5751 AUDIT EVIDENCE • Evidence accumulation: basic concepts • Types of audit evidence • Analytical procedures References: - VI. - Chapter 6 CICA Handbook sections 5145, 5300, 5301, 5303, 5305, 5306 AUDIT PLANNING AND DOCUMENTATION • Preplan • Obtaining background information • Obtaining information about legal obligations • Performing preliminary analytical procedures • Documentation References: VII. - Chapter 7 CICA Handbook sections 5100, 5150, 5141, and 5145 MATERIALITY AND RISK • The Concept of materiality • The Audit Risk Model References: - Chapter 8 CICA Handbook, section 5095, 5141, 5142, 5143, 5305 AuG-41- Applying the concept of materiality - VIII. THE STUDY OF INTERNAL CONTROL (MANUAL AND COMPUTER-BASED SYSTEMS) • Internal control: definition and elements • Obtaining an understanding of internal control • Assessing control risk and planning the audit strategy • Auditing in a computer environment References: - - IX. Chapters 9 and 22 CICA Handbook sections 5220, 5050 AuG32 THE AUDIT PROGRAM AND AUDIT SAMPLING CONCEPTS • The Audit Program • Audit sampling concepts References: - - X. Chapter 10 (p. 285 to 288; 293 to 297) Chapter 11 AUDIT OF THE SALES AND COLLECTION CYCLE: TESTS OF CONTROL • Overview of the cycle • Flowcharts : manual and computer-based systems • Lapping • I.C. procedures, control risk and tests of controls • Controls in a computerized environment References: Chapter 12 - XI. COMPLETING THE TESTS IN THE SALES AND COLLECTION CYCLE • Using analytical procedures • Tests of details of balances: A/R and AFDA • Confirmation of Accounts Receivable References: - Chapters 14 (p. 427 to 447) XII. COMPLETING THE AUDIT • Contingent Liabilities • Commitments • Review for Subsequent Events • Accumulating Final Evidence References: - - XIII. Chapter 21 CICA 6550, 6560, 5370 CASES (Audit of other cycles: payroll and personnel, acquisition and payment, inventory and warehouse cycle) References: Chapters 15, 16 and 18 - XIV. ATTEST ENGAGEMENTS • Review and Compilation Services • Selected Attest Reports References: - - Chapter 23 CICA Handbook sections 5805, 5815, 8100, 8200, 8500, 8600, 9100, 9200 SELECTED WEB SITE REFERENCES CA Magazine- http://www.camapazine.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 CASES AND TESTS Cases Due date Work required from all students Croyden Factory, Inc. (payroll) April 3, 2006 Read chapter 15 Case: • Description of 2 weaknesses • Description of I enquiry procedure Giant Stores Corporation (accounts payable) April 5, 2006 Read chapter 16 Case: • Description of 2 A.P. other than Table 6-4 Doughtie’s Foods, Inc. (inventory) April 10, 2006 Tests Test 1 Test 2 February 15, 2006 March 22, 2006 Read chapter 18 Case: • Answer question I