School of Administrative Studies
Faculty of Liberal Arts and Professional Studies
YORK UNIVERSITY
AP/ADMS 4553.03 B Auditing: Advanced Topics
Summer 2012
COURSE OUTLINE
Course Director and Contact Information:
Section
B
Course Director
Bartosz Amerski
E-mail
Bartosz.amerski@auditor.on.ca
Class Times and Locations:
Section
B
Time
Mondays 7:00-10:00 pm
Location
ACW 303
Course Description:
The course examines current and advanced issues affecting the auditing profession. Coverage
will include: audit risk, corporate governance, standards for assurance engagements, various
types of engagements such as special reports, prospectuses, future-oriented financial
information, public sector audits, internal audit, comprehensive audits, forensic audits, and issues
related to not-for-profit organizations and small business audits.
Prerequisites:
1) Students in an Honours Programme -78 credits including AK/ADMS 3595, AK/ADMS 4551
2) Other Students – These above listed courses and an average grade of “B” or better in
AK/ADMS 3585 and AK/ADMS 3595.
Nature of the Course and its Objectives:
This course aims to develop knowledge of the assurance concepts and practices relevant to
selected special topics. The course is designed to enhance students’ analytical and critical
thinking skills. Therefore, the course will use a variety of cases to help understand the various
concepts. Assignments and classes are structured so that students can develop their oral and
written communication skills as well as their research skills.
Required Texts:
1. C.I.C.A. Handbook, Canadian Institute of Chartered Accountants (Assurance Sections) –
the electronic version is available from York Library
2. Course Kit - Purchase at the Bookstore (do not purchase course kits from previous terms
– they do not contain the relevant cases or material)
3. Any current introductory auditing text. You will need to refer back to the text to help you
analyze the cases.
WARNING
Photocopying more that 10% of a textbook is illegal and may involve penalties. Do not duplicate
textbooks or obtain photocopies.
Weighting of Course:
Component
Two Pairs Case Analyses
Case preparation, group and
individual participation
Group Case Assignment/
Presentation of Integrated
Case
Midterm Examination
Final Examination
Total
Percentage
10
10
Important Dates
Due Sessions 5, and 10
N/A
15
N/A
25
40
Session 7
TBA – held during regular exam week
TBA – held
during regular exam ( Tuesday August 7Friday August 17)
100
Pair Case Analyses
Students are expected to work in groups of two and prepare a response to two audit simulations
which will be posted to the course website. Your analysis will be evaluated on the quality of: (1)
your analysis, (2) your research, and (3) professionalism of presentation.
NOTE:
The pairs assignment, group integrated case assignment and group research
project are to be posted to Moodle – details will be given at the first session.
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 10% 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 an assigned question. While
in class, they will work with their group members to prepare a one-page Issue Analysis Paper
(IAP).
Participation grade will also include individual participation – students are expected to prepare for
each session, attend classes regularly, and actively participate in class discussions (this includes
discussion of the Handbook Sections, Readings, and Cases).
NOTE: Students must bring the relevant Handbook sections and CASs (access through library
eResouces) as well as the Course Kit to class in order to facilitate their group discussions.
Group Integrated Case Assignment/Presentation of Integrated Case
Each person will be responsible for presenting one case to the class in a group. The groups will
be formed and the integrated case will be assigned in session 2.
Examinations
The midterm examination will consist of a non-directive case analysis question. The midterm will
be held in Session 7 (it will cover sessions 1-6). The primary focus of the final will be case
analysis. The final, which covers Sessions 1 to 12 will be held during regular examination
schedule.
WARNINGS -- Academic Honesty.
The instructor enforces all University 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 York University’s Academic Honesty
standards, Section D Serious Offenses Against the Standards of Academic Honesty.
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, 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.
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 during the School's
deferred examination period, which for Summer term courses will be administered sometime in
September 2012, 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: http://www.registrar.yorku.ca/pdf/deferred_standing_agreement.pdf
Attending Physician's Statement form:
http://www.yorku.ca/laps/council/students/documents/APS.pdf
Notes: (1) The readings include current CICA auditing standards. Canada has adopted a new set
of generally accepted auditing standards for financial statement audits. These new standards are
called Canadian Auditing Standards (CASs), and are based upon International Auditing
Standards (ISAs). CASs will come into effect for audits of financial statements for periods starting
December 15, 2009 or later. This course will cover the new CASs.
TOPIC SCHEDULE
Session 1
Monday May 7
Competence and Independence
Learning Objectives:






To review course expectations and
evaluation
To review some key audit concepts
To update the status of adoption of
international auditing standards
To understand the factors that impact
auditor judgment
To understand the current climate for
external auditors
To understand the debate surrounding
auditor independence and competence
REQUIRED READING
Course Kit:
 Summary of the Financial Audit Process
 Professional Judgment; Auditors’
Contribution to the Quality and Integrity of
Financial Reporting”
 Is it the Auditor or is it the Process?
 What Does it Take to be an Auditor?
 Why Good Accountants do Bad Audits
 Enron as a Symptom of Audit Process
Breakdown
 Background on the Canadian Regulatory
Environment”
 Research on Rotation-Studies Show that
Audit-Firm or Audit Partner Rotation
Doesn’t Necessarily Improve Audit Quality
 A principles-based approach
 Case 2:3: WorldCom: Professional
Responsibility (refer to Canadian
References to answer questions)
 Case 2.4: Enron: Quality Assurance (refer
to Canadian References to answer
questions)

Course Website:
Session 1 Slides
CICA Handbook Sections:
 CAS 200 – Overall Objectives of the
Independent Auditor and the Conduct of
an Audit in Accordance with Canadian
Standards
 CAS 220 – Quality Control for An Audit of
Financial Statements
Session 2
Engagement Risk and Fraud Risk
Assessment
Monday May 14
Learning Objectives:






To review the factors underlying
engagement risk assessment
To understand the link between the
client’s strategic direction and
identification of significant audit risk
To understand the motivations behind and
the methods related to earnings
management
To understand the use of audit procedures
for detecting financial statement fraud
To understand auditor’s responsibility to
consider fraud in an audit of the financial
statements
To apply this knowledge when developing
audit strategies and determining the
appropriate audit evidence
REQUIRED READING:
Course Kit
 Evaluating Engagement Risk
 KRisk: A Computerized Decision Aid for
Client Acceptance and Continuance Risk
Assessments
 The Hidden Risk in Analytical Procedures:
What WorldCom Revealed
 ZZZZ Best
 ZZZZ Best Audit Work on Restoration
Projects
 Areospace Lighting
 How to Analyze an Integrated Assurance
Case
 How to Prepare an Audit Planning Memo
 Auditing for Fraud (Pages 409-411, 413444)
 Techniques for Detecting Shenanigans
 Group Activity – Brainstorming and
Planning the Audit
Course Website:
 Session 2 Slides
CICA Handbook Section:
 CAS 240-The Auditor’s Responsibilities
Relating to Fraud in an Audit of Financial
Statements
 CAS 250 The Auditor’s Responsibilities to
Laws and Regulations in an Audit of
Financial Statements
 CAS 260 – Communications with Those
Charged with Governance
 CAS 315 – Identifying and Assessing the
Risks of Material Misstatement through
Understanding the Entity and its
Environment
 CAS 320 Materiality in Planning and
Performing an Audit




CAS 330 – The Auditor’s Responses to
Assessed Risks
CAS 450 Evaluation of Misstatements
Identified During the Audit
CAS 500 –Audit Evidence
S5750: Communication with Management
of Matters Identified During the F/S Audit
REVIEW the following:
CICA Handbook Sections:
 CAS 200 Overall Objectives of the
Independent Auditor, and the Conduct of
an Audit
Note: No class Monday May 21
(Victoria Day)
Session 3
Internal Control Assessment and Corporate
Governance
Monday May 28
Learning Objectives:





To review the auditors’, management’s,
and the audit committees responsibilities
for internal control
To understand how to conduct an audit of
the effectiveness of internal controls
To learn how to determine what is a
material
versus
significant
control
deficiency
To
understand
the
accountability
relationships among the external auditor,
internal auditor, management, and the
audit committee
To understand how to assess the
corporate governance function in the
context of the external audit
REQUIRED READING:
Course Kit:
 Notes on Audits of Internal Controls and
Reporting on Audits of Internal Controls
 Evaluate the Control Environment
 Notes on Corporate Governance
 The Front Line: Audit Committees
 Quality Auto Products
 World Com: The Internal Audit Function
 Group Activity – Internal Controls
Course Website:
 Session 3 Slides
CICA Handbook:
 Section 5925-An audit of internal control
over financing reporting that is integrated
with an audit of financial statements


CAS 265 – Communicating Deficiencies in
Internal Control to Those Charged with
Governance and Management
CAS 610 –Using the Work of the Internal
Auditors
Optional Reading
Arens et al (2010), Auditing: The Art and
Science of Assurance Engagements,
Canadian Eleventh Edition Chapter 10- Pages
311-323 (Available in the Peter Bronfman
Business Library)
Auditing Going Concern and Related Parties
Session 4
Monday June 4
Learning Objectives:




To understand the risks related to Going
Concern
To understand how to address and
evaluate the Going Concern assumption
To understand the risks related to Related
Party Transactions
To understand how to audit Related Party
Transactions
REQUIRED READING:
Course Kit:
 Notes on Making a Going Concern
Assessment
 Violet Lifestyle Inc.
 Notes on Auditing Related Party
Transactions
 Controls over Related Party Transactions
at Scotiabank
 Windsor Radio
 Group Activity – Related Party
Transactions at Tyco
Course Website:
 Session 4 Slides
CICA Handbook:
 CAS 550 – Related Parties
 CAS 570 - Going Concern
 CAS 706 - Emphasis of Matter
Paragraphs and Other Matter Paragraphs
in the Independent Auditor’s Report
Session 5
Auditing Complex Revenue Transactions
Monday June 11
Learning Objectives:

To be able to identify the risks related to
capitalization and deferral




To understand how to audit deferred costs
To be able to identify the risks related to
Revenue Recognition
To understand how to audit unique
revenue situations
To understand the professional judgment
involved in evaluating high risk audit areas
REQUIRED READING
Course Kit:
 Notes on Auditing Revenue
 Overlook Video
Course Website:
Session 5 Slides
CICA Handbook:
 CAS 240 – The Auditors’ Responsibilities
Relating to Fraud in an Audit of Financial
Statements (Appendices 1,2, and 3)
 CAS 520 – Analytical Procedures
Your 1st pair case assignment – See Course
Website
Session 6
Auditing Management Estimates, Fair Value,
Monday June 18
and Capitalization
Learning Objectives:




To understand the audit risk related to
management estimates
To learn how to apply professional
judgment in evaluating management
estimates
To be able to identify when there is a need
to rely upon others who have a particular
expertise
To understand the audit risk related to
auditing Fair Values
REQUIRED READING:
Course Kit:





Notes on Auditing Accounting Estimates
and Fair Value
Notes on the Impact of the Credit Crisis on
Estimates and Fair Value
The Gray Area of Bias
Warmth Home Comfort Ltd.
Great Lakes Cruise Inc.
Course Website:
 Session 6 Slides
CICA Handbook:
 CAS 540 – Auditing Accounting Estimates,
Including Fair Value Accounting
Estimates, and Related Disclosures
 CAS 580 –Written Representations
 CAS 620 – Using the Work of an Auditor’s
Expert
REVIEW the following:
CICA Handbook Sections:
 S3461: Employee Future Benefits
 S3870: Stock-based Compensation and
Other Stock-Based Payments
Session 7
Midterm
Exam
(Covers
Material
Sunday June 24
Sessions 1-6) Sunday June 24, 2012
from
10:00-12:00 pm Location TBA
Session 8
Monday June 25
Internal and Comprehensive Auditing
Learning Objectives:
 To review the difference between internal
audits,
public
sector
audits
and
independent financial statement audits
 To outline the independence problems of
internal, external, and public sector
auditors
 To understand the umbrella standards (S
5025) for assurance engagements
 To understand the difference between
direct reporting and attest engagements
 To
understand
how
to
design
comprehensive audits
 To understand how to design internal
audits
REQUIRED READING:
Course Kit:






Assurance Services: Internal Auditing and
Government Auditing
Other Public Accounting Services and
Reports (Pages 651-656 and
Pages 660-663)
The importance of Internal Audit Opinions
Human Rights Commission- Operational
audit question
Bloomington University
Report of Auditor General of Canada:
Management and Control
Practices in Three Small Entities
Course Website:
 Session 8 Slides
CICA Handbook:
 S5025:
Standards
Engagements
for
Assurance
Note: No class Monday July 2 ( Canada
Day)
Session 9
Monday July 9
Fraud Awareness Auditing
Learning Objectives:



To understand the use of extended
audit
procedures
for
detecting
misappropriation of assets
To understand the various categories
of fraud
To understand the difference between
a financial audit and a forensic audit
REQUIRED READING:
Course Kit:
 Notes on the Forensic, Fraud and Regular
Auditors
 A Practical approach to Fraud Risk
 4 steps to a Successful Fraud Risk
assessment
 One Fraud Leads to Another
 Elementary Fraud
 If You Need Love, Get a Puppy: A Case
Study on Professional
Skepticism and Auditor Independence
 Auditing: A Business Approach- Chapter
9- Auditing for Fraud
 ( Pages 411-413)
Course Website:
 Session 9 Slides
Session 10
Reviews, Compilations, Small Business
Audits, Other Assurance Services: Forecasts,
Other Auditor Responsibilities
Monday July 16
Learning Objectives:


To understand the risks associated
with conducting compilations and
reviews
To review the standards associated




with reviews and compilations
To understand the audit issues and
risks unique to Small Entities
To understand the control issues
unique to Small Entities
To understand the audit issues and
risks related with future oriented
information
To understand the auditor’s role and
responsibilities in connection with the
annual report, interim reviews and
offering documents of public and
private entities
REQUIRED READING:
Course Kit:
 Notes on Auditing A Small Business
 Colourful World
 Other Public Accounting Services and
Reports ( see pages 630-632)
 Q Dots - case
Course Website:
 Session 10 Slides
CICA Handbook:
 S8100: General Review Standards
 S8200: Public Accountant’s Review of
Financial Statements
 S9200 – Compilation Engagements
 CAS 800 Special Considerations; Audits
of Financial Statements Prepared in
Accordance
with
Special
Purpose
Frameworks
 AuG-5
Compilation
engagementsFinancial Statement Disclosures
 AuG-6: Examination of Financial Forecast
or Projection Included in a Prospectus or
Other Offering Document
 AuG-16: Compilation of Financial Forecast
or Projection
 CAS 720 The Auditor’s Responsibilities
Relating
to
Other
Information
in
Documents Containing Audited Financial
Statements
 S4250:
Future
Oriented
Financial
Information
- 2nd Pairs Case Assignment (See Course
Website)
Session 11
Other Assurance Services: Special Reports
Monday July 23
Learning Objectives:




To understand the issues related with
conducting
non-traditional
assurance
engagements
To understand the differences among the
various types of special reports
To be able to identify which type of report
best suits stakeholders’ economic and
information needs
To understand the differences between an
audit and a review engagement
REQUIRED READING:
Course Kit:
 Financial
Times
Business
School
Rankings: A Non-traditional Assurance
Case
 Additional Information for Financial Times
Business School Ranking Case
 24X7 Incorporated
 Other Public Accounting Services and
Reports ( see pages 627-629 and pages
632-640))
Course Website:
 Session 11 Slides
CICA Handbook:
 S5800 – Special Reports: An Introduction
 S5815 – Special Reports on Compliance
with Agreements
 S8500 – Reviews of Financial Information
Other Than F/ S
 S8600 – Review of Compliance with
Agreements and Regulations
 S9100 – Specified Audit Procedures
 CAS 805 Special Considerations-Audits of
Special Purpose
 Financial
Statements
and
Specific
Elements, accounts or Items of a
 Financial Statement
 CAS 810 Engagements to Report on
Summary Financial Statements
Session 12
Non-Profit Audits, and Review of material
covered in this course
Monday July 30
Learning Objectives:



To review definitions and disclosures
related to not-for-profit organizations
To understand the control issues
unique to NFPs
To understand the audit issues and
risks that are unique to NFPs
REQUIRED READING:
Course Kit:
 Notes on Auditing Not-for Profit
 Yorktown Art Gallery
 Canadian Links Limited (CLL)
Course Website:
 Session 12 Slides
CICA Handbook:
 S4400: Financial Statement Presentation
by Not-For-Profit Organizations
 S4410:
Contributions:
Revenue
Recognition
 S4420: Contributions Receivable
 S4430: Capital Assets Held by Not-for
Profit Organizations
 S4440: Collections Held by Not-For-Profit
Organizations
 S4450: Reporting Controlled and Related
Entities by Not-For-Profit Organizations
 S4460: Disclosure of Related Party
transactions
by
Not-For-Profit
Organizations
RELEVANT
UNIVERSITY
REGULATIONS
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 made available to the students by the main
office in the School's web site (under the heading of 'Links'), no individualized communication will
be sent by the School to the students (no letter or e-mails). The status of the DSA submitted shall
be
checked
at:
http://apps.eso.yorku.ca/apps/adms/deferredexams.nsf
Students with approved DSA will be able to write their deferred examination during the School's
deferred examination period. 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:
http://www.registrar.yorku.ca/pdf/deferred_standing_agreement.pdf
Attending
Physician's
Statement
form:
http://www.yorku.ca/laps/council/students/documents/APS.pdf
The deferred examinations for the Summer 2012 term shall be held in the period September 28 -
30,
2012.
Academic Honesty: The Faculty of Liberal Arts and Professional Studies considers breaches of
the Senate Policy on Academic Honesty to be serious matters. To quote the Senate Policy on
Academic Honesty. The Policy on Academic Honesty is an affirmation and clarification for
members of the University of the general obligation to maintain the highest standards of
academic honesty. As a clear sense of academic honesty and responsibility is fundamental to
good scholarship, the policy recognizes the general responsibility of all faculty members to foster
acceptable standards of academic conduct and of the student to be mindful of and abide by such
standards. Suspected breaches of academic honesty will be investigated and charges shall be
laid
if
reasonable
and
probable
grounds
exist.
Students should review the York Academic Honesty policy for themselves at:
http://www.yorku.ca/secretariat/policies/document.php?document=69
Students might also wish to review the interactive on-line Tutorial for students on academic
integrity,
at:
http://www.yorku.ca/tutorial/academic_integrity/
Grading Scheme and Feedback Policy: The grading scheme (i.e. kinds and weights of
assignments, essays, exams, etc.) shall be announced, and be available in writing, within the first
two weeks of class, and, under normal circumstances, graded feedback worth at least 15% of the
final grade for Fall, Winter or Summer Term, and 30% for ‘full year’ courses offered in the
Fall/Winter Term be received by students in all courses prior to the final withdrawal date from a
course.
Note: Under unusual and/or unforeseeable circumstances which disrupt the academic norm,
instructors are expected to provide grading schemes and academic feedback in the spirit of these
regulations, as soon as possible. For more information on the Grading Scheme and Feedback
Policy,
please
visit:
http://www.yorku.ca/secretariat/policies/document.php?document=86
In-Class Tests and Exams - the 20% Rule: For all Undergraduate courses, except those which
regularly meet on Friday evening or on a weekend, tests or exams worth more than 20% will not
be held in the two weeks prior to the beginning of the official examination period. For further
information
on
the
20%
Rule,
please
visit:
http://www.yorku.ca/secretariat/policies/document.php?document=141
For further information on examination scheduling and other important dates, please refer to:
http://www.registrar.yorku.ca/enrol/dates/index.htm
Reappraisals: Students may, with sufficient academic grounds, request that a final grade in a
course be reappraised (which may mean the review of specific pieces of tangible work). Nonacademic grounds are not relevant for grade reappraisals; in such cases, students are advised to
petition to their home Faculty. Students are normally expected to first contact the course director
to discuss the grade received and to request that their tangible work be reviewed. Tangible work
may include written, graphic, digitized, modeled, video recording or audio recording formats, but
not oral work. Students need to be aware that a request for a grade reappraisal may result in the
original grade being raised, lowered or confirmed. For reappraisal procedures and information,
please
visit
the
Office
of
the
Registrar
site
at:
http://www.registrar.yorku.ca/grades/reappraisal/index.htm
Accommodation Procedures: LA&PS students who have experienced a misfortune or who are
too ill to attend the final examination in an ADMS course should not attempt to do so; they must
pursue deferred standing. Other students should contact their home Faculty for information. For
further information, please visit: http://www.registrar.yorku.ca/exams/deferred/index.htm
Religious Accommodation: York University is committed to respecting the religious beliefs and
practices of all members of the community, and making accommodations for observances of
special significance to adherents. For more information on religious accommodation, please visit:
https://w2prod.sis.yorku.ca/Apps/WebObjects/cdm.woa/wa/regobs
Academic
Accommodation
for
Students
with
Disabilities
The nature and extent of accommodations shall be consistent with and supportive of the integrity
of the curriculum and of the academic standards of programs or courses. Provided that students
have given sufficient notice about their accommodation needs, instructors shall take reasonable
steps to accommodate these needs in a manner consistent with the guidelines established
hereunder. For more information please visit the Disabilities Services website at
http://www.yorku.ca/cds/
York’s disabilities offices and the Registrar’s Office work in partnership to support alternate exam
and test accommodation services for students with disabilities at the Keele campus. For more
information on alternate exams and tests please visit http://www.yorku.ca/altexams/
Please alert the Course Director as soon as possible should you require special
accommodations.