School of Administrative Studies
Faculty of Liberal Arts and Professional Studies
YORK UNIVERSITY
AP/ADMS 4553.03 A Auditing: Advanced Topics
Winter 2013
COURSE OUTLINE
Course Director and Contact Information:
Section
M
N
Course
Director
Bartosz
Amerski
Joanne
Jones
E-mail
Bartosz.amerski@auditor.on.ca
jcjones@yorku.ca
Class Times and Locations:
Section
M
N
Time
Mondays 7:00-10:00 pm
Mondays 4:00-7:00 pm
Location
HNE 032
HNE 033
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.
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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
Percentage
15
10
Important Dates
Due Sessions 4, and 11
N/A
10
N/A
25
40
Session 6
TBA – held during regular exam week
TBA
– held during regular exam
Total
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.
2
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 25% 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
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 register at
http://apps.eso.yorku.ca/apps/adms/deferredexams.nsf. Followed by
handing in a completed DSA form and supporting documentation directly to the main office of the
School of Administrative Studies (282 Atkinson) and add your ticket number to the DSA form.
The DSA and supporting documentation must be submitted no later than five (5) business days
from the date of the exam. These requests will be considered on their merit and decisions will be
made available by logging into the following link
http://apps.eso.yorku.ca/apps/adms/deferredexams.nsf. No individualized communication will be
sent by the School to the students (no letter or e-mails).
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.
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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 Winter 2013 term shall be posted to the course website when
available.
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.
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TOPIC SCHEDULE
Session 1
Monday Jan. 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 – pgs 83 and 84 to answer questions)
 Case 2.4: Enron: Quality Assurance (refer to Canadian
References – pg 89 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
Learning Objectives:
Monday Jan. 14






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
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REQUIRED READING:
Course Kit
 Evaluating Engagement Risk
 Auditing Considerations in an Uncertain Economic
Environment
 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, 413-444)
 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
Session 3
REVIEW the following:
CICA Handbook Sections:
 CAS 200 Overall Objectives of the Independent Auditor, and
the Conduct of an Audit
Internal Control Assessment and Corporate Governance
Learning Objectives:
Monday Jan. 21





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
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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
Course Website:
 Session 3 Slides
 SEC versus Siemens
 Care for Kids
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 311323 (Available in the Peter Bronfman Business Library)
Auditing Going Concern and Related Parties
Session 4
Monday Jan. 28
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
 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
Your 1st pair case assignment – See Course Website
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Session 5
Auditing Complex Revenue Transactions
Monday Feb. 4
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
 Group Activity-Revenue Recognition
Course Website:
Session 5 Slides
 Dry Quick
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
Session 6
Session 7
Midterm Exam (Covers Material from Sessions 1-5) Sunday
February 10, 2013
10:00-12:00 pm Location TBA
Please note that there is NO class on Feb. 11, 2013 – Session 7 is
on Feb. 25th.
Auditing Management Estimates, Fair Value, and Capitalization
Monday Feb. 25
Learning Objectives:
Sunday Feb. 10




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 7 Slides
 Billy Beats
CICA Handbook:
 CAS 540 – Auditing Accounting Estimates, Including Fair Value
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

Session 8
Monday Mar. 4
Accounting Estimates, and Related Disclosures
CAS 580 –Written Representations
CAS 620 – Using the Work of an Auditor’s Expert
Fair Value Con’td and Internal Audit
Learning Objectives:
 To review the difference between internal audits and
independent financial statement audits
 To outline the independence problems of internal, and external,
auditors
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
World Com: The Internal Audit Function (p. 223- 2270
WorldCom: Internal audit lessons to be learned
Canadian Links (pgs. 521 - 524)
Course Website:
 Session 8 Slides
 Group Activity – Reliance on Internal Audit
Session 9
Monday Mar. 11
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)
 Knutson Products-A Fraud Investigation
Session 10
Course Website:
 Session 9 Slides

Non-Traditional Assurance Services and Special Reports
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Monday Mar. 25
Learning Objectives:




To understand the umbrella standards (S 5025) for assurance
engagements
To understand the issues related with conducting nontraditional 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
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 10 Slides
 Tae Kwang Vina
CICA Handbook:
 S5025: Standards for Assurance Engagements
 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
Session 11
Reviews, Compilations, Small Business Audits, Other Auditor
Responsibilities
Monday Mar. 18
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
REQUIRED READING:
Course Kit:
 Notes on Auditing A Small Business
 Colourful World
 Q Dots Case (p. 265-269)
 Other Public Accounting Services and Reports ( see pages
630-632)
Course Website:
10

Session 10 Slides
CICA Handbook:
 S8100: General Review Standards
 S8200: Public Accountant’s Review of Financial Statements
 S9200 – Compilation Engagements
 AuG-5 Compilation engagements- Financial Statement
Disclosures
- 2nd Pairs Case Assignment (See Course Website)
Session 12
Monday Apr. 1
Non-Profit Audits, and Review of material covered in this course
Learning Objectives:


To review definitions and disclosures related to not-forprofit organizations
To understand new accounting standards applicable to
financial reporting framework of NFPs.


To understand the control issues unique to NFPs
To understand the audit issues and risks that are unique to
NFPs and the adaptation of new accounting standards.
REQUIRED READING:
Course Kit:
 Notes on Auditing Not-for Profit
 Yorktown Art Gallery
 Zoom Snowboards
Course Website:
 Session 12 Slides
CICA Handbook:
Part III:
 S4400: Financial Statement Presentation by Not-For-Profit
Organizations
 S4410: Contributions: Revenue Recognition
 S4420: Contributions Receivable
 S4431: Tangible Capital Assets Held by Not-for Profit
Organizations
 S4440: Collections Held by Not-For-Profit Organizations
 S4450: Reporting Controlled and Related Entities by Not-ForProfit Organizations
 S4460: Disclosure of Related Party transactions by Not-ForProfit Organizations
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