THE OPEN UNIVERSITY OF TANZANIA
FACULTY OF BUSINESS MANAGEMENT
DEPARTMENT OF ACCOUNTING AND FINANCE
OAF312: AUDITING
MODULE OUTLINE
GENERAL OBJECTIVES OF THE MODULE
The objective of the module is to provide you with knowledge and understanding of the
of nature, purpose, practices, techniques of auditing, International auditing standards,
required conduct of an auditor and the overall frame work of the process of conducting
audits and investigations.
OBJECTIVES OF THE MODULE
The module aims at making you be able to:
(i) Explain the need and nature of auditing.
(ii) Plan the audit process.
(iii) Describe the professional requirement for the practice of auditing.
(iv) Demonstrate ability in carrying out functions of internal control systems.
(v) Explain the important role which audited financial statements and auditing reports
play in the community at large.
(vi) Demonstrate ability in the use of International auditing standards in various audit
issues.
(vii) Plan an audit and design an audit program.
MODULE CONTENT
LECTURE 1: INTRODUCTION TO AUDITING
Objectives
At the end of this lecture you will be able to:
(i) Explain and discuss the objectives of auditing
(ii) Differentiate between the different types of audits
(iii) Explain the desirable qualities of an auditor
(iv) Describe the audit set up in Tanzania
(v) Regulatory framework governing auditing
(vi) Rights and duties, appointment, dismissal and resignation of an auditor
CONTENT:
•
Meaning and objectives of auditing
•
Types of auditing
•
•
•
•
Desirable qualities of an auditor
Audit set up in Tanzania:
Regulatory framework governing auditing,
rights and duties, appointment, dismissal and resignation of an auditor
LECTURE 2: PROFESSIONAL AND ETHICAL CONSIDERATIONS
Objectives
At the end of this lecture you will be able to:
(i)
Describe professional ethics
(ii)
Identify and discuss fundamental principles, threats and safeguards.
(iii)
Compare and contrast NBAA and IFAC Codes of ethics
(iv)
Explain disciplinary measures against non-compliance with the code of
Conduct
Content
•
•
•
•
Meaning and importance of professional ethics
Fundamental principles, Threats and safeguards.
NBAA and IFAC Codes of ethics
Disciplinary measures against non-compliance with the code of conduct
LECTURE 3: AUDITOR’S APPROACH TO AUDIT WORK
Objectives
At the end of this lecture you will be able to:
(i)
Describe the alternative approaches to auditing
(ii)
Describe the chronology of an audit
(iii)
Classify audits
CONTENT:
•
Alternative approaches to auditing
•
Chronology of an audit
•
Classify audits
LECTURE4: UNDERSTANDING AND ASSESSING THE INTERNAL CONTROL
SYSTEM.
Objectives
At the end of this lecture you will be able to:
(i)
(ii)
(iii)
(iv)
Explain the meaning and objectives of internal control system (ICS)
Describe the responsibilities for internal control system
Describe the types of internal controls
Record, evaluate and report on internal control system
(i)
(ii)
(iii)
(iv)
(v)
Describe internal control and external auditor
Identify the methods of ascertaining the system
Assess the inherent Limitations in an internal control system.
Use internal audit as an internal control factor.
Differentiate between administrative and accounting controls.
Content
• Meaning and objectives of internal control system (ICS)
• Responsibilities for internal control system.
• Types of internal controls
• Recording, evaluating and reporting on internal control system
• Internal control and external auditor
• Methods of ascertaining the system
• Inherent Limitations in an internal control system.
• Internal audit as an internal control factor.
• Distinction between administrative and accounting controls.
LECTURE 5: AUDIT PLANNING, RECORDING AND CONTROLLING OF
AUDIT WORK
Objectives
At the end of this lecture you will be able to:
(i)
Explain meaning and benefits of audit planning
(ii)
Set up a general strategy
(iii)
Come up factors to be considered in designing the audit plan.
(iv)
Describe the audit program me
(v)
Record the work done
(vi)
Control the audit work
(vii)
Apply quality control in auditing
(viii)
Organize staffing arrangements
Content
• Meaning and benefits of audit planning
• General strategy
• Factors to be considered in designing the audit plan.
• The audit program me
• Recording the work done
• Controlling of audit work
• Quality control in auditing
• Staffing arrangements.
• Materiality and risk
• Timing of audit work
• Audit tools
LECTURE 6: AUDIT EVIDENCE
Objectives
At the end of this lecture you will be able to:
(i)
Define audit evidence.
(ii)
Identify sources of audit evidence.
(iii) Describe the criteria for persuasiveness of audit evidence.
(iv)
Apply the techniques of obtaining audit evidence.
(v)
Assess the Audit risk.
CONTENT:
• Definition of audit evidence.
• Sources of audit evidence.
• Criteria for persuasiveness of audit evidence.
• Techniques of obtaining audit evidence.
• Audit risk.
LECTURE 7 AUDIT SAMPLING
Objectives
At the end of this lecture you will be able to:
(i)
Define auditing sampling.
(ii)
Identify and describe different types of Audit sampling
(iii)
Describe techniques for selecting a sample for audit.
(iv)
Identify approaches and stages of audit sampling.
CONTENTS
•
•
•
•
Definition and purposes of auditing sampling.
Types of Audit sampling
Techniques for selecting a sample for audit.
Approaches and stages of audit sampling.
LECTURE 8: AUDIT PROCEDURES
Objectives
At the end of this lecture you will be able to:
(i)
(ii)
(iii)
(iv)
(v)
(vi)
Audit accounting systems and internal controls.
Apply audit testing
Assess the analytical review techniques.
Use working papers.
Review financial statements.
Apply the true and fair view concept.
Content
• Accounting systems and internal controls.
• Audit testing
• Analytical review techniques.
• Working papers.
• Review of financial statements.
• The true and fair view concept.
LECTURE 9: INTERNAL AUDITING
Objectives
At the end of this lecture you will be able to:
(i)
Describe internal auditing and its functions.
(ii) Identify the essential elements of internal audit.
(iii) Differentiate between internal audit and external audit.
(iv) Assess the reliance on external auditor in internal audit. external
(v) Explain the factors to consider in assessing the effectiveness of internal audit
function.
Content
• Meaning and functions of internal auditing.
• Essential elements of internal audit.
• Distinction between internal audit and external audit.
• Reliance on internal audit. by external auditor
• Factors to consider in assessing the effectiveness of internal audit function.
LECTURE 10: AUDIT OF CURRENT ASSETS
Objectives
At the end of this lecture you will be able to
(i)
Identify Current assets
(ii)
Explain audit objectives for each element of current assets
(iii) Audit the key controls over each element of current assets
(iv)
Assess the audit objectives for the verification of cash and cash balances, stocks,
debtors and sales.
(v)
Apply the audit approach to cash and cash balances , stocks, debtors and sales
Content
(i)
Current assets identification
(ii)
Objectives for each element of current assets
(iii) Key controls over current assets
(iv)
(v)
Audit objectives for the verification (Ownership and existence) of Cash and cash
balances, Stocks, Debtors and Sales.
Audit approach to Cash and cash balances, stocks, debtors and sales
LECTURE 11: AUDIT OF NON CURRENT ASSETS
Objectives of the topic
At the end of this lecture you should be able to:
(i)
(ii)
(iii)
(iv)
Ensure that all assets acquisitions, additions and disposals are properly recorded
Confirm that the assets are fairly and consistently valued.
Ensure that the assets are depreciated reasonably.
Confirm that the assets and documents of ownership are properly safeguarded.
CONTENT:
•
Key internal controls over non-current assets.
•
Audit test objectives for non-current assets.
•
Verification procedures, for non-current assets.
•
Verification of the value, ownership, existence, accumulated depreciation and
depreciation of non-current assets.
LECTURE 12: AUDIT OF TRADE CREDITORS AND PURCHASES
Objectives
At the end of this lecture you will be able to:
(i)
Describe the principles related to the verification of trade creditors and purchases
(ii)
Explain audit objectives for the verification of trade creditors and purchases.
(iii) Apply the audit approaches used for the verification of trade creditors and
purchases.
(iv)
Conduct substantive testing of credit purchases.
(v)
Audit purchase ledger reconciliation.
(vi)
Audit supplier’s statement of reconciliation.
(vii) Audit cash purchases
(viii) Establish purchases cut – off.
(ix)
Search for unrecorded liabilities.
(x)
Explain disclosure and presentation of trade creditors.
CONTENT:
•
The principles related to the verification of trade creditors and purchases
•
Audit objectives for the verification of trade creditors and purchases.
•
Audit approaches used for the verification of trade creditors and purchases.
•
Substantive testing of credit purchases.
•
Purchase ledger reconciliation.
•
Supplier’s statement of reconciliation.
•
•
•
•
Cash purchases audit
Purchases cut – off.
Unrecorded liabilities.
Disclosure and presentation of trade creditors.
LECTURE 13: AUDIT OF CAPITAL AND LONG TERM LIABILITIES.
Objectives
At the end of this lecture you will be able to:
(i)
Describe audit objectives in verification of share capital, reserves and long term
liabilities.
(ii)
Apply procedures in respect of long term liabilities, capital and reserves.
(iii) Verify long term liabilities, share capital, reserves and dividend paid and
proposed.
CONTENT:
•
Audit objectives in the verification of share capital, reserves and long term
liabilities.
•
Audit procedures in respect of long term liabilities, capital and reserves.
•
Verification of long term liabilities.
•
Verification of share capital, Verification of reserves, dividend paid and
proposed
LECTURE 15: THE LEGAL LIABILITY OF AN AUDITOR
Objectives
At the end of this lecture you will be able to:
(i)
Classify the categories of audit liability (auditor’s liability, Liability of client,
liability to third party and criminal liability)
(ii)
Explain possible ways of minimizing auditor’s liability.
(iii) Assess the auditor’s responsibility under criminal and civil law.
(iv)
Discuss the role of the auditor in relation to fraud and irregularities.
(v)
Apply the concept of due care and skill.
(vi)
Identify the unlawful acts of clients and their staff.
(vii) Describe the audit expectation gap
CONTENTS:
•
Categories of audit liability.
•
Possible ways of minimizing auditor’s liability.
•
The auditor’s responsibility under criminal and civil law.
•
The role of the auditor in relation to fraud and irregularities.
•
Application of the concept of due care and skill.
•
Unlawful acts of clients and their staff.
•
Audit expectation gap
LECTURE 16: AUDIT IN COMPUTERISED ENVIRONMENT
Objectives
At the end of this lecture you will be able to:
(i)
Describe computer audit and its types
(ii)
Differentiate between a computerized and manual accounting system
(iii)
Describe control in a computerized environment.
(iv)
Describe auditor’s operational procedures and a computerized accounting
system
(v)
Apply computer assisted techniques (CAATS) in gathering audit evidence
Content
•
Computer audit and its types
•
•
•
•
Differences between a computerized and manual accounting system
Controls in a computerized environment.
Describe the auditor’s operational procedures and a computerized accounting
system
Computer assisted techniques (CAATS) in gathering audit evidence
LECTURE 17: THE AUDIT REPORT
Objectives
At the end of this lecture you will be able to:
(i)
Define the audit report
(ii)
Describe the legal requirement for audit report.
(iii)
Explain the evolution of audit reports
(iv)
Identify and evaluate types of audit reports
(v)
Describe the qualities of a good audit report
(vi)
Draft a standard audit report.
(vii)
Analyze information accompanying the audited financial statements.
(viii)
Give an opinion on audited financial statements and identify the circumstances
leading to a particular opinion.
Content
•
The audit report definition
•
Basic legal requirement for audit report.
•
Evolution of audit reports
•
Types of audit reports
•
Basic contents of a standard audit report.
•
Reporting on information accompanying the financial statements.
•
Qualities of a good audit report
•
Audit Opinion
LECTURE 18
INVESTIGATIONS
Objectives
At the end of this lecture you will be able to:
(i)
Describe nature and purpose of investigations.
(ii)
Explain objectives of investigation
(iii)
Identify and asses types of and procedures in various investigations.
(iv)
Differentiate between auditing and investigation.
Content
•
Meaning, nature and purpose of investigations.
•
Objectives of investigation
•
Types of and procedures in various investigations.
•
Difference between auditing and investigation.
LECTURE 19Management Audit
Objectives
At the end of this lecture you will be able to:
(i)
Describe the origins of Management Audits
(ii)
Explain the objectives and scope of management auditors
(iii) Explain Special Operational appraisal
(iv)
To draft management reports
(v)
Differences with statutory financial audits
Limitations of Management Audit
CONTENTS
•
Origins of Management Audits
•
Explain the objectives and scope of management auditors
•
Special Operational appraisal
•
Management reports
•
Differences with statutory financial audits
•
Objectives and scope of management auditors
•
Limitations of Management Audit
LECTURE 20: CONTEMPORARY ISSUES IN AUDITING
Objectives
At the end of this lecture you will be able to:
(i)
Describe current developments in International Standards on Auditing
(ISA)
(ii)
Conduct forensic audit
(iii) Describe the need for ethical guidance on Money laundering
Content
• Overview of development in ISAs
• Forensic audit
• Money laundering
• Environmental Issues i.e. Environmental law and regulations, Environment
policies.
ASSESSMENT / EVALUATION
Student Progress Portfolio
Main Test
University Final Exam
Total Score
Minimum Score shall be
0
30
70
100 %
40%
Recommended Reading list
IFAC, Handbook of International Auditing, Assurance, and Ethics Pronouncements
(2005), New York.
Whittington, R and Pany, K. (2005) Principles of Auditing and other assurance
services, Newyork: McGraw Hill
ACCA (2005) Audit and Assurance Services Paper 3.1 Text book. Foulks Lynch
Publication.
Millichamp, A.H. (2002) Auditing 8th Edition.London: ELST Continuum.
Spencer P. K. H. (2005) The Essential Handbook of Internal Auditing .indianapolis:
Wiley Publishing,
Rittenberg L.E and Schwieger B. J. (2004) Auditing Concepts for a changing
Environment.london: Thomson Learning.
Knapp M.C (2004) Contemporary Auditing: Real Issues and Cases. Thompson /
Southwestern ,Cincinn.
Shayo.Tem.S and Kingo’ri.J.(2003)Auditing Principles,Dar-es-Salaam:NBAA