FREEMAN SCHOOL OF BUSINESS
ACCN 7110-01/02
Auditing
Fall 2014
Instructor: Professor Stephen Rowe
Office Phone: 504-865-5064
Office: 506 GW1
E-mail: srowe2@tulane.edu
Office Hours: Tuesday 11:00am -12:15pm
Tuesday 2:00pm - 3:30pm
Blackboard Site:
myTulane.blackboard.com
Class Meeting Day & Time:
Section 1: Tuesday/Thursday, 12:30p – 1:45p
Section 2: Tuesday/Thursday, 3:30p – 4:45p
Class Location:
Room 2111, GW2
Room 111, GW1
COURSE DESCRIPTION:
This course examines the professional auditing function, particularly emphasizing public accounting.
COURSE GOALS:
This course is designed to familiarize students with the public company auditing environment and
introduce them to the audit process. We will discuss such concepts as the need for financial statement
audits, the current audit regulatory environment, audit reports, audit evidence, audit planning procedures,
inherent risk, internal control, analytical procedures, statistical sampling, tests of controls, and substantive
audit tests.
STUDENT LEARNING OBJECTIVES:
At the conclusion of this course, students should:
• Appreciate the audit environment and the role of the auditor.
• Understand the nature and purpose of auditing standards.
• Understand the financial statement audit process and the conceptual frameworks auditors use
when making audit judgments.
Further, students should be able to:
• Evaluate different types of audit evidence and assess inherent and control risk in the context of a
financial statement audit.
• Design and conduct appropriate tests of managerial assertions about transactions and events,
account balances, and other disclosures.
COURSE MATERIALS
1
•
Textbook (AEB): Auditing & Assurance Services – An Integrated Approach, 15th Edition, by
Arens, Elder, and Beasley; Pearson Prentice Hall, 2014. ISBN-10:0-13-312563-7; ISBN-13:9780-13-312563-4 1
•
Case: Integrated Audit Practice Case, 6th Edition, by Kerr, Elder, and Arens; Armond Dalton
Publishers, Inc. 2011. ISBN: 978-0-912503-56-1
•
Outside Readings and Assignments: Most of the readings are available electronically at the
Tulane Library (http://www.library.tulane.edu) or on the course website. Auditing Standards are
available on the PCAOB or AICPA websites. Assignments will either be handed out in class or
posted on the course website.
GRADING
Your performance in this course will be assessed on the following components:
Exam 1
Exam 2
Exam 3
Final Exam
Audit Practice Case
Assurance Project
Professionalism & Participation
10%
10%
10%
25%
15%
15%
15%
100%
Grades will be assigned using the plus/minus system and will be based on a combination of absolute
achievement and relative performance. In line with other courses at the Freeman School of Business, the
maximum Class-GPA is expected be in the range of 3.000 to 3.333.
Grading of subjective aspects of the course (assignment/questions with no objectively correct response)
starts with the assumption that the response is average (generally equivalent to about an 85%) and is then
adjusted higher or lower based on the graders evaluation of the student’s response in line with the
specified criteria.
Exams
The exams are an opportunity to assess the progress that you are making in this course. The exams will
test your conceptual and technical knowledge as well as your ability to effectively communicate and
apply acquired knowledge. The format will include multiple choice questions, short answer questions, and
problems. Exams will cover material from the readings, text and other course materials, lectures, and
class discussions. The exams are designed to test your understanding of the material covered since the
last exam; however, because the course is cumulative a strong understanding of material from earlier
exams is essential.
1
Please purchase the US edition of this textbook and not the international edition.
2
After each exam I will review the exams in class; however, I will retain the exams. Students may review
the full exam and all prior exams during office hours.
Final Exam
The format of the final exam will be similar to that of the earlier exams. The final exam will cover all
material in the class with an emphasis on material covered since the previous exam.
Absence from Exams
Absence from any exam will result in a score of zero, unless you have a university-approved excuse for
your absence. If an exam is missed for an acceptable reason, then the weight of the missed exam will be
allocated to the final exam.
Audit Practice Case
The Audit Practice Case (APC) is included in the course to provide you with an opportunity to apply the
various concepts we discussed in the lectures. This case is comprised of 10 assignments that you will
complete, in groups of 3 students, throughout the course of the semester. Each assignment will involve
practical applications of material we covered in the preceding lectures. These assignments will be graded
on the basis of (1) neatness, (2) completeness, (3) accuracy, and (4) reasonableness of judgments.
Assignments are due on the date indicated on the accompanying Class Schedule. Although the case is to
be completed in groups, I expect all members to contribute equally and be familiar with the content of
each case; to this end case material will routinely be included on exams and individuals will have the
opportunity to rate the contribution of fellow group members as part of each exam. Group members who
are rated by their fellow group members as failing to contribute to the case may have their individual case
grade adjusted downward.
Professionalism and Participation:
Professionalism is a broad concept that seeks to measure the extent to which you behave professionally in
all aspects of the class. Professional behavior in this class includes but is not limited to the following:
Coming to class prepared and contributing to the discussion
To improve your understanding of the relevant topics it is important that you attend class. I will take
attendance at each class either through the completion of in-class quizzes or activities or a sign-in roster.
You may only sign yourself in; signing in another student is dishonest and inappropriate. If you come in
late and miss the roster or quiz talk to me after class and I will ensure you are not fully penalized for an
absence.
You will learn the material best if you come to class having read the assignment for the day and are
prepared to ask questions and engage in discussion. Periodically I will administer an in-class quiz or
assign homework to gauge the extent of class preparedness.
Participating in class by answering and asking questions improves the learning environment by
demonstrating what information is already understood and what information needs more elaboration.
Asking relevant questions that demonstrate that you prepared for class and thought through the material
3
will be reflected very positively in your participation grade. Active participation also makes the time in
class more enjoyable. I may occasionally give group exercises in class and your performance on these
exercises will influence your participation grade. Participation also includes completion of the course
evaluation at the end of the semester.
Professionalism
To foster a more professional learning environment and to develop habits that lead to success in business,
all participants in class must engage in professional behavior. Broadly speaking I hold you to the same
level of professional conduct to which I held my staff in public practice, this includes:
• Taking responsibility for individual actions.
• Attending each class session, including arriving promptly and leaving at the designated time. If you
must miss class, show up late or leave early please let me know ahead of time.
• Being respectful of everyone else in the class by refraining from activities that could distract the rest of
the class (in other words, turn off your cell phone and absolutely no text-messaging during class).
Laptops are only allowed during specified group activities.
• Understanding that disagreements regarding coursework or grading should be communicated in a
professional manner.
• Actions in line with other Freeman Business School norms and expectations as specified in the student
handbook (e.g. attire, food, decorum, etc.).
• Arriving on time and prepared for meetings (whether they are with me or with fellow classmates).
Individual Project and Presentation:
Over the course of the semester you will develop an assurance plan based on concepts learned in class.
This project will culminate in a formal written plan that you present individually to the professor toward
the end of the semester. Additional details about this assignment will be provided in class.
Extra Credit
Periodically I may provide the opportunity for the class to earn extra credit. Extra credit is generally
offered to provide students with an opportunity and incentive to better understand the material. Out of
fairness, all students will have the chance to participate in any extra credit; I will not give extra credit
opportunities to individual students.
GRADING ISSUES
Re--grading Requests
Questions regarding the grading of your exams or assignments must be brought to my attention, in
writing, by the subsequent class period. Objections filed after this time will not be entertained. Because
the grading of answers to subjective questions may involve consideration of answers to other questions,
objections to grading of subjective questions will involve re-grading the entire exam or assignment.
Depending on what aspects of your grades are altered, re-grading can cause your grades to increase,
decrease or remain unchanged.
4
Late Submission of Projects and Assignments
Great thought has been placed on the timing of each assignment to ensure the greatest opportunity to learn
and understand the course content. Unless you obtain prior permission from me, assignments submitted
after the due date will not be graded and will be awarded zero points.
EMAIL POLICY
Please send all class related emails to my school email (srowe2@tulane.edu). Given the volume of emails
I receive during the semester (remember, I teach three sections this semester!), it would be most helpful if
you could include, in the subject line, your course number, section, and a brief indication of the issue you
are mailing about (e.g. ACCN 7110:01- Homework 1). I should get back to you within 24 hours during
the week (I typically do not check email on weekends). On the rare occasion that I don’t get back to you
within 24 hours, please send me a reminder email. Include the term “reminder” in the subject line (this
will draw my attention!), restate your question/concern, and I will get back to you promptly.
ABSENCE FROM CLASS
Absence for Personal Reasons
Absence from class for personal reasons falls under university absence policy, and to be excused from
class for any personal reason requires a university approved absence.
Absence for Professional Reasons:
Attendance in class is important to ensure your comprehension of the material and thus I expect students
to do everything they can to minimize absence for professional reasons. Students who must miss class
because of emergent professional commitments (e.g. interviews) must notify me at least one week ahead
of the absence and receive written approval. Approval of absences is at my discretion and is based on the
nature of the absence, prior attendance record, and demonstrated ability to catch-up on missed material.
If approved I will provide you the opportunity to complete an assignment in lieu of participating in class.
The assignment must be handed in the class immediately following the absence and you must attach
support documenting the reason for the absence (e.g. letter or email invitation for an interview from the
firm). In general, absence due to ongoing employment (including internships) is not considered emergent
and will not be approved.
UNIVERSITY STATEMENTS AND POLICIES
Statement about Academic Integrity
This class will be conducted in full accordance with Tulane’s policies about academic integrity including,
but not limited to, the Unified Code of Graduate Student Academic Conduct
(http://tulane.edu/provost/upload/Unified_Code_of_GS_Academic_Conduct_11-14-07.pdf ) and the
Tulane University Code of Student Conduct (http://studentconduct.tulane.edu).
5
Freeman Educational Norms and Expectations
This class will be conducted in full accordance with published Norms and Expectations for Students in
Freeman Classes. Please review the Norms and Expectations in your program handbook.
Learning Disabilities:
Under the Americans with Disability Act and Section 504 of the Rehabilitation Act, if you have a
disability, you may have the right to an accommodation; however, the right is contingent upon your
taking certain steps. You should review the steps that you need to take, as well as Tulane’s policy
concerning accommodations at http://erc.tulane.edu/disability/index.html.
Any student with a disability, in need of course or examination accommodation, should request an
accommodation through the University’s Goldman Office of Disability Services (ODS) located on the
first floor of the Mechanical Engineering Building. At the beginning of the semester, please provide me
with a copy of your approved ODS accommodation form. I am committed to working with ODS to ensure
that I provide you with all approved accommodations. If you do not deliver the approved accommodation
form to me, I will not know that ODS approved your accommodation and I will have no basis to provide
those accommodations.
TENTATIVE COURSE SCHEDULE
Unless noted, you should study the readings before class days indicated. You should make a diligent
attempt to understand all the concepts and issues in the assigned readings. Any changes to the course
schedule will be announced in class and major changes will be posted on the course web site. You are
responsible for learning of these changes.
Class Schedule -Tuesday/Thursday
Date
8/19/14
Day
Tuesday
#
1
8/21/14
Thursday
2
Topic Area
Introduction to the Course
& Assurance Services
Demand for Audit
8/26/14
Tuesday
3
Auditing Profession
8/28/14
Thursday
4
Ethics
9/2/14
Tuesday
5
Audit Responsibilities and
Objectives
9/4/14
Thursday
6
Audit Evidence
9/9/14
Tuesday
7
Planning & Analytical
Procedures
6
Reading (italics = optional)
AEB Chapter 1
Klein (2001)
Akerlof (1970)
AEB Chapter 2
AU: 110, 150
AEB Chapter 4
Bazerman (1997)
ET: 50, 90, 101, 102, 201-203, 301302, 501-503
AEB Chapter 6
AU: 110
AS 15 par. 3-9
AEB Chapter 7
AS 15
AU 318
AEB Chapter 8
AS 9
Hand In
9/11/14
9/16/14
9/18/14
9/23/14
Thursday
Tuesday
Thursday
Tuesday
9
Freeman Days (No class)
Exam 1
Business Forum (No class)
Materiality and Risk
9/25/14
Thursday
10
Internal Controls
9/30/14
Tuesday
11
Risk Assessments
10/2/14
Thursday
12
Audit Programs
10/7/14
Tuesday
13
Audit Production
10/9/14
10/14/14
10/16/14
10/21/14
Thursday
Tuesday
Thursday
Tuesday
14
Exam 2
No class
No class
Fraud
10/23/14
10/28/14
Thursday
Tuesday
16
10/30/14
Thursday
17
11/4/14
Tuesday
18
11/6/14
Thursday
19
11/11/14
Tuesday
20
11/13/14
11/14/14
Thursday
Friday
21
22
11/18/14
Tuesday
23
8
15
AEB Chapter 9
AS 8, 12
AU 312
AEB Chapter 10
AS 5, 13 (par 16-35)
AU 318 (par .23 - .49)
Allen, Hermanson, Kozloski and
Ramsay (2006)
AEB Chapter 13
AS 15 (Review)
Pentland (1993)
Francis (2004)
Audit
Practice
Case #1
Audit
Practice
Case #2
& #3
Audit
Practice
Case #4
AEB Chapter 11
Knapp and Knapp (2013)
AU 316
AS 13 (par 12-15)
Freeman Days (No class)
Sales and Collection
Cycle:
Controls and Substantive
tests
Sales and Collection
Cycle:
Audit Sampling
Sales and Collection
Cycle:
Completing the tests
Audit of the Acquisition
and Payment Cycle
Audit of Cash
Audit of the Inventory and
Warehousing Cycle
Exam 3
Individual project
presentations (No class)
Completing the Audit
7
AEB Chapter 14
AEB Chapter 15
AEB Chapter 17
AU 350
AEB Chapter 16
AU 330
Audit
Practice
Case #5
AEB Chapter 18
AEB Chapter 23
AEB Chapter 21
Audit
Practice
Case #6
AEB Chapter 24
AU 333, 337, 341, 390, 550, 551,
558; 560, 561 (scan all)
AS 16
Audit
Practice
Case #8
11/20/14
Thursday
24
Audit Reports
11/21/14
Friday
25
Audit Responsibilities and
Objectives
11/25/14
Tuesday
26
11/27/14
Thursday
12/2/14
Tuesday
27
Individual project
presentations (No class)
Thanksgiving Break (No
class)
Legal Liability
Exam Review
12/4/14
Thursday
28
TBA
TBA
Final review of material
FINAL EXAM
8
AEB Chapter 3
PCAOB Release No. 2013-005 (p. 19, 13-21, Appendix 1)
AU 410, 411, 504, 508, 530, 532
AS 6
Dechow and Skinner (2000)
Audit
Practice
Case #9
AEB Chapter 5
Brandon, Mueller, and Tabor (2005)
Kadous (2000)
Securities and Exchange Act of 1933
& 1934
Audit
Practice
Case #10