PRINCIPLES & THEORY OF AUDITING II
ACCOUNTING 4163
SPRING 2010
INSTRUCTOR:
TELEPHONE:
EMAIL:
WEBSITE:
OFFICE HOURS:
CLASS TIME:
Lori R. Brasher
731-852-3100 Office
lori@lrbrasher.com
www.lrbrasher.com
Will stay after class time as needed
Wednesdays, 6:00 – 8:45 p.m.
Purpose of the Course:
The purpose of the course is to provide a comprehensive introduction to auditing theory,
standards and the application of procedures used by independent Certified Public Accountants to render
an opinion on the financial statements of the entity being examined. The course will cover the ethical
environment of the independent auditor, the nature of the auditing standards and procedures underlying
the audit opinion. And the various forms of the resulting audit report. This course will also emphasize
the integration of generally accepted accounting principles and the application of statistical sampling
methods as they pertain to the auditing process.
Course Objectives:
The following are broad objectives for this course.
1. Integrate and apply knowledge acquired in prior accounting courses to the practice of
auditing.
2. Explain the role of the independent auditor in our economy.
3. Interpret and explain the auditing process both in terms of (a) the relationship between
specific audit objectives, audit procedures and the evaluation of audit evidence, and (b) the underlying
rationale for those relationships.
4. Interpret and explain the message contained in the independent auditor’s report in terms of
the responsibilities assumed and those not assumed by the auditor.
5. Demonstrate competence for all professional examinations taken is subsequent to graduation.
Prerequisites:
Accounting 3113 and 3123 (Intermediate Accounting I and II) and Accounting 4153 (Auditing
1) or their equivalents are required. Other recommended courses include CIS 1503 (Survey of Business
Software) and ECON 2033 (Principles of Macroeconomics) both of which should prove helpful in the
comprehension and preparation for the class requirements.
Should you doubt your background in meeting these requirements, please see me privately as
early as possible in the term, so that we may assess your individual situation.
Classroom Expectations
Preparation:
Classes will be conducted on a lecture-discussion and problem-solving basis. Brief lectures will
introduce the topic and review aspects of the assigned material. However, much of the class time will
center on class discussion and solving written assignments. A key element to understanding the material
will be how conscientiously the student studies the reading assignments and prepares the written
assignments before class.
Lectures and class discussions will be based upon the assumption that all assigned work and
reading have been completed prior to class. When a reading is assigned, it is essential that advance
preparation includes not only reading, but identification of key facts and major questions posed by the
assignment and the written requirement noted.
Attendance:
Regular attendance is necessary for satisfactory performance in this course. While it is
understandable that absence is occasionally unavoidable, each student is entirely responsible for making
up any missed assignments or lecture notes. Excused absences will include: 1) Statement from doctor, 2)
Statement from school nurse, 3) Official school events, and 4) Family emergency. No absence will be
excused until a memo is provided explaining why it should be excused. More than one unexcused
absences will result in your final grade being reduced by one letter grade for each unexcused
absence. It is very important to prepare for and participate in class discussion. This interaction is critical
to full development and understanding of many of the topics considered in this course.
Case Studies:
Seven short, case-based assignments will be made throughout the semester. These will require
an analysis of financial accounting issues inherent in auditing and actual business situations. Each case
will require a write-up of the issues and the conclusions you draw from the assignment. Further details
will be provided in class.
Quizzes:
Quizzes will be given for each chapter at the beginning of class. Quizzes may not be made up for
any reason.
Exams:
There will be three exams during the term when the appropriate point in material content is
reached. The third exam will be given at the time appointed by the final examination schedule for the
School of Business. The exams will cover assigned text material and will be detailed well in advance of
the test dates. To assure academic integrity and fairness to all, make-up exams will not be given. Should
you miss an exam; the third exam will be re-weighted to count for the previously missed exam.
Term Project (Pinnacle): See Attached.
Grading:
Grades will be based upon individual relative performance to that of the class. Components of
this evaluation will be based upon the following:
Exams (3)
Case Studies
Quizzes
Term Project (Pinnacle)
Total
65%
10%
05%
20%
100%
Grading Scale:
A = 90 – 100%
B = 80 – 89%
C = 70 – 79%
D = 60 – 69%
F = below 60%
**10-point scale
Standards of Conduct and Academic Integrity:
This course will be conducted according to the standards specified in the “Statement of Community
Conduct” and “Guidelines and Procedures for Academic Discipline.”
Statement of Integrity:
“Coercion of faculty to change grades is strictly prohibited; grade change requests must follow University
established guidelines; refer to the Lambuth Handbook for details; any grade change must be supported
by adequate and substantial documentation. Lambuth University will not lessen its academic standards
for any reason.”
Written Case Assignments:
Cases are assigned from the casebook by Michael Knapp, Contemporary Auditing Issues and
Cases, 7th edition. The purpose of these assignments is to expose students to situations in which auditors
failed, for various reasons, to satisfy their professional responsibilities. All assignments deal with cases
which are derived from actual event or situations. Keep in mind as you read these cases that the purpose
of these assignments is not to criticize individuals audit firms or their clients, but rather to provide
students the opportunity to learn from these ‘real-world’ situations. By semester’s end some relevant
insight and knowledge should be gained by this investigation and approach in application.
Case assignment will be collected for evaluation at the beginning of class on the date due. Late
work will not be accepted. The cases will be evaluated and returned. All case questions are to be
answered clearly and in a well-organized manner. All assignments must be typed (double-spaced), and
limited to no more than four pages, unless instructed otherwise. Several questions in the cases involve
accounting theory/practice that should be covered in most Intermediate Accounting textbooks. Other
questions may involve auditing issues not directly discussed in class. In either case, you are expected to
research the case questions to arrive at sound, logical, well-reasoned answers. This allows you the
opportunity to apply accounting and other business knowledge you have acquired to real auditing
dilemma.
Learning Accommodations:
Learning accommodations will be made for students who have documentation on file with the Director of
Student Disability Services. For those students, the following accommodations maybe made if warranted:
1. Extra time to for test taking;
2. Allow the use of a tape recorder to record class discussions;
3. Allow students to have someone else take notes on their behalf.
No other accommodations will be guaranteed, but other accommodations will be considered. The
instructor will make the final decision on other accommodations. The instructor will work with the
Office of Student Success and Retention to help any student find a tutor.
Term Project:
Pinnacle Manufacturing Integrated Case
The Pinnacle Manufacturing integrated case is based on a large, multi-division company. The case
consists of six parts included at the end of chapters 8, 9, 10, 14, 15, and 16. Each part of the case is
designed to give you hands-on experience, and the parts of the case are connected so that you will gain a
better understanding of how the parts of the audit are integrated by the audit process.
Note that a significant portion of the grade is based upon professional work, which includes organization,
grammar, clarity, correct format, etc. There are some Excel and word templates to assist you in your work
located on the textbook website: www.pearsonhighered.com/arens.
Please note that the due date is April 14. Case work will not be accepted beyond this date – no
extensions will be granted. Please work well in advance of this date to improve the overall quality of
your work and to avoid problems due to last minute time constraints. I am not opposed to students
discussing the assignment as they work through it; however, all work must be completed independently of
each other.
Texts: Auditing and Assurance Services, 13th Edition, Arens, Elder and Beasley, Pearson, ISBN 978-013-608473-0.
Contemporary Auditing Real Issues and Cases, 7th Edition, Michael C. Knapp, South-Western,
2010, ISBN 978-1-439-07819-8.
DATE
ASSIGNMENTS
1-13
Introduction to Course – Lecture Chapter 14
1-20
Lecture Chapter 15
1-27
Lecture Chapter 16
2-3
Lecture Chapter 17
Case 1.1 due
2-10
Lecture Chapter 18
Case 1.7 due
2-17
Exam 1 (Chapters 14-17)
2-24
Lecture Chapter 19
Case 2.3 due
3-3
Lecture Chapter 20
Case 2.7 due
3-10
Spring Break
3-17
Lecture Chapters 21 & 22
Case 3.5 due
3-24
Exam 2 (Chapters 18-20)
3-31
Lecture Chapter 23
Case 5.3 due
4-7
Lecture Chapter 24
Case 5.6 due
4-14
Lecture Chapter 25
Semester Project (Pinnacle) due
4-21
Review for final exam
4-28
Exam 3 (Comprehensive)