School of Administrative Studies
Faculty of Liberal Arts and Professional Studies
YORK UNIVERSITY
Winter 2015 Course Outline
AP/ADMS 4553.03 Sections A and B
Auditing: Advanced Topics
Course Instructor Contact and Class Information
Section
Course Director
Email
Class Location
M – Monday 7:00 -10:00 pm
N- Monday 4:00 -7:00 pm
O-Friday 8:30 – 11:30 am
Bartosz Amerski
Joanne Jones
Joanne Jones
Bartosz.Amerski@auditor.on.ca
jcjones@yorku.ca
jcjones@yorku.ca
HNE 033
HNE 401
ACW 305
EXPANDED COURSE DESCRIPTION:
The course is designed to enhance students’ analytical and critical thinking skills. The course will use a
variety of cases to help understand and apply 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.
This course aims to develop knowledge of the assurance concepts and practices relevant to selected
special topics. Coverage will include: audit risk, corporate governance, standards for assurance
engagements, various types of engagements such as internal audit, comprehensive audits, forensic
audits, and issues related to not-for-profit organizations and small business audits.
PREREQUISITES/CO-REQUISITES:
For students in an Honours program, 78 credits including AP/ADMS 3595 3.00, AP/ADMS 4551 3.00, or
2) or other students, these above-listed courses and an average grade of C+ or better in AP/ADMS 3585
3.00 and AP/ADMS 3595 3.00. Course credit exclusions: None.
Students are personally responsible to ensure that they have the required prerequisites as stated in the
course outline or in the course calendar. Students who do not have the prerequisites are at risk of being
dropped from the course at any time during the course. The department will not be responsible for refunds
resulting from students being dropped from a course due to a lack of the appropriate prerequisites.
REQUIRED COURSE MATERIALS
1. CPA Canada Handbook - Available on-line through York Library e-resources. Students must
have a Passport York account to access the Handbook. Students will be required to refer to
relevant accounting and assurance standards. Details for access are on Library Resources
section of the course Moodle site.
2. Alvin A. Arens, Randal J. Elder, Mark S. Beasley and Ingrid B. Splettstoesser, (2013), Auditing:
The Art and Science of Assurance Engagements, Canadian Twelfth Edition, Pearson.(Optional
but recommended).
3. From time to time, additional required reading materials will be posted on the course web site.
Warning: Photocopying more than 10% of a textbook is illegal, and may involve penalties. Do not
duplicate textbooks or obtain these photocopies. Students are reminded of York University's policy
regarding academic dishonesty as outlined in the York student calendars.
NOTE: Students must bring the relevant CPA Canada Handbook sections, and cases posted to the
course website in order to facilitate their group discussions.
1
WEIGHTING OF COURSE:
Course WORK
Description (See Also Class Due Date
Web Site)
Two Pairs Case
Analyses
Assignment done in pairs.
See below for further
information
1st assignment - Session
4 – M&N Monday Jan 26
O – Friday - Jan 30th
Weight
10%
2nd Assignment –
Session 11 –
M&N Monday Mar 23
O – Friday Mar. 20
Group Case Assignment/
Presentation of Integrated
Case
See below for further
information
Various Dates
15%
Case preparation, group
See below for further
and individual participation information
Various Dates
10%
Midterm
Sunday, February 8th, 2015 3-5:15 (room to be
announced)
Final
Cumulative: Covering
Sessions 1 – 12
TBA – held during regular
exam schedule (April 8April 24)
Total
25%
40%
100%
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, http://www.yorku.ca/laps/council/students/documents/APS.pdf 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 65%.
This signed statement is to be attached to the documentation provided in (1) above.
Physician statements need to be from the same day as the midterm or the day immediately after.
Physician statements older than one day after the date of the midterm exam will not be accepted.
OVERVIEW OF ASSIGNMENTS
Pair Case Analyses
Students are expected to work in pairs 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.
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
2
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. For
one case per class, each student is expected to prepare a summary of the case as Issue Analysis
Paper (IAP). Individual IAP is due online on Moodle before each class.
The participation grade will also include individual participation – students are expected to prepare
for each session, attend classes regularly, and actively participate in class discussions.
Group Integrated Case Assignment/Presentation of Integrated Case
The groups will be formed and the integrated case will be assigned in session 2. Details on
assignment will be posted to the course website.
NOTE: Students must submit their pair assignments, and group integrated case assignment to
turnitin.com using Moodle – details will be given at the first session.
TENTATIVE COURSE SCHEDULE
CAS: Canadian Audit Standards (CPA Handbook)
OCS: Other Canadian Standards (CPA Handbook)
CW: Posted on course website
Note: All readings, articles and cases will be either posted on the course website (moodle) or a
link provided to the library website
Other: As indicated on course outline
Session
Topics/Learning Objectives
Readings and Simulations
1
Critical Thinking and Its Relevance to Being
a Professional Auditor
CAS: 200, 210, 220, 300
M&N
Monday
Jan. 5
O
Friday
Jan 9
Learning Objectives:
 Identify and apply key audit concepts to
analysis of various issues
 Understand the professional judgment
process
 Examine the factors that impact
professional judgment and consider the
impact on audit quality
 Practice the use of professional judgment
using cases
 Explore the current climate for external
auditors
 Understand the debate surrounding
auditor independence and competence
Professional Judgment: Auditors’
Contribution to the Quality and
Integrity of Financial Reporting
What does it Take to be an Auditor
(Hall)
Why Good Accountants do Bad
Audits (Bazerman et al)
Are Checklists Killing Our
Profession? (Cowperthwaite, 2012)
Is it the Auditor or is it the Process?
Other: So You Think You Can Audit
(To be handed out in class)
Refresher Material
Summary of Audit Process, Notes on
Assertions, Notes on Summary of
Audit Process, Background on
Canadian Regulatory Environment,
Principles Based Approach
CW: Session 1 Slides
3
Session
Topics/Learning Objectives
Readings and Simulations
2
Client Acceptance/Continuance Issues, Risk
Assessment and Managing Risk in the Audit
Engagement
CAS: 240, 250, 260, 315, 320, 330,
450, 500, 520
M&N
Monday
Jan. 12
O
Friday
Jan 16
Learning Objectives:
 Analyze the factors underlying
engagement risk assessment and apply
to client acceptance/continuance issues
 Show the link between the client’s
strategic direction and identification of
significant audit risk
 Understand, analyze and identify the
motivations
behind
earnings
management
 Assess fraud risk and identify financial
statement fraud and be able to develop
an audit strategy to address these risks
 Apply professional scepticism when in an
audit of the financial statements
 Identify and analyze the risks related to
Related Party Transactions
 Develop an audit strategy and
procedures for Related Party
Transactions
Evaluating Engagement Risk
(Jones)
Keep the Skeptical Edge
(Cowperthwaite, 2011)
Enhancing Professional Skepticism
(Auditing and Assurance Bulletin,
CPA Canada)
The Hidden Risk in Analytical
Procedures: What WorldCom
Revealed ((Hitzig, 2004)
How to Analyze an Assurance Case
and Prepare and Audit Planning
Memo
Risk and Audit Strategy Notes
Notes on Auditing Related Party
Transactions
Case - Aerospace Lighting
Case - Controls over Related Party
Transactions at Scotiabank
(Iacobelli)
Group Activitiy – Related Party
Transactions at Tyco
CW: Session 2 Slides
4
Session
3
M&N
Monday
Jan. 19
O
Friday
Jan 23
Topics/Learning Objectives
Readings and Simulations
Internal Control Risk Assessment, and
Corporate Governance
CAS: 265, 550, 610,
OCS: 5925
Learning Objectives:






4
M&N
Monday
Jan. 26
O
Friday
Jan 30
Understand the auditors’, management’s,
and the audit committee’s responsibilities
for internal control
Apply understanding of corporate
governance and control environment to
analyze ethical conduct of organization
Evaluate the effectiveness of internal
controls
Identify and explain what is a material
versus significant control deficiency
Understand the accountability
relationships among the external auditor,
internal auditor, management, and the
audit committee
Assess the corporate governance
function in the context of the external
audit
Effective Corporate Governance
(Jones)
Role of the Audit Committee (CPAB,
2013)
Case – SEC versus Siemens (Mintz
and Morris)
Case – Dry Quick
Group Activitiy – Evaluating
Effectiveness of Controls
CW: Session 3 Slides
Apply and Assessing Professional Judgment
 Complex Revenue Transactions
 Deferred Costs and Capitalization
CAS 240 (Appendices 1,2, & 3), 520
Learning Objectives
 Identify and analyze risks related to
capitalization
and
deferral
of
expenditures
 Develop
an
audit
strategy
and
procedures
for
Deferred
Costs
transactions
 Research relevant accounting standards
to
determine
proper
accounting
treatment of Revenue Recognition
transactions
 Identify and analyze risks related to
Revenue Recognition
 Develop
an
audit
strategy
and
procedures for simple and complex
Revenue Recognition scenarios and
Deferral of Costs
 Apply professional judgment in
evaluating high risk audit areas and
complex accounting transactions
Group Activity – Revenue
Recognition
Notes on Auditing Revenue
Case – Violet Lifestyles
CW: Session 4 Slides
Your 1st pair case assignment is due
today – See Course Website
5
Session
Topics/Learning Objectives
Readings and Simulations
5
Applying and Assessing Professional
Judgment
 Auditing Estimates
 Auditing Fair Value
 Issues Related to Relying Upon
Specialists and Management
Learning Objectives

Identify and analyze audit risk related
to Management Estimates

Apply professional judgment in
evaluating management estimates

Identify and understand why and
when an auditor needs to rely upon others
who have a particular expertise in the subject
matter

Perform research to determine to
determine proper accounting treatment of
Management Estimates

Understand the auditor’s
responsibility when relying on the work of an
expert

Identify and analyze audit risk related
to auditing Fair Values

Develop an audit strategy and
procedures for auditing Management
Estimates and Fair Values
CAS: 540, 620, 580
M&N
Monday
Feb 2nd
O
Friday
Feb 6th
6
Sunday
Feb 8th,
2015
7
M&N
Monday
Feb. 23
O
Friday
Feb. 13
Midterm Exam
Sessions 1-5
Time:
Location
The Gray Area of Bias (Gunn, 2008)
Notes on Auditing Estimates and
Fair Value
Case: Warmth Home Comfort Ltd
(CICA 2001)
Case: Great Lake Cruises
CW: Session 5 Slides
(Covers Material from
Applying and Assessing Professional
Judgment
 The Going Concern Assumption
Learning Objectives:
 Identify and analyze the risks related to
Going Concern
 Evaluate the going concern assumption
and determine how to adjust the audit
strategy
CAS: 320, 540, 570, 620
Notes on Auditing the Going
Concern Assumption
Auditing Considerations in an
Uncertain Economic Environment
(Auditing and Assurance Bulletin,
CPA Canada)
Case: Hamm Industries
CW: Session 7 Slides
6
Session
Topics/Learning Objectives
Readings and Simulations
8
Other Assurance Engagements Related to
Financial Statements
 Reviews
 Compilations
 Small Business Audits
 Due Diligence Engagements
OCS: 8500, 8600, 9100
M&N
Monday
Mar. 2
O
Friday
Feb. 27
Learning Objectives:




9
M&N
Monday
Mar. 9
O
Friday
Mar. 6
Understand and analyze the risks
associated with conducting compilations
and reviews
Understand the reviews and compilations
standards
and
determine
when
engagements are appropriate
Understand the audit issues and risks
unique to Small Entities
Identify and analyze audit and control
issues unique to Small Entities and
develop appropriate audit strategy to
address those issues
Other Assurance Engagements and
Assurance Providers
 Internal Audits
 Compliance Audits
 Fraud and Forensic Audits
Learning Objectives
 Develop and apply extended audit
procedures for detecting
misappropriation of assets.
 Develop and apply audit procedures for
compliance audits.
 Identify and be able to explain the
various categories of fraud
 Compare and differentiate between the
purpose of a financial statement audit
and a forensic audit
Notes on Auditing A Small Business
(Jones)
Treading the Thin Line
Cowperthwaite, 2012)
Minimize Risks (Cowperthwaite,
2013)
Case: Knopa’s Kaberet
Other: Review Chapter 20, Arens
Textbook
CW: Session 8 Slides
A Practical approach to Fraud Risk
(Lister, 2007)
And one for me (Wells, 2002)
Control cash-register thievery
Case: Fraud Examination Case:
Crafty Cash Theft?
Case: Bloomington University
CW: Session 9 Slides
7
Session
Topics/Learning Objectives
Readings and Simulations
10
Evaluating and Integrating Audit Findings
 Audit of Group Financial Statements
 Reliance on Other Auditors (External &
Internal)
CAS: 500, 501, 505, 560, 570, 580,
600, 610
M&N
Monday
Mar. 16
O
Friday
Mar. 13
11
M&N
Monday
Mar 23
O
Friday
Mar 20
Learning Objectives:
 Understand the effect of pressures on
novice auditors’ professional judgment
 Understand and analyze the audit
implications and risks associated with
group audits - Subsidiaries operating in
foreign jurisdictions; and reliance upon
other auditors
 Assess the competence of internal audit
and the ability to rely upon their work in
the context of external audit.
Component Materiality for Group
Audits, (Prawitt et al)
Case: Herbal Pharma: Part 1
Case - Quality Auto Products
Other: Auditing in Foreign
Jurisdictions (CPAB Special Report)
(Download from CPA site)
CW: Session 10 Slides
Assurance Engagements other than Audits
or Reviews of Historical Financial Information
 Assurance over Non-Financial
Information
 Sustainability Assurance
 Compliance with Agreement
 Agreed-upon Procedures
CAS: 805
OCS: 5800, 5815, 8500, 8600, 9100,
CSAE 3100 (Exposure Draft)
Case: Financial Times
Learning Objectives:
 Understand the purpose and application
of the umbrella standards for assurance
engagements (CSAE 3100)
 Distinguish between the issues related
with
conducting
non-traditional
assurance engagements vs. traditional
(financial statement) engagements
 Compare the differences among the
various types of assurance engagements
covered in CPA Standards
 Identify and recommend which type of
assurance engagement best suits
stakeholders’ economic and information
needs
Case: Herbal Pharma Part 2
BP Petroleum Sustainability (E&Y
Foundation)
CW: Session 11 Slides
- 2nd Pairs Case Assignment is due
today (See Course Website)
8
Session
Topics/Learning Objectives
Readings and Simulations
12
Not-For-Profit Audits and Course Review
CPA Handbook (Part III)
Notes on Auditing Not-for-Profit
CK: Corporate Governance Tools to
Prevent Fraud in the Not-for-Profit
Sector
M&N
Monday
Mar. 30
O
Friday
Mar. 27
Learning Objectives:





Explain definitions and disclosures
related to not-for-profit organizations
Understand changes in accounting
standards applicable to financial
reporting framework of NFPs.
Using
appropriate
CPA
Canada
Handbook
section
evaluate
case
scenarios
to
determine
proper
accounting treatment of transactions for
a not-for-profit entity
Explain the control issues unique to
NFPs
Identify the audit issues and risks that
are unique to NFPs and develop
appropriate audit strategy to address
those risks
Case: Yorktown Art Gallery
Case: CCL Canada
Other: A Guide to Financial
Statements of Not-for-profit
Organizations: Questions for
Directors to Ask (Download from
CPA site)
CW: Session 12 Slides
9