School of Administrative Studies
Faculty of Liberal Arts and Professional Studies
YORK UNIVERSITY
Summer 2015-Course Outline
AP/ADMS 4553.03A
Auditing: Advanced Topics
Course Instructor Contact and Class Information
Section
Course Director
Email
Class Location
A– Monday 4:00 -7:00 pm
Larry Yarmolinsky
yarmo@rogers.com
ACW304
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
5 – Monday June 22
2nd Assignment –
Session 11 –
Monday August 10
10%
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
Monday July 6,2015
Final
Cumulative: Covering
Sessions 1 – 12
4-6:15 pm
TBA – held during regular
exam schedule (August
21-28)
Total
Weight
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
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
2
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 posted on the course website (moodle):
Session
Topics/Learning Objectives
Readings and Simulations
1
Critical Thinking and Its Relevance to Being a
Professional Auditor
CAS: 200, 210, 220, 300
Monday
May 25
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?
Case: Computer Bazaar Inc.
Refresher Material
Summary of Audit Process,
Notes on Assertions
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
Monday
June 1
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
How to 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)
CW: Session 2 Slides
3
Monday
June 8
Internal Control Risk Assessment, and Corporate
Governance
CAS: 265, 550, 610,
OCS: 5925
Learning Objectives:






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)
Fraud at the Top ( Eye on
Business-Internal Auditor 2014)
Case –Quality Auto Parts
Group Activity – Evaluating
Effectiveness of Controls
CW: Session 3 Slides
4
Session
Topics/Learning Objectives
Readings and Simulations
4
Apply and Assessing Professional Judgment
 Complex Revenue Transactions
 Deferred Costs and Capitalization
CAS 240 (Appendices 1,2, & 3),
520
Monday
June 15
5
Monday
June 22
Notes on Auditing Revenue
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
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
Group Activity – Revenue
Recognition
Case – Violet Lifestyles
CW: Session 4 Slides
CAS: 540, 620, 580
The Gray Area of Bias (Gunn,
2008)
Notes on Auditing Estimates and
Fair Value
Case: Warmth Home Comfort
Ltd (CICA 2001)
Case: Overlook Video Stores
Inc.
CW: Session 5 Slides
Your 1st pair case assignment is
due today – See Course Website
5
Session
Topics/Learning Objectives
Readings and Simulations
6
Applying and Assessing Professional Judgment
 The Going Concern Assumption
CAS: 320, 540, 570, 620
Monday
June 29
Learning Objectives:
 Identify and analyze the risks related to Going
Concern
 Evaluate the going concern assumption and
determine how to adjust the audit strategy
Notes on Auditing the Going
Concern Assumption
Auditing Considerations in an
Uncertain Economic
Environment (Auditing and
Assurance Bulletin, CPA
Canada)
Case: Great Lakes Cruises
Case: Hamm Industries
CW: Session 6 Slides
7
Midterm Exam (Covers Material from Sessions 16
Monday
July 6
8
Monday
July 13
Other Assurance Engagements
Financial Statements
 Reviews
 Compilations
 Small Business Audits
 Due Diligence Engagements
Related
to
Learning Objectives:




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
OCS: 8500, 8600, 9100
Notes on Auditing A Small
Business (Jones)
Minimize Risks (Cowperthwaite,
2013)
Case: Knopa’s Kaberet
Case: Q Dots
Other: Review
Arens Textbook
Chapter
20,
CW: Session 8 Slides
6
Session
Topics/Learning Objectives
Readings and Simulations
9
Other Assurance Engagements and Assurance
Providers
 Internal Audits
 Compliance Audits
 Fraud and Forensic Audits
What Makes Us Unique (M.
Jacka. Internal Auditor 2014)
Monday
July 20
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
10
Monday
July 27
Evaluating and Integrating Audit Findings
 Audit of Group Financial Statements
 Reliance on Other Auditors (External &
Internal)
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.
A Practical approach to Fraud
Risk (Lister, 2007)
And one for me (Wells, 2002)
Control cash-register thievery
Case: Radio Windsor
Case: Bloomington University
CW: Session 9 Slides
CAS: 500, 501, 505, 560, 570,
580, 600, 610
Component Materiality for Group
Audits, (Prawitt et al)
Case: Herbal Pharma: Part 1
CW: Session 10 Slides
No class on Monday August 3 (Civic Holiday)
7
Session
Topics/Learning Objectives
Readings and Simulations
11
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: 5025, 5800, 5815, 8500,
8600, 9100,
CSRS: 4460
CSAE 3100 (Exposure Draft)
Monday
August
10
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
12
Monday
August
17
Not-For-Profit Audits and Course Review
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
BP Petroleum Sustainability
(E&Y Foundation
Case: Financial Times
Case: Herbal Pharma Part 2
CW: Session 11 Slides
- 2nd Pairs Case Assignment is
due today (See Course Website)
CPA Handbook (Part III)
Notes on Auditing Not-for-Profit
CK: Corporate Governance
Tools to Prevent Fraud in the
Not-for-Profit Sector
Case: Yorktown Art Gallery
Case: CCL Canada
CW: Session 12 Slides
8