YORK UNIVERSITY
Faculty of Liberal Arts and Professional Studies
School of Administrative Studies
AP/ADMS 4551 - Section N
Auditing and Other Assurance Services
Winter 2013
COURSE OUTLINE
Schedule:
Section
Course Director
Larry Yarmolinsky
N
yarmo@rogers.com
Date of week and time
Wednesday
4-7 pm
Location
ACW 303
Course Description:
This course provides an introduction to auditing and other assurance services for students who
have not had significant exposure to auditing concepts or significant auditing experience.
The primary emphasis of the course is on the auditor’s decision-making process and the nature
and amount of audit evidence needed to render an opinion on the fairness of an organization’s
financial statements. Topics include professional standards, rules of conduct, ethical
considerations, legal liability, audit and review objectives, the audit risk model, audit evidence,
development and execution of compliance and substantive audit strategies, sampling methods
and audit reports.
Required Text(s) and Academic Honesty Warning:
Alvin A. Arens, Randal J. Elder, Mark S. Beasley and Ingrid Splettstoesser-Hogeterp, (2010),
Auditing: The Art and Science of Assurance Engagements, Canadian Eleventh Edition, Pearson
/Prentice Hall.
C.I.C.A. Handbook, Canadian Institute of Chartered Accountants Accounting and Assurance
Handbooks [Part I and Part II] - Available on-line through York Library e-resources. Students must
have passport account to access the Handbook.
I.C.A.O. Member's Handbook, Institute of Chartered Accountants, most recent edition. This
material is also available on the Internet at http://www.icao.on.ca
Lecture slides, Hand In Assignments, Term Paper, Oral Presentation requirements and Solutions
to In Class Discussion Questions will be posted on the course website.
WARNINGS -- Academic Honesty.
The instructor enforces all Faculty rules, especially those regarding academic honesty. There is
zero tolerance in this area. Plagiarism is a violation of academic honesty. The use of another’s
material without permission and without recognition is plagiarism. This applies to textbooks, study
guides, solution manuals, a friend’s assignment, past assignments, Internet resources or any
other material irrespective of the source. Any students handing in or providing material with
plagiarism will be prosecuted. Students must be aware of York University’s Academic Honesty
standards, Section D Serious Offenses Against the Standards of Academic Honesty.
Course Learning Objectives:
 To understand the purposes, benefits and disadvantages of auditing and assurance
engagements, and the responsibilities of both management and the auditor.
 Be able to explain the environment within which audit and assurance engagements are
conducted, and the impact that the environment has upon such engagements; identify
and discuss relevant standards and legislation that are part of this environment.
 To describe and assess the processes involved in conducting a financial statement audit,
including risk assessment, planning, execution and reporting.
 To understand the objectives of the financial statement audit, and to design audit
procedures for specific audit objectives, in the context of risks (analytical review, control
procedures, tests of details, sampling).
 To develop analytical and communication skills.
Organization of the Course:
This course outline will provide a broad overview of the content, structure and other aspects of the
course. The course content and structure is, however, subject to change.
This course requires substantial group work. Groups will be formed and group work will start in
the first class.
Learning Objectives and Required Readings
Session 1 – Jan 9
The Demand for Auditing / The Public Accounting
Profession
Assignments and Class Work
Learning Objectives:
-Define and explain auditing
-Distinguish between accounting and auditing
-Identify the factors that affect the demand for audits
-Describe the types of auditors and types of audits
-Explain the various standards under generally accepted
auditing standards (GAAS)
-Identify quality control standards
Form Groups
Discussion/practice questions:
Textbook 1-13, 2-20
In-class group exercises: Textbook 116 (Consumers’ Union) Please bring
questions posted to course website
Read:
Chapter 1 – The Auditing Profession
Chapter 2- The Public Accounting Profession
CICA Handbook:
CAS 200 - Overall Objective of the Independent Auditor
and the Conduct of an Audit in Accordance with
Canadian Auditing Standards
CAS 220 - Quality Control for an Audit of Financial
Statements
Session 2 – Jan 16
Overview of the Audit Process
Discussion/practice questions:
Textbook 5-22, 5-24, 5-25
Learning Objectives:
- Understand the objective of conducting an audit of
financial statements
- Understand the difference between management and
auditor responsibilities relating to the financial statements
- Understand the financial statement cycles approach to
segmenting the audit
- Understand the relationship among financial
In-class group exercise: Kingston
Company (Course Website)
statements, management assertions, audit objectives,
and audit procedures
- Identify the major phases of the audit process
- Grasp the basic elements of audit reporting
Read:
Chapter 5 - Audit Responsibilities and Objectives
Chapter 22 -Auditor Reporting, p. 714-720
CICA Handbook:
CAS 500 - Audit Evidence
Session 3 – Jan 23
Materiality, Risk, and Developing the Client Risk Profile
Discussion/practice questions:
Textbook 7-18, 7-19, 7-20, 8-23, 8-24
Learning Objectives:
-Understand materiality and its purpose
-Explain the relationship between materiality, risk and
audit evidence
-Identify the various bases for determining materiality
-Understand how to assess business risk and its
relationship to the audit risk model
_ Understand the type of evidence used in developing a
client risk profile
Understand how to develop and apply analytical review in
developing the client risk profile
-Understand when need to rely on the work of a specialist
Read:
Chapter 7 - Materiality and Risk
Chapter 8 – Client Risk Profile and Documentation p. 239253
Chapter 6 – Purpose and timing of analytical procedures
(p. 182-189) and Appendix 6A
In-class group exercises:
Materiality – Who’s Right? (Course
Website)
HighTech Software & Games Inc.
(Course Website)
Epoch Jeans (Course Website)
Linking risk factors (Course Website)
Individual Hand-In Assignment #1
(Course Website)
CICA Handbook:
CAS 200 (see Session 1)
CAS 315 - Identifying and Assessing the Risks of
Material Misstatements through Understanding the Entity
and its Environment
CAS 320 - Materiality in Planning and Performing an
Audit
CAS 210 - Agreeing the Terms of audit Engagements
CAS 300 - Planning an Audit of Financial Statements
CAS 510 - Initial Engagements – Opening Balances
CAS 520 - Analytical Procedures
CAS 620 - Using the Work of an Auditor’s Expert
Session 4 – Jan 30
Corporate Governance, Internal Controls, and Control
Risk
Learning Objectives:
- Describe internal control and understand its role in
developing the client risk profile
-Understand the importance of internal control for
management and the auditor
-Understand the four components of internal control
-Identify the components of the control environment
Discussion/practice questions:
Textbook 9-22, 9-24,
Segregation of Duties (Course
Website)
In-class group exercises:
Northern Frontier Park (Course
Website)
Little City Payroll – Identifying Control
Weaknesses (Course Website)
-Understand how to assess control risk
-Understand the different approaches used to understand
the client’s internal control
-Link internal control to audit objectives and audit
procedures
-Discuss the purpose of a management letter
-Understand the relationship between corporate
governance strategies and risk management.
Acco (course website)
Read
Chapter 9 Internal Controls and Control Risk
Chapter 10 – Corporate governance and entity level
controls (pp. 311-323)
Chapter 14 -- Methodology for Designing Tests of
Controls for Sales (pp. 455-468)
Chapter 18 -- Test of Controls, for the audit of the
acquisition and payment cycle (pp. 600-605)
CICA Handbook:
CAS 265, Communicating Deficiencies in Internal Control
to Those Charged with Governance and Management
CAS 260, Communications with Those Charged with
governance
Session 5 – February 6
Audit Evidence, Evidence Mix, and Audit Strategy
Learning Objectives
Explain the purposes of working papers and identify the
various types of working papers
Understand the factors that influence audit evidence
decisions
Evaluate the quality of evidence
Understand the relationship between analytical
procedures, test of controls and test of details
Understand how to develop an audit strategy that is
efficient and effective
Discussion/practice questions:
Textbook, 6-22, 6-23, 6-26, 12-18,
12-22 and 12-23
In-class group exercises:
Epoch Jeans – cont’d (course
website)
Lernout & Hauspie (course website)
Individual Hand-in Assignment #2 –
Course Website
Read
Chapter 8 – The Nature of Working Papers (p. 253-260)
Chapter 6 – Audit Evidence
Chapter 12 – Overall Audit Plan and Audit Program
CICA Handbook:
CAS 230 - Audit Documentation
CAS 330 - The Auditor’s Responses to Assessed Risks
CAS 500 - Audit Evidence
Session 6 – February 13
Fraud Auditing
Discussion/practice questions:
Textbook 11-23, 11-30
Learning Objectives
Understand the fraud and the fraud triangle
Understand the difference between fraudulent financial
reporting and misappropriation of assets
Understand the features of corporate governance and of
the control environment that that could reduce fraud risk
Understand the auditor’s responsibility for assessing and
detecting fraud
In-class group exercises:
Little City Payroll – Fraud Risk
Assessment (course website)
Lola Whole Foods (course website)
Group Assignment #1 Due – See the
course website for the posted
assignment
Read
Chapter 11
CICA Handbook:
CAS 240-The auditor’s responsibilities relating to fraud in
an audit of financial statements
Reading Week - NO CLASSES
February 20
Session 7 –
pm)
Sunday February 24th at (12 – 2
Location TBD
MIDTERM EXAM INATION
(covers materials from session 1-6)
There will be no class on Wednesday February 27- as
the midterm was on the previous Sunday
Session 8 – March 6
Audit Sampling
Discussion/practice questions:
Learning Objectives:
- Explain why sampling is important in auditing
-Explain the concept of representative sampling
-Distinguish between statistical and non statistical
sampling
-List the advantages and disadvantages of statistical
versus non statistical sampling
-Describe the steps in planning, selecting and evaluating
a sample
-Identify the steps to conduct attribute sampling
In-Class Group Exercises:
Textbook 13-22, and 13-26
Packet Corporation (website)
Dan Scribner (website)
Read:
Chapter 13 -- Audit Sampling Concepts
Chapter 14 -- Audit of the Sales and Collection Cycle –
Tests of Controls Application of Attribute Sampling (pp.
481-486)
CICA Handbook:
· CAS 530, Audit Sampling
Session 9 – March 13
Application of the Audit Process: The Sales/Receivable
Cycle
Learning Objectives:
-Identify the typical records and transactions in the sales
cycle
- Understand the relationship between overall audit
planning risks and risks for sales and collections cycle
assertions
- Identify and describe the processes for designing
control tests and test of details for the sales and
collection cycle
Discussion/practice questions: 15-29,
15-31, Adecco Employment Services
(Course Website)
In-class group exercise
Fisher Boats (Course Website)
Verona Shoe (Course Website)
Group Assignment #2 Due - See the
course website for the posted
assignment
- Identify the various analytical procedures used in the
audit of the sales and collection cycle
-Comparison of positive and negative confirmations
-Discuss the process for confirming accounts receivable
confirmations and following up non replies
Read:
Chapter 14 - Audit of the Sales and Collection Cycle –
Tests of Controls (p. 443-455 and 464Chapter 15 – Designing Tests of Details of Balances for
Accounts Receivable
Session 10 – March 20
Application of the Audit Process: The Inventory and
Warehousing Cycle And Acquisition and Payment Cycle
Learning Objectives
- Explain the components of the inventory and
warehousing cycle to the auditor
- Explain the components of the Acquisition and
Payment cycle to the auditor
-Identify the various types of analytical procedures
relating to the inventory and warehousing cycle
-Identify the various types of analytical procedures
relating to the Acquisition and Payment cycle.
-Discuss the physical observation and pricing/compilation
audit tests for inventory
- Understand the relationships among the tests of
different cycles
Discussion/practice questions: 19-18,
Hillmart Retail (Course Website),
Consumer Electronics (Course
Website)
In-class group exercise
Harris and the Auditors (Course
Website)
Individual Hand-in Assignment # 3
Read:
Chapter 18, 19
Session 11 – March 27
Professional Relationships and Legal Liability
Learning Objectives:
- Explain what ethics are and why they are important to
auditors
-Understand the six fundamental statements of accepted
conduct
-Understand the various facets of independence
-Understand confidentiality as it applies to a public
accountant
-Understand advertising and solicitation from the
perspective of a public accountant
-Discuss how public accountants become associated with
information and their responsibilities
-Compare the auditor’s responsibilities with respect to
errors, fraud, and other irregularities
-Distinguish between a business failure and an audit
failure
-Describe the accountant’s liability to third parties under
common law and the related defenses
Discussion/practice questions:
Textbook 3 -16, 3-17, 3-24, 4-13, 416, and 4-18
In-class group exercises:
Textbook 4-17
Lance Popper (course website)
-Discuss the profession’s response to legal liability
-Examine the impact of Sarbanes Oxley and Bill 198
Readings:
Chapter 3 -- Professional Relationships: The role of
ethics and independence
Chapter 4 –Legal Liability
CICA Handbook
Section 5020 - Association
CAS 240 - The Auditor’s Responsibilities Relating to
Fraud in an Audit of Financial Statements
CAS 250 - Consideration of Laws and Regulations in an
Audit of Financial Statements
· ICAO Handbook - Rules of Professional Conduct
(available from www.icao.on.ca. Click on Site Map, scroll
down to Resources and click on Member’s Handbook.
Download the pdf file titled “Rules of Professional
Conduct.”)
Session 12 – April 3
Contingent Liabilities, Audit Completion and
Modifications to the Auditor’s Standard Report
Read:
Chapter 21 - Completing the Audit
Chapter 22 - Audit Reporting p.720-737
CAS 260 - Communications with Those Charged with
governance
CAS 560 - Subsequent Events
CAS 570 - Going Concern
CAS 580 - Written Representations
CAS 450 - Evaluation of Misstatements Identified during
the Audit
CAS 700 - listed in S1
CAS 705 - Modifications to the Opinion in the
Independent Auditor’s Report
CAS 710 - Comparative Information – Corresponding
Figures and Comparative Financial Statements
CAS 706 - Emphasis of Matter Paragraphs and Other
Matter
CAS 720 - The auditor’s responsibility in relation to other
information in documents containing audited financial
statements
Session 13 – FINAL EXAMINATION (covers the entire
course-during regular examination schedule: April 10th –
April 26th)
Discussion/practice questions: 21-17,
In-class group exercises:
Textbook 22-22,
Report Qualifications (Course
Website)
Gabby – review question (course
website)
Individual Hand-in Assignment # 4
Weighting of Course:
Class Attendance, Participation, and
Hand in Assignments (4)
15% Various Sessions
Midterm Examination (Sessions 1-6)
25% Session 7
Group Assignments(2)
20% Various Sessions
Final Examination
40% During exam schedule (April
10-26th)
TOTAL
100%
(1) Break-down of Attendance, Hand-in assignment and Class Participation:
Mark Allocation
8
5
2
15
Description
Hand-in assignments (4 assignments)
In-class group and individual participation
Attendance
TOTAL % OF FINAL GRADE
Instructions for the “Hand In Assignments” will be posted on the course website.
(2) The four individual assignments and two group assignments
are to be posted to
turnitin.com using Moodle – details will be given at the first session.
Missed Midterm
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 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, 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.
An email notification of the missed midterm must be sent to the course director within 2 days of
the missed midterm and the required documentation must be delivered to the course director/
Room 282 Atkinson within 7 days of the missed midterm.
Deferred Examination Policy
Deferred standing may be granted to students who are unable to write their final examination at
the scheduled time or to submit their outstanding course work on the last day of classes. In order
to apply for deferred standing, students must register at
http://apps.eso.yorku.ca/apps/adms/deferredexams.nsf then subsequently
hand in a completed DSA (Deferred Standing Agreement) form with supporting documentation
directly to the main office of the School of Administrative Studies (282 Atkinson). Write your ticket
number from the online registration system directly onto the DSA form. The DSA and supporting
documentation must be submitted no later than five (5) business days from the date of the exam
to the main office of the School of Administrative Studies (282 Atkinson), NOT to the Course
Director.
These requests will be considered on their merit and decisions will be made on a case by case
basis. Decisions will be made available by logging into the following link:
http://apps.eso.yorku.ca/apps/adms/deferredexams.nsf. No individualized communication will be
sent by the School to the students (no letter or e-mails).
Students with an approved DSA will be able to write their deferred examination during the
School's deferred examination period. No further extensions of deferred exams shall be
granted. The format and covered content of the deferred examination may be different from that of
the originally scheduled examination. The deferred exam may be closed book, cumulative and
comprehensive and may include all subjects/topics of the textbook whether they have been
covered in class or not. Any request for deferred standing on medical grounds must include an
Attending Physician's Statement form; a “Doctor’s Note” will not be accepted.
DSA Form: http://www.registrar.yorku.ca/pdf/deferred_standing_agreement.pdf
Attending Physician's Statement
form: http://www.yorku.ca/laps/council/students/documents/APS.pdf
The deferred examinations for the Winter 2013 term shall be held in the period May 24-26, 2013.