Lifelong Learning for a Brighter World

Jing Zhou, McMaster University Continuing Education Accounting graduate Jing Zhou, McMaster University Continuing Education Accounting graduate

Accounting

Cheques and balances. It all adds up.

Work towards your CPA designation!

ACC 931 - Auditing C32

Academic Credit Value:
3 units
Course Delivery Mode:
Online Self-Study (OSS)
Hours of Study:
42 hours
Course Prerequisite(s):
ACC 927 Intermediate Financial Accounting II, ACC 928 Introductory Management Accounting, & ACC 932 Management Information Systems or equivalents. Be advised: Students who do not meet the pre-requisite will be required to withdraw. In such cases, CCE’s withdrawal/refund policies will apply.
Course Anti-requisite(s):
N/A
Instructor Name:
Greg Caers
Course Dates:
07/15/2019 - 12/14/2019



Required Course Materials:
Auditing: An International Approach (with Access Code), Seventh Edition. Smieliauskas. McGraw-Hill Ryerson. 2016.
Optional Course Materials:
CPA Standards and Guidance Collection, Assurance Handbook, most recent edition. Available via McMaster Library
Course Description:
This course is an introduction to the field of auditing, which is broadly defined as a systematic process of objective accumulation and evaluation of evidence regarding written assertions about economic actions and events in order to determine the degree of correspondence between those assertions and established criteria (Applicable Financial Reporting Framework which is GAAP.  The Canadian Auditing Standards (CAS) apply to all audits of financial statements.

As this is an introductory auditing course, the focus will be on the identification of key terminology and concepts as well as an overview of auditing in the context of a general business environment. A secondary focus will be on a rudimentary examination of the audit process and identification of the various roles that auditors can assume.

Learning Outcomes:
Course Evaluation
The overall grade for this course includes the following components:

Method Percent/Weight
Assignment 20%
Research Paper 20%
Final Exam 60%
TOTAL 100%

Note: A passing grade on the final examination is required to pass the course.

The final exam must be written on or before your course end date/final exam date. Students who have submitted all assignments ahead of schedule may opt to write their final examination prior to the posted examination/course end date. Although students are permitted to accelerate through course material, no student will be permitted to schedule/sit the final examination earlier than two (2) months post course start date. After the final exam is written no further assignment submissions will be accepted. 

Course Format:

This course is designed to present the fundamental concepts and theories in auditing and promote the application to the workplace and professional practice. Course activities will include instructor presentations, required readings and experiential learning activities (i.e. case studies, group discussions, projects, etc.).

Assignments:
Each assignment is worth 60 marks and accounts for 20% of your overall grade. There are 5 assignments worth 4% each. Assignment due dates are posted to your assignment schedule. Students may elect to submit assignments ahead of schedule. Assignments must be submitted no later than the posted due date. Penalties will apply to any/all late submissions. Assignments received 5 days after the due date will receive a grade of zero.  The submissions must be in word or other standard Microsoft document applications and be submitted through the dropbox.  Please do not scan and send assignments.

Research Report:
A comprehensive case must be submitted no later than the day of the final examination. Each student will prepare and submit a paper on a topic covered with the course. The paper will be a maximum of 10 single-spaced pages (including exhibits) (20 pages double-spaced). The paper will have one inch margins on all sides and be written in Times New Roman 12 point font. Students will complete a one –page outline, including an itemization of planned content, and submit it by the 5th week in the course.

Study Tips:
This auditing course can be very challenging because it may require you to look at things from different perspectives than in previous accounting courses: auditing requires you to take a critical perspective and be skeptical about accounting information. 

This course covers a significant amount of material in order to introduce the fundamental auditing knowledge that professional accountants require. To manage the course readings, I suggest you try to read all the assigned Text material at least once before class.  

You are encouraged to make full use of the discussion boards in avenue to learn.

For the CPA Handbook readings, I suggest you review the assigned sections so you will start to be familiar with the content of the Canadian Auditing Standards (“CAS”), as well as the structure of Canadian generally accepted auditing standards. You do not need to read or memorize every word of the assigned CPA materials, but you should focus on the topics covered in each of the assigned readings.

Unit 1 Introduction to Auditing, Auditor’s Professional Practice and Responsibility and the Independent Auditor’s Report
Unit 2 Preliminary Audit Planning, Assessing Risk and Internal Controls, Fraud and Internal Control Assessment and Testing
Unit 3  Audit Evidence and Sampling
Unit 4  Completing the Audit, Applying Professional Judgment to Form the Audit Opinion and Issue the Audit Report and Ethics and Legal Responsibilities
Unit 5  Other assurance and non-assurance engagements

Assignment Submission:
Course assignments are submitted to the appropriate A2L Assignment folder by the specified due date
Late Coursework:
Late assignments will be subject to a 2% per day late penalty (includes weekends and holidays) for up to seven (7) days. After this date, no assignments will be accepted and a grade of zero (0) will be applied. Extensions for course work must be approved by the instructor before the due date (see Academic Regulations below), and will be granted for illness or emergencies only. Students may be asked to submit supporting documentation for an extension request. NOTE:  This policy applies to assignments and other hand in type coursework only.  This policy does not apply to discussion board topics/postings which do not allow for late postings/contributions

Policy & Procedures:

Academic Regulations (Attendance, Coursework, Tests/Exams):
In accordance with McMaster University’s General Academic Regulations, “it is imperative that students make every effort to meet the originally scheduled course requirements and it is a student’s responsibility to write examinations as scheduled.” Therefore, all students are expected to attend and complete the specific course requirements (i.e. attendance, assignments, and tests/exams) listed in the course outline on or by the date specified.  Students who need to arrange for coursework accommodation, as a result of medical, personal or family reasons, must contact the course instructor within 48 hours of the originally scheduled due date. It is the student’s responsibility to contact the Program Manager/Program Associate to discuss accommodations and procedures related to deferred tests and/or examinations within 48 hours of the originally scheduled test/exam, as per policy.  Failure to contact the course instructor, in the case of missed coursework, or the Program Manager/Program Associate, in the case of a missed test/examination, within the specified 48 hour window will result in a grade of zero (0) on the coursework/exam and no further consideration will be granted.  

*Note: Supporting documentation will be required but will not ensure approval of accommodation(s).
Academic Integrity
You are expected to exhibit honesty and use ethical behaviour in all aspects of the learning process. Academic credentials you earn are rooted in principles of honesty and academic integrity. Academic dishonesty is to knowingly act or fail to act in a way that results or could result in unearned academic credit or advantage. This behaviour can result in serious consequences, e.g. the grade of zero on an assignment, loss of credit with a notation on the transcript (notation reads: “Grade of F assigned for academic dishonesty”), and/or suspension or expulsion from the university.

It is your responsibility to understand what constitutes academic dishonesty. For information on the various types of academic dishonesty please refer to the Academic Integrity Policy, located at http://www.mcmaster.ca/academicintegrity/

The following illustrates only three forms of academic dishonesty:
Plagiarism, e.g. the submission of work that is not one’s own or for which other credit has been obtained.
Improper collaboration in-group work.
Copying or using unauthorized aids in tests and examinations.
Academic Accommodations:
Students with disabilities who require academic accommodations must contact the Student Accessibility Centre (SAS) to meet with an appropriate Disability Services Coordinator. To contact SAS, phone 905-525-9140 ext. 28652, or email sas@mcmaster.ca. For further information, consult McMaster University’s Policy for Academic Accommodation for Students with Disabilities.
On-line Elements:
In this course, we will be using on-line elements, which may include email, Avenue to Learn, WebEX, and external web sites.  Students should be aware that, when they access the electronic components of this course, private information such as first and last names, user names for the McMaster e-mail accounts, and program affiliation may become apparent to all other students in the same course. The available information is dependent on the technology used. Continuation in this course will be deemed consent to this disclosure. If you have any questions or concerns about such disclosure please discuss this with the course instructor.

Accessing the CPA Handbook:
CPA Handbook (available through the McMaster University Library System)

To access the CPA Handbook, please follow these steps:
- Go to https://library.mcmaster.ca/articles/knotia
- Click on the URL for McMaster Users Only
- Log in using your MacID and password
- Under subscriptions find the CPA Standards and Guidance Collection and click to access this resource
- Under the heading CPA Canada Standards and Guidance Collection (CPACHB), click on Assurance. The  majority of the references in the detailed course outline below can be found in the following links:
- Canadian Assurance Standards
- Other Canadian Standards
- Canadian Standards on Quality Control
- Assurance and Related Services Guidelines

Turnitin.com:
Course Changes:
The instructor reserves the right to modify elements of the course and will notify students accordingly.
Course Withdrawal Policy:
Policies related to dropping a course and course withdrawals are posted to the Centre for Continuing Education’s program webpage, FAQs & Policies (https://www.mcmastercce.ca/cce-policies#Dropping). 
Storm Closure Policy:
In the event of inclement weather, the Centre for Continuing Education will abide by the University’s Storm Closure Policy: https://www.mcmaster.ca/policy/Employee/storm_emergency_policy.pdf, and will only close if the University is closed. All in-class courses, exams and room bookings by internal and external clients will be cancelled if the Centre for Continuing Education is closed. On-line courses will take place as scheduled.
Grading Scale:
 Grade Equivalent
Grade Point
Equivalent Percentages
A+ 12 90-100
A 11 85-89
A- 10 80-84
B+ 9 77-79
B 8 73-76
B- 7 70-72
C+ 6 67-69
C 5 63-66
C- 4 60-62
D+ 3 57-59
D 2 53-56
D- 1 50-52
F 0 0-49
Course Schedule:

Unit 

Topics

SB 6e Text & Other

Readings:

Assigned Problems

Learning Objectives

1



Introduction to Auditing.

Auditors’ Professional Roles and Responsibilities









Independent Auditor’s Report.



Ch 1: LO 1-5,  Ch 2: LO 1-5, 6

Inside front cover

HBK: Preface , CAS 200, 220,CSQC-1 Accounting: s.1000 (F/S concepts)

or Part I- Framework










Ch 4: LO 1-7  

HBK:  OCS 5020, 5021, CAS 700, CAS 705, 706, 710.

Ch 1

RC 1-1, 1-6, 1-8,1-11, 1-13, 1-15, 1-16, 1-19

EP 1-1, 1-4, 1-6, ACA

Ch 2

RC 1- 2-1, 2-2, 2-3, 2-4,2-5, 2-6, 2-8, 2-9,2-17,2-20, 2-21, 2-22,2-25

EP 2-2, 2-4, 2-8, ACA



Ch.4

RC 1 4-3, 4-5, 4-6, 4-7, 4-10, 4-12, 4-13, 4-16

EP 4-1, 4-2,  4-6 4-10,  4-12, 4-13, ACA

  • Discuss the objectives and purpose of an audit of financial statements.
  • Explain the importance of auditing and the role of the external auditor.
  • Explain how information risk arises and how auditors can reduce information risk.
  • Distinguish auditing from accounting.
  • Explain how professional judgment is performed in an audit.
  • Describe the applicable financial reporting framework as being the criteria auditors use to render an opinion on the financial statements.
  • Discuss the three party accountability relationship.
  • Provide an overview of international auditing and its impact on Canadian Auditing Standards (CAS).
  • Discuss the different types of auditors.
  • Understand the current regulatory environment of auditing.
  • Understand the different  types of auditors. (note different types of audit engagements are discussed in unit five).
  • Identify and apply Generally Accepted Auditing Standards (GAAS), Relevant Ethical Requirements and the Canadian Auditing Standards
  • Discuss the association framework; determine how auditors are associated with financial statements and financial information.
  • Discuss the 3 levels of assurance.
  • Explain concept of professional skepticism
  • Identify and apply the Canadian Quality Control Standards to a problem
  • Explain the components of a standard unmodified audit report.
  • For a given set of accounting facts and audit circumstances, analyze qualified, adverse and disclaimer audit reports - determine how the standard audit report would change for a scope limitation and a GAAP departure (including change in wording in the opinion paragraph.
  • Understand the different types of audit reports
  • Understand when an auditor is required to provided an emphasis of the matter paragraph or others matters paragraph.
  • Understand how the audit report changes with each type of opinion.
  • Understand the use of comparative vs. corresponding approach.

2

Preliminary Audit Planning: Understanding the Auditee’s Business.








Assessing Risks & Internal Control.

Fraud Risk Assessment.




















Control Assessment and Testing

Prelude to Parts 2 and 3 of the Text

Ch 5: LO 1-7, 9 App 5A

Inside back cover

HBK:CAS 210, 230, 240, 250, 300, 320, 520







Ch 6: LO 1-8,

HBK: CAS  315

Ch 7: LO 1-7






















Ch 9:  LO 1-8

HBK: CAS 330, 260, 265, 610

CSAE 3416 Reporting on Controls at a Service Organization

HBK 5925 An audit of Control Over Financial Reporting that is integrated with an Audit of Financial Statements.

Ch.5  

RC 5-1, 5-3,5-4, 5-7,5-8, 5-9, 510, 5-15, 5-15, 5-16, 5-17, 5-18,5-21, 5-22, 5-29, 5--30, 5-31, 5-34, 5-37, 5-39, 5-40, 5-42,52, 5-68, 5-69, 5-70, 5-74,

EP 5-6, 5-7

DC 5-4, ACA

Ch 6

RC 6-2, 6-7,6-8,6-9,6-12, 6-16, 6-18, 6-19, 6-20, 6-25, 6-26, 6-44, 6-54

EP 6-1, 6-2,

DC 6-1, 6-4, 6-5,  ACA


Ch 7

RC 7-2, 7-6, 7-8, 7-10, 7-11, 7-12, 7-13

EP 7-5










Ch.9

RC 9-1, 9-2, 9-3, 9-5, 9-6, 9-7,9-8, 9-9, 9-16, 9-22, 9-31, 9-33, 9-34, 9-37, 9-38, 9-44, 9-63, 9-64, 9-65, 9-66, 9-67, 9-68, 9-70, 9-72, 9-101

EP 9-10

DC 9-2

  • Describe the activities auditors undertake before starting a financial statement audit engagement - pre-engagement activities
  • Explain why auditors need to understand the auditee organization’s business, its environment, and risks at the start of a financial statement audit.
  • Explain why auditors need to communicate with the predecessor auditor for new engagements.
  • Define engagement letters and understand why engagement letters are prepared, including the various components of an engagement letter.
  • Explain the purpose of preliminary analytical procedures and business risk analysis in the audit planning process.
  • Explain the concept of materiality.
  • Determine planning materiality and performance materiality by assessing users and their information needs, qualitative factors, quantitative factors and make a final recommendation for each of planning materiality and performance materiality.
  • Describe the principal assertions in management’s financial statements and their application in establishing audit objectives.
  • Explain how the preliminary planning activities are integrated in the overall audit strategy.
  • Describe the basic components of internal control:  control environment, management’s risk assessment process, information systems and communication, control activities, and monitoring.
  • Define fraud.
  • Outline the auditor’s and management responsibility for fraud.
  • Discuss the fraud risk factors also referred to as the fraud triangle
  • Explain how the auditor’s understanding of an organization’s internal control helps to assess the risk that its financial statements are misstated.
  • Discuss the risk assessment procedures used to understand internal controls.
  • Describe the conceptual audit risk model and its components, and explain its usefulness and limitations in conducting the audit.
  • Understand how the components of the audit risk model are related.
  • Explain how auditors assess the auditee’s business risk through strategic analysis and business process analysis.
  • Outline the relationships among business processes, accounting processes/cycles, and management’s general purpose financial statements.
  • Illustrate how business risk analysis is used in a preliminary assessment of the risk that fraud or error has led to material misstatement at the overall financial statement level.
  • Define seven internal control objectives, relating them to the management assertions in financial account balances.
  • Discuss the three phases of internal control.
  • Describe general and application control activities, document accounting systems, identify key controls and weaknesses, and write key controls for an audit program.
  • Outline the auditor’s responsibility when internal control evaluation work detects or indicates a high risk of fraudulent misstatement.
  • Explain reasonable assurance and cost-benefit in the context of control risk assessment and development of the audit approach.
  • Understand how the auditor documents internal controls.
  • Explain the limitations of internal controls.
  • Identify strengths and deficiencies in internal controls.
  • Understand the auditor’s and management responsibilities for internal control. 

3

Audit Evidence and Assurance






















Audit Sampling.

Ch 8: LO 1-5, ACA

HBK: CAS 240, 330, 500, 501, 505,  540, 550, 610, 620

Writing audit procedures




















Ch 10, LO 1-8

HBK: CAS 530

Ch 8

RC 8-1, 8-3, 8-4, 8-5, 8-6, 8-8, 8-11, 8-15, 8-16, 8-20, 8-31, 8-41, 8-43, 8-44, 8-46, 8-47

EP 8.1. 8-3,  ACA

DC 8-5, 8-7
















Ch10

RC 10-1,10-2,10-3,10-5,10-6, 10-18, 10-19, 10-22, 10-23, 10-28, 10-31, 10-33, 10-34, 10-43, 10-46

EP 10-2

  • Outline seven general audit techniques (audit procedures) for gathering evidence.
  • Identify the procedures and sources of information auditors can use to obtain evidence for understanding an auditee’s business and industry, assessing risk, and responding to assessed risk.
  • Explain audit evidence in terms of its appropriateness and relative strength of persuasiveness.
  • Describe the content and purpose of the audit plan as well as the specific audit programs and detailed procedures it contains.
  • Discuss working papers, types and purpose of working papers.
  • Write audit procedures.
  • Test of controls & related control objectives
  • Substantive test & related management assertions
  • Develop a simple audit program for a test of a client’s internal control procedures / Develop a simple audit program for an account balance, considering the influence of risk and tolerable misstatement.
  • Specify objectives and a population of data.
  • Determine sample size and select sample units.
  • Evaluate evidence from performing  test of controls, / evaluate monetary error evidence from a balance audit sample.
  • Explain the role of professional judgment in audit sampling decisions.
  • Distinguish audit sampling work from non-sampling work.
  • Compare and contrast statistical and non-statistical sampling.
  • Differentiate between sampling and non-sampling risk
  • Explain the use of stratification in sampling.
  • Discuss sampling and non sampling error.
  • Explain how sample size is related to the related factors that determine sample size.

4

Completing the Audit.

Applying Professional Judgment to Form the Audit Opinion and Issue the Audit Report.






















Auditors’ Ethical and Legal Responsibilities

Ch 15: LO 1-6

Ch 16: LO 1-7

Ch 3: LO 1 -6  

HBK:  CAS 260,450, 520, 540, 550, 560, 570



























Ch 3: LO 1-6

RC 15-1, 15,3, 15-8, 15-0, 15-11, 15-12, 15-14, 15-15, 15-24, 15-26, 15-28, 15-29, 15-30, 15-33

EP 15-4, 15-5



RC 16-6, 16-7, 16-8, 1-18, 16-19, 16-21, 15-22, 16-23, 16-24, 15-25, 16-26, 16-27, 16-33, 16-24, 16-25, 16-26, 16-27, 16-33, 16-35, 16-37, 16-40, 16B-1, 16B-2, 16B-3

EP 16-4

DC 16-3










Ch.3

EP 3-1

  • Describe the balance sheet account groups that the major revenue and expense accounts are associated with, as well as the substantive analytical procedures applied to audit revenue and expenses.
  • Outline the overall analytical procedures to be performed at the final stage of a financial statement audit, including analysis of the income statement, cash flow statement, financial statement presentation, and disclosures.
  • Explain why written management representations are obtained, and what items are generally included in the representation letter, including identification of related parties Explain the purpose of lawyers’ letters (letters of enquiry) and how they are used at the completion stage of an audit to identify any contingencies.
  • Given a set of facts and circumstances, classify a subsequent event by type and proper treatment in the financial statements, and outline the implications of the timing of discovery of the event for the auditor’s report.
  • Outline procedures for subsequent events, contingencies and related party transactions.
  • Explain the final evaluation and conclusion stage of the audit:  adjustments resulting from the audit, evaluation of evidence and misstatements to form the audit opinion, and reviews of working paper files.
  • Apply the  CPA professional rules of conduct
  • Explain independence and objectivity
  • Apply the independence framework.
  • Understand concept of Common Law liability
  • Understand concept of Statutory liability
  • Apply rules of conduct to a problem
  • Discuss the components of negligence
  • Discuss who the auditor owes a duty of care to
  • Discuss how auditors can respond to legal liability

5

Other Assurance and Non-Assurance Engagements

 

Group financial statements

Other Positive Assurance Engagements

 

Review Engagements

 

Non-Assurance Engagements

Offering documents

 

Future oriented financial information

Other Types of Audit Engagements

 

Direct Engagements

Auditing in the public sector

Other Assurance Engagements

CAS 800, 805, 810

 

CAS 600

 CSAE 3416, 5925, PS 5300




CSRE 2400, 7060

 

9100, 9200, 9110, CSRS 4460,

7150, 7170, 7200, 7500,

 

 

AuG 6, AuG 16

Operational Audit, Continuous Audits, Forensic Audits, Comprehensive Audits, Environmental Audits


CSAE 3000, 3001, 3410, 3416, 3530, 3531

PS 5000, 5400, 6410, 6420


CSAE 3000- Attestation Engagements Other than Audits or Reviews.

CSAE 3001- Direct Engagements

CSAE 3410 Assurance engagements on greenhouse gas statements

CSAE 3530 and CSAE 3531


Recent Auditor General's Report

PS 5000,5300,5400,6410,6420

Ch 4

EP 4-4



Discuss the other types of assurance and non-assurance engagements and the auditor's involvement in each of these engagements

Understand the auditors requirements and ethical requirements to accept other types of assurance and non-assurance engagements

Understand the level of assurance provided in each of these engagements

Identify and assess the appropriate framework or set criteria to apply to an engagement

Discuss operational audits, continuous audits, forensic audits, environmental audits and auditing in the public sector

Discuss the nature of the reports for other types of assurance and non-assurance engagements

There are no key chapters from the text assigned to unit five because it does not exist.

Assigned readings are from the CPA Handbook

                          

Note: Audit Applications, Chapters 11, 12, 13 and 14 would have been covered in your ACC 932 Management Information Systems Course.