Lahore University of Management Sciences ACCT 250 Auditing Spring Semester 2018 Instructor Syed Zain ul Abideen / Waqar Ali Room No. SDSB room no. 442, 422 Office Hours TBA Email syed.zain@lums.edu.pk; waqar_ali@lums.edu.pk Telephone Ext. 5326; 5312 Secretary/TA Sec: Malik Imran, Ahmad Ali/ TA: TBA TA Office Hours TBA Course URL (if any) suraj.lums.edu.pk/~ro/ COURSE BASICS Credit Hours 3 Lecture(s) Nbr of Lec(s) Per Week 2 Duration One hour and fifty minutes, each. Recitation/Lab (per week) Nbr of Lec(s) Per Week N/A Duration N/A Tutorial (per week) Nbr of Lec(s) Per Week On need basis Duration Appropriate to cover the content. COURSE DISTRIBUTION Core Elective Open for Student Category Close for Student Category Core COURSE DESCRIPTION This course introduces students to auditing principles and practice. Students learn International Auditing Standards, profession al and ethical requirements and the Legal & Regulatory Framework to conduct audit engagements. The courses covers the complete lifecycle of financial statement audits, covers acceptance of audit engagements, developing a competitive proposal, complying with independence and other ethical requirements, risk assessment, development of audit programs, finalization of audit and issuing final auditor s opinion. This course also gives an overview of governance, internal auditing and as surance engagements other than audit. COURSE PREREQUISITE(S) ACCT 221 Corporate Financial Reporting (CFR) I COURSE OBJECTIVES To develop knowledge and understanding of: the auditing and Assurance Services the process of carrying out audit and review of financial statements; and the applicable legal, regulatory and ethical framework.
Lahore University of Management Sciences LEARNING OUTCOMES On completion of this course, students should be able to: Describe and evaluate the accounting and internal control systems and identify and communicate control risks, potential consequences and recommendations thereon. Explain and evaluate the sources of evidence, describe the nature, timing and extent of tests on class of transactions and account balances (including sampling and analytical procedures) and design programs for audit and review assignments. Evaluate findings, investigate inconsistencies and modify the work program as necessary. Explain how the conclusions from audit work are reflected in different types of audit report. UNDERGRADUATE PROGRAM LEARNING GOALS & OBJECTIVES General Learning Goals & Objectives Goal 1 Effective Written and Oral Communication Objective: Students will demonstrate effective writing and oral communication skills Goal 2 Ethical Understanding and Reasoning Objective: Students will demonstrate that they are able to identify and address ethical issues in an organizational context. Goal 3 Analytical Thinking and Problem Solving Skills Objective: Students will demonstrate that they are able to identify key problems and generate viable solutions. Goal 4 Application of Information Technology Objective: Students will demonstrate that they are able to use current technologies in business and management context. Goal 5 Teamwork in Diverse and Multicultural Environments Objective: Students will demonstrate that they are able to work effectively in diverse environments. Goal 6 Understanding Organizational Ecosystems Objective: Students will demonstrate that they have an understanding of Economic, Political, Regulatory, Legal, Technological, and Social environment of organizations. Major Specific Learning Goals & Objectives Goal 7 (a) Program Specific Knowledge and Understanding Objective: Students will demonstrate knowledge of key business disciplines and how they interact including application to real world situations (Including subject knowledge). Goal 7 (b) Understanding the science behind the decision making process (for MGS Majors) Objective: Students will demonstrate ability to analyze a business problem, design and apply appropriate decision support tools, interpret results and make meaningful recommendations to support the decision maker PROGRAM LEARNING GOALS AND OBJECTIVES Goal 1 Effective Written and Oral Communication Goal 2 Ethical Understanding and Reasoning Goal 3 Analytical Thinking and Problem Solving Skills COURSE LEARNING OBJECTIVES Understand the nature, purpose and scope of auditing in public, private and not forprofit entities, and its regulatory and ethical framework. Describe and evaluate accounting and internal control systems and identify and communicate control risks, potential consequences and recommendations thereon. COURSE ASSESSMENT ITEM CP, Quizzes, Mid Term, Final exam
Goal 4 Application of Information Technology Lahore University of Management Sciences Obtain understanding of the entity and its environment, assess risks and plan audit of financial statements. Describe and evaluate accounting and internal control systems and identify and communicate control risks, potential consequences and recommendations thereon. Goal 5 Teamwork in Diverse and Multicultural Environments Goal 6 Understanding Organizational Ecosystems Goal 7 (a) Discipline Specific Knowledge and Understanding Goal 7 (b) Understanding the science behind the decision making process Obtain understanding of the entity and its environment, assess risks and plan audit of financial statements. Understand the nature, purpose and scope of auditing in public, private and not forprofit entities, and its regulatory and ethical framework. Discuss the preconditions, requirements of professional ethics and other regulatory requirements in relation to the acceptance or continuance of audit engagements. Obtain understanding of the entity and its environment, assess risks and plan audit of financial statements. Describe and evaluate accounting and internal control systems and identify and communicate control risks, potential consequences and recommendations thereon. Explain and evaluate sources of evidence, describe the nature, timing and extent of tests on class of transactions and account balances (including sampling and analytical procedures) and design programs for audit and review assignments. Evaluate findings, investigate inconsistencies and modify the work program as necessary. Explain how the conclusions from audit work are reflected in different types of audit report.
Lahore University of Management Sciences GRADING BREAKUP AND POLICY Quizzes (n 1) : 20% Class Participation: 10% Midterm Examination: 30% Final Examination: 40% A maximum of 3 absences will be allowed, beyond which a proportional grade reduction would apply. There will be no allowance for late attendance (a zero minute policy holds) or absence unless properly routed through the OSA. An aggregate grade below 50% would tantamount to an F in the course. EXAMINATION DETAIL Midterm Exam Yes/No: Combine Separate: Duration: Preferred Date: Exam Specifications: Yes Separate 1.5 hours TBA Free Response & MCQs Final Exam Yes/No: Combine Separate: Duration: Exam Specifications: Yes Separate 2 hours Free Response & MCQs COURSE OVERVIEW WEEK TOPICS 1 Introduction to Auditing/Assurance (including Internal Audit) 2 Legal and Regulatory Environment and Overview of government auditing RECOMMENDED READINGS Chapter 1 (IAASB framework ISA 200 & Internal Auditing Standards) Chapter 2 (CO 1984, Specimen auditor s report, ISA 250) 3 Ethics for Professional Accountants Chapter 3 (Code of ethics, ISA 210, Listing regulations selected) 4 Auditor s Services Chapter 4 (ISA 220) OBJECTIVES/ APPLICATION What is assurance? Levels of assurance Objective of audit Materiality True and fair view Public sector auditing External vs. internal, audit Limitations of audit Corporate Governance IFAC, IAASB, ISAs, ISREs, ISQCs Standard setting procedures Statutory requirement of audit and small co. exemption ICAP Code Of Ethics Enforcement of Ethical Requirements Elements of an Assurance Engagement General Considerations Professional Skepticism Quality Control
5 Acceptance or Continuance Procedures Lahore University of Management Sciences Chapter 5 Eligibility, appointment, removal, tenure, rights and obligations of auditors Cases on application of code Procedures for accepting new appointments Engagement letter 6 Planning and Risk Assessment & Chapter 6 Importance of planning Using the work of Others (ISAs 240, 250, 300, 315, 320, 520, 500, 330, 600, 610, 620 & ISRE 2400) Understanding the entity and its environment and analytical procedures Audit risk and its components Risk assessment, significant risk, fraud risks Special considerations for NGOs Materiality assessment Sources of evidence + assertions Development of Audit Strategy and Plan Using work of: Experts Internal auditors Other Auditors 7 Internal Control Framework Chapter 7 Importance of IC (COSO Integrated Framework for Internal Control Objectives Internal Controls) Components of IC Inherent Limitations Information Technology General Control (ITGC) 8 Revision and Mid Term Exam 9 Tests of Controls Chapter 7 (Remainder) Designing and applying Test of Controls for: Sales Purchases Payroll Inventory Cash and bank 10 Analytical Procedures & Audit Chapter 8 & Appendix The Analytical Review Process Sampling Audit Sampling and Other Selective Testing Procedures 11 Auditor s Response to Assessed Risk Chapter 9 Basis of Evidence (ISA 330, 500) Assertions Tests of control and substantive procedures Sufficiency and appropriateness Sources of evidence
12 Audit Evidence & Verification of Specific Areas and opening balances Lahore University of Management Sciences Chapter 10 (ISA 540, 510, 550 ISAs 500, 501, 505, 530, 580 Sample Audit Programs) 13 Review and Finalization Procedures Chapter 11 (ISAs 450, 560, 570) 14 Reporting Chapter 12 (ISAs 700, 705, 706, 710, 720 ISRE 2410, specimen reports) TEXTBOOK(S)/SUPPLEMENTARY READINGS Recommended Text Book Management representations Related parties Designing and applying substantive audit procedures for: Receivables Inventories Payables Cash and bank Fixed assets Liabilities Estimates Working Papers Document Retention Permanent & Current Files Preparation of Working Schedule Subsequent events Going concern Quality control Review Documentation Compilation Reporting to management Reporting to those charged with governance Reporting non compliance of laws Reporting fraud and errors Rick Hayes, R. D. (2014). Principles of Auditing: An Introduction to International Standards on Auditing (Vol. 3nd Edition ). Gosport: FT Prentice Hall. Other Text Books International Standards on Auditing BPP. (2014). Auditing and Assurance (Global). Lahore: BPP. Other Readings Relevant sections of Company s Ordinance 1984 ICAP Code of Ethics for Professional Accountants Extracts from Code of Corporate governance Selected Cases and articles