AUDIT THEORY AND PRACTICE (ACCT 341)

AIM

This course aims to develop knowledge and understanding of the principles of external audit and the audit process and technical proficiency in the skills used for auditing financial statements.

  • COURSE DESCRIPTION
  • ROLE IN CURRICULUM
  • LEARNING OUTCOMES
  • STUDY PLAN
  • TEACHING METHODS
  • ASSESSMENT AND GRADING
  • TEXTBOOKS AND REFERENCES

COURSE DESCRIPTION

The syllabus for audit theory starts with an introduction to the nature and purpose of an audit, including the duties and liability of auditors, and the regulation that auditors must adhere to. The syllabus then covers the areas relating to the process of an audit of financial statements starting at audit planning and risk assessment, recording and evaluating internal control, as well as tests of controls, audit evidence and the use of substantive procedures. The final section deals with audit completion including the audit report.

Credits: 5
Lecture Hours: 75

Self-Study Hours:

  • Reading: 54 (162 pages of technical reading)     
  • Review: 42 (3 short case studies, final case study)
  • Assignment: 54 (research, analysis, writing)
    150  

Total Study Hours: 225

ROLE IN CURRICULUM

Audit Theory and Practice is the first course to introduce the fundamental knowledge on external audit processes for the bachelor of accounting and finance, building on existing financial accounting studies.

Prerequisites

Students must have completed Financial Accounting 1 and Financial Accounting 2.

 

LEARNING OUTCOMES

The learning outcomes for this course covers five main areas: Business environment and audit framework, Audit planning and risk, Internal control, Audit evidence and procedures and Audit completion. On successful completion of this course, students will be able to:

1  Knowledge

Level of Learning PLO CLO Learning Outcome
Understand PK1 CK1 Explain the principles of internal control and the features of information systems
Understand PK2 CK2 Describe audit evidence and audit procedures required to meet the objectives of an audit and apply International Standards on Auditing (ISAs)

2  Cognitive Skills

Level of Learning PLO CLO Learning Outcome
Apply PK1 CC1 Interpret the purpose and scope of an audit and its regulatory framework as well as uphold the fundamental principles of the ACCA code of ethics and conduct to the duties of an auditor
Apply PK1 CC2 Illustrate how to understand the entity and assess risks
Analyze PK3 CC3 Analyze how the audit is completed and reflected in the different types of audit Report

3  Communication, Information Technology, and Numerical Skills

Level of Learning PLO CLO Learning Outcome
Apply PCIT2 CCIT1 Utilize word software and spreadsheets to facilitate the preparation of learning papers on case studies, assignment, quizzes and mock exams.

4   Interpersonal Skills and Responsibilities

Level of Learning PLO CLO Learning Outcome
Apply PIP2 CIP1 Participate in a team to prepare audit programmes for real entities and/or audit simulations.

STUDY PLAN

The course targets the 50 lessons in the study plan below. Each lesson is 1.5 class hours each; there are a total of 75 class hours (excluding 3 hours of Final Review) The study plan below describes the learning outcome for each lesson, described in terms of what the student should be able to do at the end of the lesson. Readings should be done by students as preparation before the start of each class. Implementation of this study plan may vary somewhat depending on the progress and needs of students.

No  Lesson Learning Outcomes Teaching and Learning Activities, Assessment
 1

Introduction

  1. Describe the course learning outcomes and assessment
  2. Explain the nature of the audit, including the advantages and disadvantages of an audit. (CK1)

 

 Lecture Discussion – Kahoot Video
2

Business environment

  1. Explain the nature of the audit, including the advantages and disadvantages of an audit. (CK1)
  2. Explain the nature of accounting records. (CK1)
 Lecture Demonstration of an audit report Oral questions Homework
3

Business environment (continued)

  1. Explain the concept of true and fair presentation, and reasonable assurance. (CK1)
  2. Explain the regulations governing the appointment, removal and resignation of auditors. (CK1)
 Lecture Demonstration of an audit report Oral questions Quiz Reading: Chapter 1
4

Auditors responsibilities

  1. Describe the responsibilities of directors. (CK1)
  2. Describe the duties/rights of auditors. (CK1)
 Lecture Demonstration of director’s responsibilities – Kahoot Homework Reading: Chapter 2
5

Auditors responsibilities (continued)

  1. Explain the liabilities of auditors under contract and negligence to clients (CK1)
  2. Explain the liability of auditors to third parties (CK1)
 Lecture Demonstration of director’s responsibilities Quiz Reading: Chapter 2
6

Audit regulation

  1. Explain the structure of auditing profession and the scope of ISA (CK1)
  2. Discuss the fundamental principles of professional ethics (CK1)
 Lecture Discussion Case Study Homework Reading: Chapter 3 Technical Paper
7

The ACCA Code of Ethics and Conduct

  1. Describe each of the ACCA fundamental principles of the code of ethics and conduct  (CK1)
 Discussion – Kahoot Didactic questioning Reading: Chapter 3
8

The ACCA Code of Ethics and Conduct for Auditors

  1. Apply the ACCA code of ethics and conduct to professional appointment and conflicts of interest of an auditor  (CK1)
 Lecture Discussion – Kahoot Case Study no. 1 Reading: Chapter 3
9

Audit regulation (continued)

  1. Describe the detailed requirements, and application of professional ethics (CK1)
 Lecture Discussion – Kahoot Drill & Practice Quiz Reading: Chapter 3
10

Auditor appointment

  1. Explain the regulations governing the appointment, removal and resignation of auditors (CK1)
 Lecture Discussion – Kahoot Concept mapping Homework Reading: Chapter 4
11

Auditor appointment (continued)

  1. Explain how auditors obtain an initial understanding of the entity and its environment (CK2)
 Lecture Discussion – Kahoot Drill & Practice Quiz Reading: Chapter 4
12

Risk assessment

  1. Explain the importance of audit evidence, including sufficient appropriate audit evidence (CK4)
 Lecture Didactic questioning Drill and practice Homework Reading: Chapter 5 Technical Paper
13

Risk assessment (continued)

  1. Identify the factors that influence the relevance and reliability of audit evidence (CK.4)
 Lecture Didactic questioning Drill and practice Kahoot Reading: Chapter 5
14

Risk assessment (continued)

  1. Define audit risk, including inherent risk, control risk and detection risk (CK2)
  2. Explain a risk-based approach to the audit (CK2)
 Lecture Concept mapping Case Study no. 2 Reading: Chapter 5
15

Risk assessment (continued)

  1. Define the concept of materiality.(CK2)
  2. Explain how auditors obtain an initial understanding of the entity and its environment (CK2)
 Lecture Concept mapping Reading: Chapter 5
16

Risk assessment (continued)

  1. Define the concept of materiality.(CK2)
  2. Explain how auditors obtain an initial understanding of the entity and its environment (CK2)
 Lecture Concept mapping Reading: Chapter 5
17

Risk assessment (continued)

  1. Define the concept of materiality.(CK2)
  2. Explain how auditors obtain an initial understanding of the entity and its environment (CK2)
 Lecture Concept mapping Quiz Reading: Chapter 5
18

Audit planning

  1. Identify and explain the need for planning an audit (CK2)
  2. Identify and describe the contents of the overall audit strategy and the audit plan (CK2)
 Lecture Discussion – Kahoot Didactic questioning Homework Reading: Chapter 6
19

Audit planning (continued)

  1. Describe planning issues such as staffing (CK2)
  2. Explain the use of CAATs in audit including the use of audit software and test data (CCIP1)
 Lecture Discussion – Kahoot Didactic questioning Drill and practice Reading: Chapter 6 Technical Paper
20

Audit planning (continued)

  1. Explain the purpose and contents of the current file and the permanent file (CK4)
 Lecture Concept mapping Compare and contrast Reading: Chapter 6
21

Audit planning (continued)

  1. Explain the quality control procedures that should exist over the review of audit working papers (CK4)
 Lecture Discussion – Kahoot Didactic questioning Drill and practice Homework Reading: Chapter 6
22

Audit planning (continued)

  1. Define audit sampling and identify the sampling methods (CK4)
  2. State the main factors affecting sample sizes (CK4)
 Lecture Discussion – Kahoot Didactic questioning Drill and practice Reading: Chapter 6 Technical Paper
23

Audit planning (continued)

  1. Define audit sampling and identify the sampling methods (CK4)
  2. State the main factors affecting sample sizes (CK4)
 Lecture Didactic questioning Drill and practice Quiz Reading: Chapter 6
24

Internal control evaluation

  1. Describe the five components of an internal control system. (CK3)
  2. Describe the objectives of an internal control (CK3)
 Lecture Discussion – Kahoot Case Study no. 3 Reading: Chapter 7 Technical Paper
25

Internal control evaluation (continued)

  1. Describe the techniques used by auditors to understand, record accounting systems including narrative notes and flowcharts. (CK4)
  2. Describe the techniques used by auditors to evaluate accounting systems including internal control questionnaires (ICQs), internal control evaluation questionnaires (ICEQs) and checklists. (CK4)
 Lecture Didactic questioning Discussion – Kahoot Reading: Chapter 7
26

Internal control evaluation (continued)

  1. Describe the inherent limitations of an internal control system. (CK3)
  2. Evaluate the internal control system. (CCI1) & (CIP1)

 

 Lecture Didactic questioning Discussion – Kahoot Reading: Chapter 7
27

Internal control evaluation (continued)

  1. Describe the inherent limitations of an internal control system. (CK3)
  2. Evaluate the internal control system. (CCI1) & (CIP1)
 Lecture Didactic questioning Discussion Quiz Reading: Chapter 7
28

Tests of control: income and expenditures cycles

  1. Describe and illustrate control procedures to meet specified objectives and explain the testing of controls of purchases and trade payables (CK4)
 Lecture Didactic questioning Demonstration Homework Reading: Chapter 8 & 9
29

Tests of control: income and expenditures cycles (continued)

  1. Describe and illustrate control procedures to meet specified objectives and explain the testing of controls of sales and trade receivables.  (CK4)
 Lecture Didactic questioning Demonstration Reading: Chapter 8 & 9
30

Tests of control: income and expenditures cycles (continued)

  1. Describe and illustrate control procedures to meet specified objectives and explain the testing of controls of wages and salaries. (CK4)
 Lecture Drill & Practice Quiz Reading: Chapter 8 & 9
31

Analytical procedures and estimates

  1. Describe procedures used by auditors to obtain audit evidence, including analytical procedures (CK4)
 Lecture Compare and contrast exercise Homework Reading: Chapter 10 Technical Paper
32

Analytical procedures and estimates (continued)

  1. Describe audit testings over accounting estimates (CK4)
 Lecture Quiz Reading: Chapter 10
33

Non-current assets

  1. Explain the importance of the use of assertions (CK2)
  2. Explain the assertions in relation to classes of transactions, account balances, and presentation and disclosure (CK2)
 Lecture Discussion – Kahoot Homework Reading: Chapter 12
34

Non-current assets (continued)

  1. Describe procedures used by auditors to obtain audit evidence, including inspection, observation, external confirmation, recalculations, reperformance, analytical procedures and inquiry (CK4)
 Lecture Discussion – Kahoot Case Study no. 4 Reading: Chapter 12
35

Non-current assets (continued)

  1. Explain the rationale for designing audit programmes by reference to audit procedures (CCI2)
 Lecture Discussion – Kahoot Reading: Chapter 12
36

Non-current assets (continued)

  1. Explain the rationale for designing audit programmes by reference to audit procedures (CCI2)
 Drill and Practice Quiz Reading: Chapter 12
37

Inventories

  1. Explain why the audit of inventory is often an area of high inherent risk (CK2)
  2. Describe the audit procedures that should be undertaken before, during, and after attending an inventory count (CK4)
 Lecture Video Concept mapping Homework Reading: Chapter 11
38

Inventories (continued)

  1. Describe the extent to which an auditor may rely on a system of perpetual inventory (CK4)
 Lecture Discussion – Kahoot Reading: Chapter 11
39

Inventories (continued)

  1. Explain the substantive procedures to meet the specific objectives for the audit of inventory (CK4)
 Lecture Discussion – Kahoot Reading: Chapter 11
40

Inventories (continued)

  1. Explain the substantive procedures to meet the specific objectives for the audit of inventory (CK4)
 Lecture Drill & Practice Quiz Reading: Chapter 11
41

Accounts receivable and cash

  1. Explain the substantive procedures used in auditing each of the following: 
    1. Trade receivable, prepayments and other receivables
    2. Bank and Cash (CK4)
 Lecture Homework Reading: Chapter 13
42

Accounts receivable and cash (continued)

  1. Explain the substantive procedures used in auditing each of the following: 
    1. Trade receivable, prepayments and other receivables
    2. Bank and Cash (CK4)
     Lecture Discussion – Kahoot   Reading: Chapter 13
43

Accounts receivable and cash (continued)

  1. Explain the substantive procedures used in auditing each of the following: 
    1. Trade receivable, prepayments and other receivables
    2. Bank and Cash (CK4)
 Lecture Drill & Practice Quiz Reading: Chapter 13
44

Liabilities

  1. Explain the substantive procedures used in auditing each of the following: 
    1. Trade payables, accruals and other payables (CK4)
 Lecture Discussion – Kahoot Homework Reading: Chapter 14
45

Liabilities (continued)

  1. Explain the substantive procedures used in auditing each of the following: 
    1. Non-current liabilities  (CK4)
 Lecture Discussion – Kahoot Reading: Chapter 14
46

Liabilities (continued)

  1. Explain the substantive procedures used in auditing each of the following: 
    1. Provision (CK4)
 Lecture Drill and practice Quiz Reading: Chapter 14
47

Forming an audit judgement

  1. Define and discuss the significance of going concern and discuss indicators of going concern problems (CK2)
 Lecture Didactic questioning Homework Reading: Chapter 15
48

Forming an audit judgement (continued)

  1. Explain the procedures to be applied in performing going concern reviews (CK4)
  2. Explain the purpose of written representation and describe the circumstances where they are necessary (CK4)
 Lecture Drill & Practice Quiz   Reading: Chapter 15
49

The external audit opinion

  1.  Describe the form and content of unmodified audit reports. (CK5)
 Lecture Discussion – Kahoot Homework Reading: Chapter 16 Technical Paper
50

The external audit opinion (continued)

  1. State the circumstances where an auditor should issue a modified audit report (CK5).
 Lecture Drill & Practice Quiz Reading: Chapter 16
  Review 1 (All CK, CC, CCIT, CIP) Drill and Practice Discussion
  Review 2 (All CK, CC, CCIT, CIP) Drill and Practice Discussion
                                    Total Hours : 75 hours

TEACHING METHODS

This course is primarily lecture and assignment based; assigned homework and in-class tests will support learning to material covered in class. The class will be devoted to lecture, exercises and in-class tests.

ASSESSMENT AND GRADING

Grades will be determined based on a grading score, calculated using the following assessments and score allocations:

Assessment Weight of each assessment Learning Outcome Assessed
CLO PLO
Participation and Attendance 5% CK1, CK2, CK3, CK4 PK1
In-Class Tests 15% CK1, CK2, CK3 PK1, PK2
Homework and Controlled Case Studies 10% CK1, CK2, CK3, CK4, CK5 PK1, PK2
Group Assignment 20% CK1, CK2, CK3, CK4 PK1, PK2
Midterm exam 20% CK1, CK2, CK3, CK4 PK1, PK2
Final exam 30% CK1, CK2, CK3, CK4, CK5 PK1, PK2
Total grading score 100%  

During the course, the following Course Outputs are required:

1 – Learning Paper on Controlled Case Studies:

Case Study no. 1 on ACCA Fundamental Principles on Ethics

Case Study no. 2 on Audit Planning and Risk Assessments

Case Study no. 3 on Understanding and Testing Internal Control Systems

Final Case Study on Audit Procedures

2 – Group Assignment on Audit Simulation

Work Group: Group
Output format: Presentation Slide and Working Papers
Language: English
Assignment: Students will be assigned to participate in the audit simulation. They will  be in charge of an audit engagement for a particular client and will be given a list of tasks to complete in each phase. They will start the engagement by understanding the client and its environment until the completion stage in which the auditor will issue an audit report. At the end of the term, students are required to do a presentation about their work from each phase, complete the peer assessment, and write a self-reflection about this simulation.

TEXTBOOKS AND REFERENCES

Textbooks

  1. BPP Learning Media, Interactive Tex on FAU Foundation in Audit*
  2. BPP Learning Media, Practice & Revision Kit Paper FAU Foundation in Audit*

References

  1. Kaplan Publishing, FAU Foundation in Audit*
  2. Kaplan Publishing, Practice & Revision Kit Paper FAU Foundation in Audit*
  3. International Standards on Auditing

*latest applicable version

Education Resources