School of Administrative Studies Faculty of Liberal Arts and Professional Studies

YORK UNIVERSITYSummer 2015 Course Outline

AP/ADMS 4551 Sections A and BAuditing and Other Assurance Services

REQUIRED COURSE TEXT / READINGS:1. 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.

2. CPA Canada Handbook, Chartered Professional Accountants Canada Accounting and Assurance Handbooks [Part I and Part II] - Available on-line through York Library e-resources. Students must have a Passport York account to access the Handbook remotely.

3. CPA Ontario Member's Handbook, Chartered Professional Accountants of Ontario, most recent edition. This material is also available on the Internet at http://www.cpaontario.ca/

Any 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.

WEIGHTING OF COURSE:

Course Work Due Date WeightClass Attendance and Participation (See below for further information)

All classes 5%

Individual Hand in Assignments Session 3, Session 5, and Session 11 15%

ACL Assignment Session 9, July 16 5%Midterm Exam(covers Sessions 1 - 6)

Session 7, July 2 Location: TBA 25%

Group Risk Analysis Assignment Session 12 Hand in Report –August 13

10%

Final Exam TBA - held during regular exam schedule August 21 - August 28)

40%

Total 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

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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, AND2. 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.

Class Attendance and Participation This course is designed to encourage active participation. In each session we will be taking up questions from the text as well as an in class exercise in some sessions (to be posted to the course website). Participation marks of 3% will be assigned for participation in the take up of the questions from the text and the in class exercises. Attendance will be taken each week and is worth 2% in total.

Details about Assignments will be posted to Course Website

COURSE DIRECTOR / CONTACT:

Section A (Thursdays: 4 pm-7 pm): Stanley Faria Email: s.faria@rogers.com

Section B (Thursdays: 7 pm -10 pm): Michael Yarmolinsky E-mail: myarmol@yorku.ca

CALENDAR DESCRIPTION:

This course examines audit concepts and techniques. Coverage will include audit theory, the timing, nature and extent of audit testing, audit procedures and the application and interpretation of statistics in an audit context. Prerequisites: 1) For students in an Honours program, 78 credits including AP/ADMS 2511 3.00, AP/ADMS 3585 3.00, AP/ADMS 3595 3.00, AP/ECON 1000 3.00, or 2) for 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. AP/ADMS 4535 3.00 is not required, but strongly recommended. Course credit exclusions: None. PRIOR TO FALL 2009: Prerequisites: 1) For students in an Honours program, 78 credits including AK/ADMS 3585 3.00, AK/ECON 1000 3.00, or 2) for other students, these above-listed courses and an average grade of C+ or better in AK/ADMS 3585 3.00. Course credit exclusion: AK/ADMS 4551 3.00.

PREREQUISITES/CO-REQUISITES:

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Prerequisites: 1) For students in an Honours program, 78 credits including AP/ADMS 2511 3.00, AP/ADMS 3585 3.00, AP/ADMS 3595 3.00, AP/ECON 1000 3.00, or 2) for 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. AP/ADMS 4535 3.00 is not required, but strongly recommended. Course credit exclusions: None. PRIOR TO FALL 2009: Prerequisites: 1) For students in an Honours program, 78 credits including AK/ADMS 3585 3.00, AK/ECON 1000 3.00, or 2) for other students, these above-listed courses and an average grade of C+ or better in AK/ADMS 3585 3.00. Course credit exclusion: AK/ADMS 4551 3.00.

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.

EXPANDED 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.

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ORGANIZATION OF THE COURSE

Changes to this course outline may occur closer to the date of commencement of classes.

Session Description Assignments and ReadingsSession 1

Thursday, May 21

The Demand for Auditing, The Public Accounting Profession

Learning Objectives:

1. Identify the components of an audit and explain why there is a demand for audits

2. Distinguish between accounting and auditing3. Explore the different types of auditors and what they

do4. Understand the responsibilities of public

accountants5. Explain generally accepted auditing standards

(GAAS)6. Examine the characteristics of quality control for

public accounting firms. Explain how quality control is managed.

ASSIGNMENT AND CLASS WORK

Discussion/practice questions: Textbook1-13, 1-18, 2-20

REQUIRED READING:Chapter 1 – The Demand For An Auditing And Assurance ProfessionChapter 2 - The Public Accounting Profession

CPA Handbook:CSQC 1CAS 200 CAS 220

Session 2

Thursday, May 28

Overview of the Audit Process and the Standard Independent Audit Report

Learning Objectives:

1. Review the objective of conducting an audit of financial statements

2. Understand the purpose of the standard audit report3. Distinguish between management’s and the

auditor’s responsibilities for the financial statements

Assignment and Class WorkDiscussion/practice questions: Textbook 5-23, 5-25, 5-29 (c),Kingston Company (web site)

Form Groups

REQUIRED READING:

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Session Description Assignments and ReadingsSession 2 cont’d 4. Understand the role of professional skepticism in

fraud risk assessment and the conduct of the audit5. Understand the importance of auditor independence

and understand how to conduct an independence threat analysis

6. Understand how transactions are related within key financial statements cycles. Apply the cycle approach to planning the financial statement audit

7. Understand the role of entity-level controls in cycles and assessing risk in the audit

8. Understand and apply management assertions to develop audit objectives for classes of transaction- balances, and presentation and disclosure.

9. Describe the audit process.

Chapter 5 - Audit Responsibilities and Objectives (Omit Section 2 – Preplan Audit (covered in Week 3)Chapter 3 – Professional Relationships, (Independence Section, p. 58-63)Chapter 20 -Auditor Reporting, p. 596-599

CPA Handbook:CAS 210CAS 240 CAS 500

Session 3

Thursday, June 4

Preplanning and Developing Client Risk Profile

Learning Objectives:

1. Understand the purpose of preplanning the audit and the various steps to be performed

2. Conduct an Independence Threat Analysis3. Explain the importance of an adequate audit

planning process.4. Develop a client risk profile to aid in planning the

financial statement audit5. Assess client’s business and industry to determine

risk of material misstatement at the financial statement and account level

6. Understand the types of evidence that the auditor

Assignment and Class WorkDiscussion/practice questions: Textbook 6-25In-class group exercise:Epoch Jeans (parts a and b)

Individual Hand In- Assignment #1 due(See Course Website)

REQUIRED READING:Chapter 5 – Section 2 - Preplan Audit (p. 108-112)Chapter 6 - Client risk profile (Omit Section 3 Nature of Audit Working Papers)Chapter 8 – Purpose and timing of analytical procedures (p. 232-239) and Appendix 8A

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Session Description Assignments and ReadingsSession 3 cont’d collects to develop the client risk profile and assess

client business risk7. Understand and develop analytical procedures at the

planning stage to determine risk of material misstatement at the financial statement and account level

CPA Handbook:CAS 230CAS 300 CAS 315CAS 520CAS 550CAS 620

Session 4

Thursday, June 11

Materiality and Risk

Learning Objectives:

1. Understand and apply the components of the audit risk model to assess achieved audit risk

2. Describe the factors the auditor considers when assessing inherent risks

3. Understand and apply quantitative and qualitative factors to determine the appropriate materiality for the overall financial statements,

4. Develop an appropriate allocation of materiality to segments and performance materiality

5. Understand the relevance of materiality in conducting the audit and the relationship between materiality and audit risk

Assignment and Class WorkDiscussion/practice questions:7-17, 7-23, Epoch Jeans (parts c and d)Materiality – Who’s Right?,Linking risk factors

REQUIRED READING:Chapter 7 - Materiality And Risk

CPA Handbook:CAS 200 CAS 315CAS 320CAS 450

Session 5

Thursday, June 18

Corporate Governance, Internal Controls, and Control Risk Assessment

Learning Objectives:

1. State the three primary objectives of effective

Assignment and Class WorkDiscussion/practice questions:9-33, 9-34, Little City Payroll (course web site), Acco, Segregation of Duties

Individual Hand In- Assignment #2 due

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Session Description Assignments and Readingsinternal control.

2. Compare management’s concerns about internal control with those of the auditor.

3. Describe the inherent limitations of internal control.4. Understand the fraud triangle and apply to analysis

of risk of fraudulent financial reporting and misappropriation of assets.

5. Describe the COSO components of internal control and provide examples of each component.

6. Use the COSO model to assess internal control risk7. Understand the two audit strategies of (i) a

substantive approach and (ii) a combined approach and using risk assessment to determine when each approach is approach is appropriate

8. Understand auditor’s responsibility for reporting significant control weaknesses to management and those in charge of governance

9. Assess controls and develop recommendations for the management letter

(See Course Website)

REQUIRED READING:Chapter 9-Internal Controls and Control Risk:

CPA HandbookCAS 240CAS 265CAS 330CAS 500 CAS 520CAS 505

Session 6

Thursday, June 25

Audit Evidence, Documentation, Evidence Mix, and Audit Strategy

Learning Objectives:

1. Describe the nature of audit evidence and the five evidence decisions made during the audit process

2. Describe the seven general methods of evidence collection and provide examples of each

3. Evaluate the reliability of evidence in specific

Assignment and Class WorkDiscussion/practice questions: 6-24, 8-17, 8-18, 10-17, 10-22, Epoch Jeans Part 2

REQUIRED READING:Chapter 8 – Audit Evidence (p. 213-232, 239-241)Chapter 6 – Nature of Audit Working Papers (p. 168- 172)Chapter 10 – Audit Strategy and Audit Program

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Session Description Assignments and ReadingsSession 6 cont’d situations

4. Evaluate the appropriateness of evidence given the risk and relevant assertion

5. Describe three specific situations when collection of audit evidence is mandated and assess when this type of evidence-gathering is required

6. Understand and evaluate quality of working paper documentation

7. Review the nature of an audit strategy and the role of audit planning in the financial statement audit process.

8. Describe the purpose of an audit program and relate the five types of audit tests to the overall risk summary and to the audit strategy.

9. Describe the methodology for designing tests for controls and substantive tests in the audit program. Link the methodology to the selection of audit tests by assertion.

CPA Handbook:CAS 315CAS 330CAS 500

Session 7

Thursday, July 2nd

Midterm Exam- Thursday July 2 (during scheduled class time)

(Covers Material from Sessions 1 - 6)Location: TBA

Session 8

Thursday, July 9th

Audit Sampling & ACL Demo

This class will be held in a computer lab, (Room TBD)Ensure that your FAS (PassPort York Accounts) are working in the AP lab prior to the demonstration.

Assignment and Class WorkDiscussion/practice questions: Textbook 11-22, 11-23,

REQUIRED READING:Chapter 11 -- Audit Sampling Concepts

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Session Description Assignments and ReadingsSession 8 cont’d Learning Objectives:

1. Explain why sampling is important in auditing2. Distinguish between statistical and non statistical

sampling and between probabilistic and non-probabilistic sample selection

3. Contrast the different types of nonstatistical methods used by auditors

4. Distinguish between a sampling error and a non-sampling error using sampling risk and non-sampling risk

5. Describe sampling process6. Apply the sampling process to tests of controls and

substantive tests

Chapter 12 -- Audit of the Sales and Collection Cycle – Tests of Controls Application of Attribute Sampling (pp. 393-401)

CPA Handbook:CAS 500 CAS 530

Session 9

Thursday, July 16

Application of the Audit Process: The Sales and Collection Cycle

Learning Objectives:

1. Describe major risks of error or fraud in the sales and collection cycle

2. Identify and describe typical records, transactions and business functions in the sales cycle.

3. Understand and analyze sales and acquisition controls and provide recommendations (for management letter)

4. State the relationship between overall audit planning risks and risks for sales and collection assertions

5. Develop analytical procedures for planning for the

Assignment and Class WorkDiscussion/practice questions:12-23, 13-20, 13-29, Petal Ltd. Fisher Boats, Adecco, Verona Shoes

ACL Assignment due

REQUIRED READING:Chapter 12 -- - Audit of the Sales and Collection Cycle – Tests of Controls (p. 360-392)Chapter 13 – Completing the Tests in the Sales and Collection Cycle

CPA Handbook:

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Session Description Assignments and Readings

Session 9 cont’d

sales and collection cycle.6. Design tests of controls sales and collection cycle by

assertion.7. Design substantive tests (analytical procedures and

tests of detail) for sales and collection, by assertion, using a risk-based approach.

8. Develop the process for confirming accounts receivable confirmations and for following up non-replies

CAS 240CAS 505

Break (no class) Thursday, July 23Session 10

Thursday, July 30

Application of the Audit Process: The Acquisition and Payment Cycle; the Inventory and Distribution Cycle

Learning Objectives:

1. Describe major risks of error or fraud in the acquisition and payment cycle.

2. Describe the major business functions, documents, records and internal controls in the acquisition and payment cycle.

3. Understand and analyze acquisition and payment controls and provide recommendations (for management letter)

4. Develop analytical procedures for planning for the acquisition and payment cycle.

5. Develop tests of controls for the acquisition and payment cycle, by assertion, using a risk-based approach.

6. Develop an audit program, by assertion, for a system conversion in accounts payable.

Assignment and Class WorkDiscussion/practice question:16-21, 16-24, 16-25, 17-20 Inventory Cases Posted to Course Website

REQUIRED READING:Chapter 16 - Audit of the Acquisition and Payment CycleChapter 17 – Audit of the Inventory and Distribution Cycle

CPA Handbook:CAS 550CAS 501

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Session Description Assignments and Readings7. Design substantive tests (analytical procedures and

tests of detail) for accounts payable, by assertion, using a risk-based approach.

8. Application of the audit process (as listed above) to the inventory and distribution cycle

Session 11

Thursday, August 6

Professional Relationships and Legal Liability

Learning Objectives:

1. Describe ethics and their relevance2. Apply rules of professional conduct to case facts

and identify violations.3. Explain the threats to independence and how the

threats can be mitigated4. Distinguish between independence in fact and

independence in appearance5. Compare the auditor’s responsibilities with respect

to errors, fraud, and other irregularities6. Distinguish between a business failure and an audit

failure7. Describe and analyze the accountant’s liability to

third parties under common law and the related defenses

Assignment and Class WorkDiscussion/practice questions: Textbook 3-20, 4-13, 4-16, Lance Popper & Rules of Professional Conduct Cases

REQUIRED READINGChapter 3 -- Professional Relationships: The role of ethics and independence (Omit Independence Section)Chapter 4 –Legal Liability – (Table 4-2, p. 77- 86, Section 4 – Prevention – Omit Section 5)

Individual Hand In- Assignment #3 due(See Course Website)

CPA HandbookSection 5020 CAS 220CPA Ontario Handbook - Rules of Professional Conduct (available from http://www.cpaontario.ca/

Session 12

Thursday, August 13th

Contingent Liabilities, Audit Completion and Modifications to the Auditor’s Standard Report

Assignment and Class WorkDiscussion/practice questions: Textbook 19-17, 19-18, 20-20, Gabby CaseGroup Risk Assessment Assignment Due Today

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Session Description Assignments and Readings

Session 12 cont’d

Learning Objectives:

1. Describe final audit procedures for presentation and disclosure.

2. Describe how the auditor searches for contingent liabilities, commitments, and contingent assets

3. State the purpose of obtaining external confirmation from the client’s law firms and assess law firm responses

4. Distinguish between subsequent events requiring adjustment and those requiring disclosure

5. Provide examples of work completed as part of the evidence-gathering process

6. Provide the purpose of and examples of auditor communications with the audit committee and management

7. Review the requirements for a standard unqualified audit report and describe the variations that can occur in unqualified reports

8. Apply professional judgment to determine when it is necessary to issue a qualified opinion, an adverse opinion, or a disclaimer of opinion

(See Course Website)

REQUIRED READING:Chapter 19 - Completing the AuditChapter 22 - Audit Reporting

CPA HandbookCAS 240CAS 250CAS 260CAS 450CAS 501CAS 520CAS 550CAS 560CAS 570 CAS 580CAS 620CAS 700CAS 705CAS 706

Session 13 Final ExaminationTBA

During regularly scheduled final examination period,August 21- to August 28, 2015

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RELEVANT UNIVERSITY REGULATIONSDeferred 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 complete a Deferred Standing Agreement (DSA) form and submit their request no later than five (5) business days from the date of the exam. The request must be properly submitted with supporting documentation directly 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 available to the students by the main office in the School's web site (under the heading of 'Links'), no individualized communication will be sent by the School to the students (no letter or e-mails). The status of the DSA submitted shall be checked at: http://apps.eso.yorku.ca/apps/adms/deferredexams.nsf

Students with 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.pdfAttending Physician's Statement form: http://www.yorku.ca/laps/council/students/documents/APS.pdfThe deferred examinations for the Summer 2015 term shall be held during the last two weeks of September 2015.

Academic Honesty: The Faculty of Liberal Arts and Professional Studies considers breaches of the Senate Policy on Academic Honesty to be serious matters. To quote the Senate Policy on Academic Honesty. The Policy on Academic Honesty is an affirmation and clarification for members of the University of the general obligation to maintain the highest standards of academic honesty. As a clear sense of academic honesty and responsibility is fundamental to good scholarship, the policy recognizes the general responsibility of all faculty members to foster acceptable standards of academic conduct and of the student to be mindful of and abide by such standards. Suspected breaches of academic honesty will be investigated and charges shall be laid if reasonable and probable grounds exist.Students should review the York Academic Honesty policy for themselves at:http://www.yorku.ca/secretariat/policies/document.php?document=69Students might also wish to review the interactive on-line Tutorial for students on academic integrity, at: http://www.yorku.ca/tutorial/academic_integrity/

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Grading Scheme and Feedback Policy: The grading scheme (i.e. kinds and weights of assignments, essays, exams, etc.) shall be announced, and be available in writing, within the first two weeks of class, and, under normal circumstances, graded feedback worth at least 15% of the final grade for Fall, Winter or Summer Term, and 30% for ‘full year’ courses offered in the Fall/Winter Term be received by students in all courses prior to the final withdrawal date from a course. Note: Under unusual and/or unforeseeable circumstances which disrupt the academic norm, instructors are expected to provide grading schemes and academic feedback in the spirit of these regulations, as soon as possible. For more information on the Grading Scheme and Feedback Policy, please visit: http://www.yorku.ca/secretariat/policies/document.php?document=86

In-Class Tests and Exams - the 20% Rule: For all Undergraduate courses, except those which regularly meet on Friday evening or on a weekend, tests or exams worth more than 20% will not be held in the two weeks prior to the beginning of the official examination period. For further information on the 20% Rule, please visit: http://www.yorku.ca/secretariat/policies/document.php?document=141

For further information on examination scheduling and other important dates, please refer to: http://www.registrar.yorku.ca/enrol/dates/index.htm Reappraisals: Students may, with sufficient academic grounds, request that a final grade in a course be reappraised (which may mean the review of specific pieces of tangible work). Non-academic grounds are not relevant for grade reappraisals; in such cases, students are advised to petition to their home Faculty. Students are normally expected to first contact the course director to discuss the grade received and to request that their tangible work be reviewed. Tangible work may include written, graphic, digitized, modeled, video recording or audio recording formats, but not oral work. Students need to be aware that a request for a grade reappraisal may result in the original grade being raised, lowered or confirmed. For reappraisal procedures and information, please visit the Office of the Registrar site at: http://www.registrar.yorku.ca/grades/reappraisal/index.htm

Accommodation Procedures: LA&PS students who have experienced a misfortune or who are too ill to attend the final examination in an ADMS course should not attempt to do so; they must pursue deferred standing. Other students should contact their home Faculty for information. For further information, please visit: http://www.registrar.yorku.ca/exams/deferred/index.htm

Religious Accommodation: York University is committed to respecting the religious beliefs and practices of all members of the community, and making accommodations for observances of special significance to adherents. For more information on religious accommodation, please visit:

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https://w2prod.sis.yorku.ca/Apps/WebObjects/cdm.woa/wa/regobs

Academic Accommodation for Students with DisabilitiesThe nature and extent of accommodations shall be consistent with and supportive of the integrity of the curriculum and of the academic standards of programs or courses. Provided that students have given sufficient notice about their accommodation needs, instructors shall take reasonable steps to accommodate these needs in a manner consistent with the guidelines established hereunder. For more information please visit the Disabilities Services website at http://www.yorku.ca/cds/

York’s disabilities offices and the Registrar’s Office work in partnership to support alternate exam and test accommodation services for students with disabilities at the Keele campus. For more information on alternate exams and tests please visit http://www.yorku.ca/altexams/Please alert the Course Director as soon as possible should you require special accommodations.

Effective date: April 3, 2015

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