Dec 07, 2022  
2020-2021 Course Catalog 
    
2020-2021 Course Catalog [ARCHIVED CATALOG]

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ACC 281 - Auditing

Credits: 3
Lecture Hours: 3
Lab Hours: 0
Practicum Hours: 0
Work Experience: 0
Course Type: Voc/Tech
An introduction to auditing concepts, internal control procedures, preparation of audit programs and working papers, application of methods and procedures for conducting an audit. The legal and ethical responsibilities of auditors. Preparation of audit reports.
Prerequisite: Successful completion of ACC 231  with a grade of “C” or above
Competencies
  1. Analyze the audit’s nature and environment
    1. Outline the auditing process
    2. Explain the objectives of an audit
    3. Describes the characteristics of an audit
    4. Relate the definition of auditing to the three broad categories of independent auditing, internal auditing and governmental auditing
    5. Describe how the economic environment contributes to the need for independent audits
    6. Identify the professional organizations that influence auditing
    7. Describe the attest function and how it relates to the overall audit function
    8. Describe the parts of the standard audit report that is the final product of the independent audit
  2. Conform to professional standards
    1. Identify the ten generally accepted auditing standards
    2. Describe the authoritative status of the Statements of Auditing Standards
    3. Discuss the auditor’s responsibility for detecting errors, irregularities, and illegal acts
    4. Explain the key elements of the auditor’s standard report
    5. Discuss the other types of reports that are issued by auditors
    6. Describe the attestation standards
    7. Describe the quality control standards and their purposes
  3. Interpret professional ethics
    1. Describe the reasons that professions establish professional ethics
    2. Identify the two parts of the AICPA Code of Professional Conduct
    3. Discuss the Principles section of the AICPA Code of Professional Conduce
    4. Describe each of the Rules contained in the AICPA code of Professional Conduct
    5. Explain the concept of independence
    6. Identify circumstances in which independence is impaired
    7. Discuss the Institute of Internal Auditors Code of Ethics
  4. Analyze the legal liability of auditors
    1. Define the major legal concepts that relate to auditors’ liability
    2. Distinguish between auditor’s liability under common law and their liability under statutory law
    3. Explain the factors that must be proven by clients and third parties to be successful in actions against the auditors under common law and the auditors’ defenses
    4. Contrast liability under the securities Act of 1933 and the Securities Act of 1934
    5. Describe accountants’ legal liability for accounting and review services
  5. Explain evidence, audit risk and materiality
    1. Know the process by which the financial statement audit is conducted
    2. Know the five basic financial statement assertions, verification of which is the objective of the independent audit
    3. Discuss the nature of evidence
    4. Recognize the types of evidence that exist
    5. Assess audit risk
    6. Assess materiality on an audit
  6. Analyze audit objectives and procedures
    1. Develop audit objectives as a natural extension of the client’s financial statement assertions
    2. Describe the details of the evidence gathering process
    3. Write a simple audit program that takes into the account the proper nature, timing, and extent of detection risk procedures, given a certain set of audit objectives
    4. Document the evidence gathering process in working papers
  7. Conduct a computerized audit
    1. Plan an audit with a computer
    2. Analyze control structure with a computer
    3. Conduct substantive testing with a computer
    4. Review phases of the audit with a computer
    5. Report phases of the audit with a computer
  8. Design audit programs
    1. Identify the factors considered by auditors in accepting new clients
    2. Explain a CPA’s responsibilities when planning an audit
    3. Describe the manner in which an audit is affected by the auditor’s assessment of audit risk and materiality
    4. Distinguish between the systems portion of the audit program and the substantive test part
    5. Describe the general objectives of audit programs for asset accounts
    6. Explain how the general objectives of audit programs are used to develop the specific objectives that are then used to determine the audit procedures to be applied to an account
    7. Discuss the major steps in the audit process
  9. Evaluate internal control
    1. Define what is meant by an internal control structure
    2. Describe management’s responsibility for internal control
    3. Distinguish among the major elements of client’s internal control structure, the control environment, the accounting system, and control procedures
    4. Explain the characteristics of effective internal control
    5. Describe the auditor’s consideration of the internal control structure
    6. Discuss the techniques used by the auditors to obtain an understanding of internal control and describe the results in their working papers
    7. Describe the auditors’ responsibility for communication of internal control structure related matters
    8. Describe the effects of service organizations on internal controls
  10. Evaluate sampling concepts and techniques
    1. Define audit sampling
    2. Explain the difference between sampling and nonsampling risk
    3. Distinguish between statistical and nonstatistical sampling
    4. Describe how basic sampling concepts apply to audit sampling
    5. Distinguish among attribute, discovery, classical variable, and probability proportional to size sampling plans
    6. Discuss the effects of changes in various population characteristics and changes in sampling risk on required sample size
    7. Describe how auditors plan, perform, and evaluate samples for test of controls
    8. Explain how the auditors use attributes sampling to perform tests of controls
    9. Describe in general how auditors plan, perform, and evaluate samples for substantive auditing
  11. Analyze audit procedures
    1. Describe the activities auditors undertake before beginning an audit
    2. Identify the procedures auditors use to obtain knowledge of a client’s business and industry
    3. List sources of information auditors can use to obtain knowledge of a client’s business and industry
    4. Define the five principal management assertions in financial statements
    5. Explain the role of the five principal management assertions in establishing audit objectives
    6. Evaluation seven general types of audit procedures for gathering evidence
    7. Review an audit working paper for proper form and content
  12. Evaluate audit sampling
    1. Explain the terms unique to audit sampling
    2. Contrast statistical and nonstatistical sampling
    3. Identify audit sampling
    4. Contrast audit sampling with audit work that is not sampling
    5. Develop a simple audit program for a test of controls audit of client’s internal control procedures
    6. Specify objectives, deviation conditions, population and sampling units for an audit
    7. Determine the sample size for an internal control audit
    8. Select sampling units for an internal control audit
    9. Evaluate evidence from a test of internal controls audit
    10. Develop a simple audit program for an account balance audit considering the influence of risk and tolerable error
    11. Specify objectives for an account balance audit
    12. Define a population for data for an account balance audit
    13. Determine sample sizes and select sampling units for an account balance audit
    14. Evaluate monetary error evidence from an account balance audit sample
  13. Analyze audit sampling applications for substantive testing
    1. Identify the various statistical techniques used for substantive testing
    2. Describe how to plan, perform, and evaluate an audit sample using mean per unit estimation
    3. Distinguish between ratio and difference estimation techniques
    4. Describe how to plan, perform, and evaluate sample using probability proportional to size sampling
    5. Explain how nonstatistical sampling may be used in performing substantive tests
    6. Describe how to plan, perform and evaluate an audit sample using a structured nonstatistical sapling approach
  14. Evaluate tests of controls with attribute sampling
    1. Explain the role or professional judgement in assigning numbers to risk of assessing control risk too low, risk of assessing control risk too high and tolerable deviation rate
    2. Use statistical tables or calculations to determine test of controls sample sizes
    3. Use evaluation tables or calculations to compute statistical results (CUL, the computed upper limit) for evidence obtained with detail test of controls procedures
  15. Perform test of balances with dollar value sampling
    1. Calculate the risk of incorrect acceptance, given judgments about inherent risk, control risk, and analytical procedures risk, using SAS 39 audit risk model
    2. Explain the cost trade-off theory for determining a risk of incorrect rejection
    3. Explain the characteristics of dollar-unit sampling and its relationship to attribute sampling
    4. Calculate the dollar-unit sample size for the audit of the details of an account balance
    5. Describe a method for selecting a dollar-unit sample
    6. Define a logical unit
    7. Explain stratification effect of dollar-unit selection
    8. Calculate an upper error limit for the evaluation of dollar-value evidence
    9. Discuss the relative merits of alternatives for determining an amount by which a monetary balance should be adjusted
    10. Calculate a classical sampling sample size for the audit of the details of an account balance
  16. Prepare reports on audited financial statements
    1. Determine whether an accountant is associated with financial statements
    2. Explain the general meaning of the three levels of assurance
    3. Write a detailed description of the meaning of the scope paragraph and the opinion paragraph in a standard unqualified audit report
    4. Write a qualified, adverse, and a disclaimer report for a given description of accounting facts and audit circumstances
    5. Write an audit report with an unqualified opinion but containing additional explanation or modified wording for a given description of accounting facts and circumstances
    6. Explain the reasons why auditors have standards for reporting on the application of accounting principles
    7. List and explain the effects of materiality on audit report choices
  17. Analyze other public accounting services and reports
    1. Write appropriate reports for review and compilation of unaudited financial statements, given specific fact circumstances
    2. List some interim information review procedures and write a report on review of interim financial information
    3. Explain examples of other comprehensive bases of accounting
    4. Distinguish other comprehensive bases of accounting from GAAP
    5. Explain the content of an auditor’s report on supplementary current value financial statements
    6. Contrast a report on supplementary current value financial statements with a standard report on historical cost financial statements
    7. Describe the various reports on internal control and their connection with public reporting and reporting to the audit committee



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