Module Code and Title:   ACT307 Audit and Assurance

Programme:                          Bachelor of Commerce

Credit:                                    12

Module Tutor:                       Madhav Verma, Arindam Ghosh,Tika Ram sharma

Module Coordinator:            Madhav Verma

General objective: The module will develop knowledge and understanding of the conceptual and the underlying principles of modern auditing and assurance service along with the skills of carrying out the audit and assurance engagement in the context of the regulatory framework. The learners acquire other capabilities such as communication, application of computers and decision making skills by participating in the learning activities and assessment components.

Learning outcomes – On completion of the module, students will be able to:

1. Explain the concept of audit and assurance and the functions of audit;
2. Differentiate  between internal and external audit;
3. Discuss audit procedures of obtaining an understanding of the entity and its environment including control systems to assess risk of material misstatements;
4. Discuss materiality concept and apply this in audit planning, performance and reporting;
5. Assess effectiveness of internal control system of an entity through test of control, and communicate such control deficiencies;
6. Develop a comprehensive audit plan for an audit of a financial statements covering RMM of various assertions, and perform appropriate audit procedures such as test of control, substantive analytical procedures and detail checks;
7.  Identify and assess the work and evidence obtained by auditor’s experts and company’s internal auditors to meet the objectives of audit engagements;
8. Explain how consideration of subsequent events and the going concern principle can inform the conclusions from audit work and are reflected in different types of audit report, written representations and the final review and report.
9. Describe the nature of audit trails in computerized accounting system and how that will differ from the manual accounting system;
10. Discuss audit completion checklist and finalise audit; and
11. Recommend appropriate audit report based on the auditor’s conclusion about the true and fair view of the financial statements.

Teaching and Learning Approach:

 Assessment Approach:

1. Written assignments: Portion of Final Marks: 15 %

Each student will complete 2 written assignments each being assessed for 10%, on topics related with audit management on different hypothetical scenarios. Each assignment shall be within the word limits of 1100-1500 words. The exact topics will be informed during the session. (The 20% marks will be converted to 15% later).

4%       Content, identifying the problems areas

4%       Analysis of problems and suggesting solutions using appropriate auditing principles and standards.

2%       Presentation, writing style- use of proper academic style

1. Case Study and presentation: Portion of Final Marks: 30 %

Students will be assigned two case studies, each of 10% and 20 % marks, in a group of 4. They will analyse the case, identify issues, propose relevant point for discussion with the relevant auditing principles and standards, and provide plausible solutions or recommendations in a paper of 1000 words each. The group will make a presentation (10%) for the second case study of 15 minutes, with 5 min Q&A.

2%       Group mark: coordination of presentation and distribution of work among the group members.

6%       Analysis of case material (identify issues, discuss with relevant principles and standards and propose plausible solutions and recommendations)

1%       Logical presentation, writing style

4%       Presentation Group mark: coordination and distribution of work among the group member.

6%       Presentation Individual mark will be assessed on following criteria:

2%       Subject knowledge and ability to answer Q& A

2%       Smartness, body language, pronunciation, audibility

2%       Organization of presentation

1. Class participation and preparedness: Portion of Final Mark: 5%

Each student will be assessed based on their active participation and preparedness in the class by contributing to the class discussions by answering questions, stating their opinions, and solving in class exercises during the sessions. This will be assessed based on following criteria

5%       Contribution to the class discussion and listening to and responding logically to the viewpoints of others

1. Midterm Examination: Portion of Final Mark: 20%

Students will take a written exam of 2 hours duration covering topics up to the mid-point of the semester.

1. Semester-End Examination: Portion of Final Marks: 30%

The module will have a semester-end exam for 2 hours covering the entire syllabus. The question will be divided into two parts – Part A (carrying 40% of the exam weightage) will be mostly of short answer including objective questions. Part-B (carrying almost 60% of the exam weightage) will be mostly of essay type or an extended response to the given question. This part of the question requires students to apply, analyse, and evaluate or construct knowledge and skills. Cases will also be used to test the levels of knowledge.

Pre-requisites: ACT101 Financial Accounting

Subject matter:

1. Introduction to auditing and assurance                                       

1.1.          Concept of audit and other assurance engagements

1.2.          Regulatory framework of audit

1.3.          Types of audit and scope of audit

1.4.          Audit objectives

1.5.          Corporate governance and audit mechanism

1.6.          Internal audit and external audit

1.7.          Auditing standards

1.8.          Auditors liability

1.9.          Independence and ethical requirements for auditors

1.10.        Statutory audit requirements of the Companies Act

2. Financial statements audit-planning and risk assessment                                

2.1.        Obtaining and accepting audit engagements

2.2.        Objective and general principles of financial statement audit

2.3.        Concept and application of professional scepticism

2.4.        Understanding the entity and its environment to assess audit risks and risk of material misstatements

2.5.        Risks due to fraud and auditors responsibilities towards fraud

2.6.        Consideration of laws and regulations

2.7.        Audit planning and documentation

2.8.        Planning for materiality

3. Financial statements audit-internal controls                                                       

3.1.        Concept of internal control systems

3.2.        COSO model of internal control systems

3.3.        Use and evaluation of internal control systems by auditors

3.4.        Tests of control

3.5.        Communication on internal control to body charged with governance

4. Financial statements audit-audit evidence:                                  

4.1.        Financial statement assertions

4.2.        Audit procedures–considerations in determining audit procedures

4.3.        Substantive procedures

4.4.        Substantive Vs control test

4.5.        Concept of audit evidence

4.6.        Primary and corroborative audit evidences

4.7.        Reliability and relevancy of audit evidences

4.8.        Audit sampling and other means of testing

5. Audit of specific items and transaction cycles

5.1.        Audit of cash and bank balance

5.2.        Payrolls

5.3.        Inventory

5.4.        Audit of purchase cycle

5.5.        Audit of revenue cycle

6. Financial statements audit-completing audit and audit report              

6.1.        Review of subsequent events

6.2.        Review of going concern

6.3.        Use of the work of internal auditors and auditor’s expert

6.4.        Obtaining written representations

6.5.        Audit finalisation and the final review

6.6.        Audit reports-standard and modified reports

6.7.        Emphasis of matter paragraph

7. Computer-assisted audit techniques

7.1.        Nature of computerised accounting system

7.2.        Internal control aspects of computerised accounting system

7.3.        Audit trail in computerised system of accounting

7.4.        Familiarisation with computer aided technique of auditing (any relevant software)

8. Introduction to performance audit

8.1.        Concept of performance audit

8.2.        The three Es perspective

8.3.        Audit approach to performance audit

8.4.        Difference between performance audit and financial statements audit

8.5.        Mandates of the Royal Audit Authority of Bhutan

8.6.        Reporting on performance 

Reading List:

1. Essential Reading

1.1.        Arens, A., Randal E. & Beasley, M.Auditing and Assurance Services, (15th Edition). India. Pearson Education,

1.2.        Beasley, M., Buckless, F., Glover, S. & Prawitt, D. Auditing Cases- An Interactive Learning Approach (6th ed.), Pearson Education

1.3.        Hayes, R. &Gortemaker, H. (2016). Principles of Auditing: An Introduction to International Standards on Auditing, Pearson education

1.4.        Weirich, T. R., Pearson, T.C. & Churyk, N. T. (2017). Accounting and Auditing Research: Tools and Strategies. (8^th ed.). India, Wiley.

1.5.        Leung, P., Coram, P. , Cooper, B.J. &Richardson, P. (2017). Modern Auditing and Assurance Services, (6th ed.). India, Wiley.

2. Additional Reading

2.1.        Royal Audit Authority of Bhutan, Audit Act 2006.

2.2.        Bogdan, L., Stoian, F., Geanina Gabrela, T. & Grazia-Oana P. (2016).  Assurance of a Credible Financial Information: A Product of Convergence Between Prudence and Continuity by Statutory Audit and a Good Corporation Governance, Eurasian Studies in Business and Economics , Vol.3 (2), pp 113-126

2.3.        Caplan, D. &Saurav, K. Dutta (2016). Managing the risk of misleading financial metrics in annual reports: A first step towards providing assurance over management's discussion, Journal of Accounting Literature, Vol. 36 (2016), pp. 1–27

2.4.        Collings, S. (2011). Interpretation and Application of International Standards on Auditing, Wiley & Sons

2.5.        Domenico, C.& Donnelly, R. (2016). Non-audit services provided to audit clients, independence of mind and independence in appearance: latest evidence from large UK listed companies, accounting and Business research, Vol. 46 (4), pp. 422-449

2.6.        Fearnley, S., Beattie, V., Hines, T. (2011). Reaching Key Financial Reporting Decisions: How Directors and Auditors Interact, Wiley & Sons

2.7.        Fountain, L. (2016). Leading the Internal Audit Function, EDPACS: The EDP Audit, Control, and Security Newsletter, Vol. 53 (2), pp.14-17

2.8.        Gupta, A., Rai, S. (2016). Challenges before finance professional in ethical decision making, Global Journal for Research Analysis, vol.5(2).

2.9.        IAASB (2013). Handbook of International Quality Control, Auditing, Review, Other Assurance, and Related Services Pronouncements , IFAC

2.10.      Lesage, C., Nicole V. S., Ratzinger-Sakel&Kettunen, J. (2016). Consequences of the Abandonment of Mandatory Joint 7. Audit: An Empirical Study of Audit Costs and Audit Quality Effects, Europen accounting Review.

2.11.      Ling, L. L, Linda, A. M., Robert, J. P. &Timothy, A. S. (2016). Do Accounting Firm Consulting Revenues Affect Audit Quality? Evidence from the Post-SOX Era

2.12.      Martin, T. B., & Joel, T. B. (-). Executive Roadmap to Fraud Prevention and Internal Control: Creating a Culture of Compliance (2nd Edition), Wiley & Sons

2.13.      Messier Jr, W., Glover, Steven & Prawitt, D. (2016). Auditing and Assurance Services: A Systematic Approach, Metadata.

2.14.      Royal Audit Authority of Bhutan (2009). RAA Auditing Standards, Kuensel Corporation

2.15.      See Liang Foo & Zheng Wang (2016). Innovation in Assurance: Doing More, and More Effectively, with Less, Singapore Management University

http://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=1744253

2.16      Thomas R. Weirich, Thomas C. Pearson, Natalie Tatiana Churyk (2015). Accounting and Auditing Research: Tools and Strategies (8^th Ed.). New Delhi, India. Wiley. 

Date: July, 2017