Dominican University

Graduate School of Business

ACCT 430: Auditing

Fall 2009

 

 

 

Instructor:       James Winikates

Phone:             708-524-6537

Fax:                 708-524-6939

E-mail: jwinikat@dom.edu

Office:             Fine Arts 200

Office hours:   Tu/Thur by appointment

 

Required Text

 

Principles of Auditing & Other Assurance Services, Whittington & Pany, Seventeenth Edition, McGraw-Hill Irwin, 2010 (ISBN 978-0-07-337965-4)

 

Course Description

 

ACCT 430 is an introduction to audits of financial statements by certified public accountants.  The course covers the business, ethical, and legal environment of the profession, the audit process, application of the audit process to transaction cycles, audit sampling, and reports on audited financial statements.  Techniques learned in the course can also be used by internal and government auditors.  Prerequisite: ACCT 315

 

Expected Learning Outcomes

 

Auditing is a profession that protects the public interest when CPAs express an independent opinion on the presentation of financial statements in accordance with generally accepted accounting principles.  The AICPA has identified the skills “necessary for the protection of the public interest” as the following: the ability to perform research and analyze information; the ability to communicate; and the ability to exercise judgment and understanding.  This course will therefore require you to do online research, analyze several auditing issues, and practice and develop written communication skills.

 

Upon completion of this course, students will understand:

1.                  The business, ethical, and legal environment of the CPA;

2.                  Generally accepted auditing standards and their application;

3.                  The auditor’s decision-making process;

4.                  How the audit process is applied to an entity’s principal transaction cycles;

5.                  Audit sampling concepts and their application;

6.                  Reports on audited financial statements; and

7.                  How business risks and information technology affect the audit process.

 

Students will also:

1.                  Gain an understanding of the activities of the Public Company Accounting Oversight Board (PCAOB) and how it affects independent auditors.

2.                  Be able to research accounting questions using the Internet to locate relevant Staff Accounting Bulletins of the Securities and Exchange Commission.

3.                  Become aware of ethical dilemmas faced by independent auditors, and how professional ethical standards are used to resolve them.

 

Instructional Method

 

The course is lecture and group discussion based.  Your success in the course requires careful attention to and use of the course calendar that accompanies this syllabus.  In order to cover the required material, certain classes will cover more than one chapter.  As a result, this course may require more reading (and less problem solving) than you may be used to in your other accounting courses.  Systematic preparation for each class is an absolute must for success.

 

Grading and Attendance Policies

 

Final grades will be determined as follows:

                                                                                                          Points

Homework Assignments (15 @ 20 points each)                                300

Project – Phase I                                                                                 100

Project – Phase II                                                                                100

First examination                                                                                100

Second examination                                                                            200

Final Examination                                                                               200

 

            Total Points                                                                           1000

 

The grading scale is:

 

Letter Grade Assigned

Cumulative Points

Associated Grade Percentage

A

920-1000

92-100%

A-

890-919

89-91.9%

B+

870-889

87-88.9%

B

830-869

83-86.9%

B-

800-829

80-82.9%

C+

780-799

78-79.9%

C

730-779

73-77.9%

C-

650-729

65-72.9%

F

649 & below

64.9% & below

 

 

Assignments

 

You are expected to read the assigned chapters prior to coming to class, review the assigned discussion questions and be prepared to discuss them in class. 

 

The homework assignments will be collected in class.   All homework assignments should be typed.

 

Please note that a homework assignment turned in late will receive a reduced grade. 

 

Project

 

You are to select a publicly-owned company and obtain its most recent annual report on Form 10-K (and any other information you deem appropriate) for purposes of this project.  It is suggested that the company you select be in a single line of business (as opposed to several types of businesses).

 

Phase I

 

You are to prepare a brief report that covers the following:

  1. Briefly describe the business of the company.
  2. Identify what you believe to be the most significant business risks that the company faces.
  3. Perform a preliminary financial statement review of the most recent annual financial statements using the guidance in pages 149-152 of the textbook.  You report should include:
    1. Horizontal and vertical analysis of balance sheets for the last two fiscal years and the income statements for the last three fiscal years.
    2. Key financial ratios for the same periods, as follows:

                                                              i.      Current ratio

                                                            ii.      Quick ratio

                                                          iii.      Receivables turnover and days sales in ending receivables

                                                          iv.      Inventory turnover and days sales in ending inventory

                                                            v.      Gross profit percentage

                                                          vi.      Operating profit percentage

 

 

  1. Based on your understanding of the business of the company, its principal business risks, and your preliminary financial statement review, identify no more than one or two significant accounts (balance sheet) and which particular relevant assertions that you believe have the greatest risk of material misstatement. Other factors that you may consider are:
    1. Size and composition of the account.
    2. Susceptibility to misstatement due to errors or fraud.
    3. Volume of activity, complexity, and homogeneity of the individual transactions processed through the account.
    4. Nature of the account.
    5. Accounting complexities associated with the account.
    6. Exposure to losses in the account.

However, you must link the account(s) and its(their) relevant assertions to the significant business risks you identified in 2. above.

 

Phase II

 

Revise your Phase I report based on instructor feedback (if necessary) and add the following discussion to your report:

  1. Describe in general terms the internal controls that you would expect to be present to prevent or detect any misstatements (whether caused by error or fraud) in the significant accounts and related assertions identified as having the greatest risk of misstatement in Phase I.
  2. Describe in general terms what audit procedures (tests of controls and substantive tests) you would perform for aforementioned identified significant accounts and related assertions.

 

Other Resources

 

You should register for the course at http://blackboard.dom.edu to enable you to access certain course information and to facilitate email communication between the instructor and students.  In particular, the Blackboard site contains PowerPoint presentations that will serve as a basis for class presentations.  The Blackboard site also contains answers to the discussion problems questions at the end of each chapter.

 

Examinations

 

There will be three examinations.  The final exam will not be cumulative but will only cover material after the previous exam.  The exams will consist of multiple choice and short essay questions.

 

 

 

Course Calendar*

 

 

Date

 

Readings

 

Discussion Problems

Assignment Due

Sep 1

Chapter 1 – The Role of the Public Accountant in the American Economy

1-28, 1-30

 

 

Sep 3

Chapter 2 – Professional Standards

2-26, 2-31

 

Sep 8

Chapter 3 – Professional Ethics

3-26, 3-32, 3-33, 3-34, 3-46

2-32

Sep 10

Chapter 3 – Professional Ethics

Chapter 4 – Legal Liability of CPAs

 

4-31, 4-32, 4-33, 4-39

 

Sep 15

Chapter 4 – Legal Liability of CPAs

 

10-50

Sep 17

Chapter 5 – Audit Evidence and Documentation

5-34, 5-40, 5-43, 5-49, 5-51, 5-53,

5-54

4-40

Sep 22

Examination – Chapters 1-4

 

 

Sep 24

Chapter 5 – Audit Evidence and Documentation

 

 

Sep 29

Chapter 6 – Planning the Audit, Understanding the Client, Assessing Risk and Responding

6-25, 6-33, 6-37, 6-39, 6-43, 10-49

5-59

Oct 1

Chapter 6 – Planning the Audit, Understanding the Client, Assessing Risk and Responding

 

 

Oct 6

Chapter 7 – Internal Control

7-25, 7-36, 7-38, 7-40, 7-41, 7-43, 7-44

6-44

Oct 8

Chapter 7 – Internal Control

 

 

Oct 13

Chapter 9 - Audit Sampling (excluding appendix)

9-19, 9-32 (a, b, & c), 9-35, 9-36, 9-41

7-47, Course Project – Phase I

Oct 15

Chapter 9 - Audit Sampling (excluding appendix)

 

 

Oct 20

Chapter 10 – Cash and Financial Instruments

Auditing Fair Value

10-1, 10-8, 10-16, 10-27, 10-35,

10-36, 10-37, 10-39, 10-41

9-53

Oct 22

Examination – Chapters 5-7 & 9

 

 

Oct 27

Chapter 10 – Cash and Financial Instruments

Auditing Fair Value

 

 

Oct 29

Chapter 11 – Accounts Receivable, Notes Receivable, and Sales Transactions

11-19, 11-27, 11-34, 11-37, 11-40, 11-45, 11-51

10-47, 10-48

Nov 3

Chapter 11 – Accounts Receivable, Notes Receivable, and Sales Transactions

 

 

Nov 5

Chapter 14 – Accounts Payable and Other Liabilities

14-34, 14-35, 14-36, 14-39, 14-40

11-50

Nov 10

Chapter 14 – Accounts Payable and Other Liabilities

 

 

Nov 12

Chapter 12 – Inventories and Cost of Goods Sold

12-21, 12-22, 12-26, 12-32, 12-35, 12-44

Revenue Recognition Case**

Nov 17

Chapter 12 – Inventories and Cost of Goods Sold

 

 

Nov 19

Chapter 13 – Property, Plant, and Equipment: Depreciation and Depletion

13-15, 13-23, 13-28, 13-32, 13-34, 13-35

12-45

Nov 24

Chapter 15 – Debt and Equity Capital

15-30, 15-34, 15-35, 15-37

13-40

Nov 26

Thanksgiving – No Class

 

 

Dec 1

Chapter 8 – Internal Control in a Computer Environment

8-10, 8-12, 8-31, 8-39

 

15-40

Dec 3

Chapter 16 – Completing the Audit (pages 628-644)

16-36, 16-38, 16-44, 16-45, 16-46

 

Dec 8

Chapter 17 – Auditors’ Reports

17-21, 17-23, 17-26, 17-31, 17-35, 17-37, 17-38

16-47

Dec 10

Chapter 17 – Auditors’ Reports

 

Course Project – Phase II

TBD

Examination – Chapters 8 & 10-17

 

 

 

* Subject to change.

** In “Assignments” folder on Blackboard