Course Name (short): External Auditing 2
School: Continuing Ed & Corp Training
Program(s): Accounting
Program Coordinator(s): Multiple Coordinators
Course Leader or Contact: Multiple Course Leaders
Originator: Ravneet Malhi
Designate: Ravneet Malhi
Version: 2.0
Status: Approved (APPR)

Calendar Description
N/A

Typical Instructional Format

Courses may be offered in other formats.

Section I Notes: A minimum grade of ¿B¿ (70%) in each of ACCG70026 and ACCG70027 qualify the student to apply for a partial exemption from the Certified General Accountants of Ontario (CGA) course AU1. The CGA challenge exam for AU1 is required.

Detailed Description
Students build upon the theoretical knowledge gained in Auditing 1 by applying auditing standards and techniques. Topics include the study and evaluation of internal control, auditing in a computerized environment and audit sampling. The emphasis in this course is the application of auditing concepts to audit revenues, purchases, production, payroll, finance and investment cycle. The course ends with the completion of the audit and the basic preparation of working papers. Students will learn by participating in class lectures, group discussions, weekly assignments and short reports based on research of current topics in the media. Prerequisite(s): ACCG70026 External Auditing 1

Program Context

 Critical Performance

By the end of this course, students will have demonstrated the 
ability to design tests based on audit objectives for financial 
statement audits.

Learning Outcomes

To achieve the critical performance, students will have demonstrated 
the ability to:

1.  Explain the purpose and advantages of evaluating a client's 
    internal control

2.  Apply the seven internal control objectives and weaknesses,  
    explain reasonable assurance, and cost/benefit aspects of audit   
    tests. 

3.  Compare with examples auditing around, through, and with the 
    computer. 

4.  Compare statistical vs. non-statistical (judgmental) sampling  
    examples for each.

5.  Prepare a basic audit program for tests of controls and tests of
    balances.

6.  Describe the transactions, documents, confirmations, controls, 
    and accounts included in the sales cycle. 

7.  Describe transactions, documents, controls, and accounts of the 
    acquisition cycle.

8.  Prepare audit tests of control & balances for purchases and    
    disbursements transactions.

9.  Explain procedures for the inventory count observation and cut-
    off tests.

10. Describe audit tests, transactions, documents,  accounts, and  
    controls of the a) production cycle, b) payroll cycle, c) finance 
    & investment cycle.

11. Prepare analytical and detail audit tests for overall revenue and
    expense accounts.

12. Explain the concepts for subsequent events, contingent  
    liabilities, review of working papers & discovery of errors.

Students demonstrate their learning in the following ways: 

Test 1 (Chapters 9,10,11)              20%
Consists of multiple choices,
short answers, detail 
descriptions/explanations

Test 2 (Chapters 12,13,14)             20%
Consists of multiple choices, 
short answers, detail 
descriptions/explanations

Final Exam (Comprehensive)             40 %
Consists of multiple choices, 
theory questions, detail explanations 
& analysis questions

Assignments working papers and reports 20 %
                  
 Total                                 100 %

Smieliauskas and Bewley, Auditing: An International Approach, 6th 
McGraw-Hill Ryerson

Module 1  (LO# 1,2,3) Control Assessment and Testing

 - Explain the auditor's need to understand the client's system of  
   internal control
 - Understand and explain the purpose of evaluating a client's
   internal control
 - Describe and apply the seven internal control objectives
 - Describe  advantages & disadvantages of 3 methods of describing 
   client's system of internal control 
 - Identify weaknesses in internal control and audit tests of control
  (compliance tests)
 - Outline the auditor's responsibilities when fraud is detected
 - Explain reasonable assurance and the cost/ benefit aspects of 
   testing internal control
 - Compare with examples auditing around, threw, and with the computer
 - Describe the problems of control risk assessment in a small 
   business

Text Reference: Chapter 9

Module 2  (LO# 4)  Audit Sampling

 - Distinguish audit sampling vs non-sampling work 
 - Compare statistical vs non-statistical (judgemental) sampling with
   examples for each
 - Differentiate between sampling and non-sampling risk

Text Reference: Chapter 10

Module 3  (LO# 5)Revenues, Receivables, and Receipts Process

 - Prepare a basic audit program for tests of controls
 - Develop a basic audit program for tests of balances

Text Reference:  Chapter 11

Module 4 Review for test 1

Test 1 (Chapters 9,10,& 11)    20%
  
Module 5  (LO# 7,8,9) Purchases, Payables, Payments Process

 - Describe the transactions, documents, controls, and accounts    
   included in the SAES cycle
 - Outline examples of tests of control
 - Design audit tests to detect errors
 - Explain  the importance of the "existence" objective for the   
   assets of the client
 - Explain the importance and procedures to prepare bank and  
   receivables confirmations
 - Design substantive audit tests for the accounts in the sales cycle
 - Describe 2 common frauds involving receivables and cash accounts
 - Describe transactions, documents, controls, and accounts of the 
   acquisition cycle
 - Prepare audit tests of control for purchases and disbursements 
   transactions
 - Design audit procedures for detecting errors and irregularities
 - Explain the importance of completion objective for liabilities and
   related audit tests
 - Explain procedures for the inventory count observation and cut-off 
   tests

Text Reference: Chapter 12

Module 6  (LO# 10) Production and Payroll Processes
 - Describe the transactions, documents, accounts, and controls of 
   the production cycle
 - Outline control tests for production transactions
 - Design audit tests to detect errors and irregularities in the 
   Production process
 - Describe the transactions, controls, accounts, and documents in
   the payroll cycle
 - Design control tests and tests of balances for the payroll cycle

Text Reference: Chapter 13

Module 7  (LO# 10) Finance and Investment Process

 - Describe transactions, controls, accounts, and documents of the 
   finance & investment cycle
 - Design tests of control for the liabilities, equity, and 
   investment transactions
 - Design tests to detect errors and other irregularities
 - Prepare audit tests for overall revenue and expense accounts

Text Reference: Chapter 14

Module 8  Review  for Test 2 Chapters 12,13,14

Test 2 (Module 5 to 8)   20%

Module 9 (LO# 12) Completing the Audit
 - Describe analytical procedures for the completion of the audit
 - Explain the use of various letters and reports in completing the 
   audit
 - Explain and apply the concepts for subsequent events and 
   contingent liabilities
 - Explain the actions required for discovery of errors after the 
   audit is completed 
 - Describe the actions for review of working papers

Text Reference: Chapter 15
 
Assignment is due

Module 10  Review from Chapters 9 to 15

Comprehensive Final Exam 40%