ACC568 - Auditing
Session 1 2016
Faculty of Business
School of Accounting and Finance Internal Mode
Subject Overview
This subject adopts a risk-based approach to auditing and assurance services, exploring the practice and theory of auditing as it applies to Australia within a global environment. The concept of risk management is emphasised as it permeates all functions of management, audit and corporate governance.
Learning outcomes
On successful completion of this subject, you should
be able to explain and critically evaluate influences on audit and assurance services including: Australian and international professional standards, statutory and common laws, regulatory bodies, and public expectations within a global market;
be able to evaluate the expanding scope of assurance services and providers in today's international business environment;
be able to demonstrate risk management methodologies and the role of internal controls in an audit context;
be able to design an audit plan and select and apply appropriate audit procedures for a financial statement audit; and be able to exercise critical and reflective judgement and appreciate the value of ethical practice.
Lecturer Details
Subject Coordinator Humayun Murshed Email hmurshed@studygroup.com Phone To be advised.
Campus Other
Building/Room number To be advised.
About your lecturer
May Vargas
CFE, CPA, Masters of Forensic Accounting and Masters of Management.
I have a Masters of Forensic Accounting and a Masters of Management in Community Management. I am a Certified Fraud Examiner and hold a CPA Public Practice certificate and a Tax Practitioner license. I have considerable experience as a Certified Practising Accountant (CPA); providing accounting, taxation, financial statement audit and self managed superannuation fund audit services as well as consultancy, training and advisory services on fraud risk assessment, fraud prevention and fraud investigation.
Learning, Teaching and Support Strategies
Class times and location
You would have received your timetable by email. You can also obtain a copy from the timetable stand outside the academic office or via the noticeboard. You can also obtain a current copy from the link below: https://interact2.csu.edu.au/webapps/blackboard/content/listContentEditable.jsp?content_id=_452392_1
Important: It is essential that you keep checking the timetable for the latest class information. The timetable may change until the second week of the teaching session, and it is important to monitor the timetable regularly on the noticeboard.
The weekly instruction in this subject will consist of a combined lecture /tutorial lasting up to 3 hours and will cover the main points from each topic.
Attendance is required at all scheduled lectures and tutorials.
How to contact your lecturer
Any questions concerning the teaching of this subject can be addressed to your subject lecturer.
May Vargas
Room 6, Level 1, 63 Oxford Street, Darlinghurst
Email: MVargas@studygroup.com (mailto:MVargas@studygroup.com)
Email is the best option . Please send a brief message regarding the issue. Include your phone number so a staff member can contact you via phone if that is more appropriate. When sending emails, please state the subject code and your name and ID number in the email title/subject. This will avoid your email being treated as SPAM.
How you are expected to engage with the subject
All of your subject materials are available on the Interact site under the Topics link in the left hand side menu. I suggest that before you attend the weekly lecture read the learning objectives carefully, work through any activities included in the material and refer to the text. Once you have got a feel for what the topic is about, try and make a good set of notes under each of the topic objectives. You can do this by consulting the text again in a more considered way. The questions at the end of the topic have been designed to help you focus in the topic, so it really helps to prepare a useful set of answers to them as these will help you self assess your understanding of the topic.
You will be preparing multiple choice quiz questions in PeerWise for a number of the subject learning outcomes so think about the questions that you will write as you work through the material for each topic.
It is helpful to have a small task to complete early in the session, so that you have a focus in the subject from the very first day, and so I have set you the task of writing a multiple choice question. If you don’t attempt this task, I may contact you to have a chat about study and if there are any issue that I can help with.
Academic learning support
Information on effective time management is available on the CSU Learning Support website via the following link: student.csu.edu.au
Visit the learning support website for advice about assignment preparation, academic reading and note-taking, referencing, and preparing for exams at: http://student.csu.edu.au/study
The Study Centres also offers a range of workshops specifically targeting the needs of international students. These workshops run multiple times per week and build into the comprehensive Academic Skills Development Program that all students should participate in. Additionally, a number of student volunteers are available to assist students in a program known as Discipline Support Sessions. Please see the timetables for these programs on the noticeboards at the campus and also with the iLearn Interact2 Organisation site. You may also contact:
Dr Susan Lee
Study Support Coordinator
Phone: 02 9291 9337
E-mail: SusanLee@studygroup.com ( mailto:SusanLee@studygroup.com )
Angela Maag
Study Support Coordinator (Intervention)
Phone: 0292919358
E-mail: AMaag@studygroup.com For appointments, please see Reception.
Queries regarding the content of this subject should be directed to your Subject Lecturer.
Library services
CSU Study Centre Library Collection
The CSU Study Centre Library Catalogue is online at: http://primo.unilinc.edu.au/primo_library/libweb/action/search.do?vid=SGA
Students can search for books in the local Sydney library collection. Students are able to Sign In to the CSU Study Centre library catalogue online to place requests for books that are on loan to other students, check their library record, and renew loans prior to the due date. This library service is available online 24/7.
When books with outstanding requests are returned to the CSU Study Centre Library, an email will be automatically sent to the next student who is waiting for that book.
CSU Library
The CSU Library online provides access to online and print material, using Primo Search to find:
http://student.csu.edu.au/library
Online journal articles eBooks
Print books from CSU Library (Interlibrary loans may be requested – see the Library Manager)
Company and government reports
eJournals
Dissertations & theses
Newspapers including Business & Financial newspapers in Factiva (see Business & IT Journal databases)
Other Reference resources (eg. Australian Bureau of Statistics, Australian standards, online encyclopaedias & dictionaries to be read on the computer
You will also find library guides, Subject Reserve for any readings, eg. ACC100, BUS100, ITC100, etc., and online assistance via free call phone number 1800 808 369, or Ask a Librarian – Live Chat or Web Form.
Other CSU Library services and resources: https://student.csu.edu.au/library/study-research
Video tutorials in research skills, finding journal articles for assignments, topic analysis
Endnote referencing software
Other online library services to help you successfully complete your assignments
Online Tutorials http://student.csu.edu.au/library/study-research/training-tutorials-videos Learn how to:
Use Primo Search to find eReserve study materials and journal articles
Search journal databases and web resources for information for your assessment tasks
Identify appropriate sources of information and peer reviewed material, to evaluate resources
Subject Library Resource Guides http://libguides.csu.edu.au/
Subject Library Guides are a great way to get started with research. Each online guide is tailored to a specific area of study, including Accounting, Business and Information Technology outlining how to research in your area and where to look for information. Library Help
http://student.csu.edu.au/library/help-contacts
Friendly and quick assistance is available. Ask for help finding information and navigating the library’s extensive eResources.
National Library of Australia – Trove database
http://trove.nla.gov.au/
The Trove database from the National Library of Australia provides access to many different online resources on any subject.
University of Technology Sydney – Blake Library
http://find.lib.uts.edu.au/
All students with a CSU student card can access University of Technology, Sydney (UTS) library for free 10 times per year or paying $50 per year to join CAUL scheme to borrow books and use the UTS library as often as students like. The UTS Blake library is located near Chinatown: corner Quay Street & Ultimo Road, Haymarket. Ph: 02 9514 3666.
Contact Details below for any student enquiries:
CSU Study Centre Darlinghurst Library
Zora Janeva – Senior Library Technician
Ph: (02) 9291 9315; email: librarians@studygroup.com ( mailto:librarians@studygroup.com )
Your workload in this subject
Each week you should spend around 9 - 12 hours studying this subject – obviously some weeks may require more time than others depending on how you work – but the following is a guide for your information.
Reading text and other readings 2.5 Hours Preparation of answers to topic review questions 2.5 Hours Preparing and answering questions in Peerwise 2.0 Hours Attending Weekly Lecture & Tutorial 3.0 Hours
Preparation of assessment items 2.0 Hours
Text and Learning Materials
Prescribed text(s)
Textbook:
Gay, G. E., & Simnett, R. (2015). Auditing and assurance services in Australia (6th ed.). Roseville: McGraw Hill.
OR
Gay, G. E., & Simnett, R. (2015). Auditing and assurance services in Australia (6th ed.). Roseville: McGraw Hill. eBook
The downloadable form of this eBook can be purchased from https://create.mheducation.com/shop/#/catalog/details/?isbn=9781308101484 ( https://create.mheducation.com/shop/%23/catalog/details/?isbn=9781308101484)(Details on how to access this will be provided on Interact).
Handbook:
Chartered Accountants Australia and New Zealand (2015) or ICAA (2014). Auditing and assurance handbook. Brisbane: John Wiley & Sons Australia.
The handbook can be taken into your final examination but the only marking allowed on the text is highlighting and underlining. Please take care not to mark your text carelessly or you will be unable to use it in the final examination.
Schedule
This study schedule has been devised to assist in your planning during the session, and is intended as a guide only.
Learning activities associated with each topic, listed in the above schedule, comprise:
1 . Reading :
- the topic notes in Interact ‘Topics’;
- the topic podcast and or voice over powerpoint, noting there are links to these in the Interact ‘Topics’.
2 . Completing :
- the textbook readings as identified in the schedule above;
- any review tasks and discussion forum questions identified in the Interact ‘Topic’ notes; - the PeerWise activities identified in the schedule above; - the assignments by the dates identified in the schedule above.
3. Attending weekly tutorials.
Assessment Information
Introduction to assessment
To protect the academic integrity of the subject, you may be asked to complete an additional test ( which may be verbal) if I or another member of the teaching staff have doubts that the work that you have submitted for an assessment item is your own. This test would be held within 4 weeks of the submission of the assessment.
Detailed information regarding:
Sample exam (for subjects with a formal exam)
Pass requirements
Grades
Presentation
Submissions
Extensions
Penalties for late submission
Assignment return
Resubmission Plagiarism
are included in Appendix 1.
* due date is the last date for assessment items to be received at the University
** applies only to assessment items submitted by the due date
Assessment item 1
PeerWise
Value: 10 %
Due date: Variable
Return date: -
Submission method options Alternative submission method
Task
This session, we will be using an online system called PeerWise that lets you submit multiple choice questions (MCQs) and answers and rate other students' MCQs. Your activity in PeerWise is worth 10 % of your final subject grade. To earn the 10%, you must contribute to PeerWise by writing questions that directly address a number of learning outcomes, answering questions and commenting on and rating questions.
I will advise you through an Announcement when the student numbers have been loaded into the site. Then you need to visit the following website: http://peerwise.cs.auckland.ac.nz/. If this link fails please cut and paste the link into your internet browser.
If you have enrolled late, please let me know so that your student number can be added to the site.
If you have not used PeerWise before, just click the -Registration- link and follow the prompts. All you need to do is choose a user name and a password for your PeerWise account.
If you have used PeerWise before, simply log in and then select -Join course- from the Home menu.
To access our course, you will need to enter two pieces of information:
1) Course ID = xxxx This will be provided to you in the first week of the session.
2) Identifier = Your student number for this subject - please be careful, if you enter your student number incorrectly, you will not be awarded marks for this assignment.
Over the session you need to create 5 multiple choice questions and answer 50 questions. You need to create 1 question by the end of week 2 to give fellow students time to attempt your questions and grade them. Try and answer 10 questions by the end of week 3. If you need help, please email me. I have set out a table below to help you time your question writing and answering. On the subject Interact site you will find at the beginning of each topic details of the subject learning outcomes addressed by that topic.
The MCQs you develop must address the learning outcomes listed under Rationale below. An explanation of the correct answer must also be provided. Within the explanation, the sources of information you used to develop the MCQ (e.g. lecture notes and/or textbooks) should be indicated. This will allow other students to further investigate the concepts covered in the MCQ.
To encourage everyone to participate equally, all activity on PeerWise is anonymous however I am able to track contributions. Offensive comments or questions will not be tolerated.
The following schedule provides details about when relative PeerWise tasks need to be completed.
Date Due No. Questions No. Questions Subject learning outcome and Topics created answered and
commented
14 March 1 be able to exercise critical and reflective
21 March 10 judgement and appreciate the value of ethical
practice. Topic 2.
28 March 1 be able to explain and critically evaluate
4 April 10 influences on audit and assurance services
including: Australian and international professional standards, statutory and common laws, regulatory bodies, and public expectations within a global market. Topic 3.
25 April 1 be able to demonstrate risk management
2 May 10 methodologies and the role of internal controls in
an audit context. Topic 4,5 or 6.
9 May 2 be able to design an audit plan and select and
16 May 20 apply appropriate audit procedures for a financial
statement audit
be able to evaluate the expanding scope of assurance services and providers in today's international business environment. Topic 7.
Rationale
There are a number of reasons for asking you to write your own questions.
Firstly, the ability to write a good question means that you have understood the topic. When you write your alternate answer choices you show evidence of deep learning because you understand possible misconceptions.
You will also get feedback on your questions from your fellow students. It has been shown that feedback that is given often and quickly is important for learning.
The more questions you attempt, the better your grasp will be of the core concepts in this subject.
The following learning outcomes are addressed by this assessment activity:
be able to explain and critically evaluate influences on audit and assurance services including: Australian and international professional standards, statutory and common laws, regulatory bodies, and public expectations within a global market;
be able to demonstrate risk management methodologies and the role of internal controls in an audit context;
be able to design an audit plan and select and apply appropriate audit procedures for a financial statement audit; and be able to exercise critical and reflective judgement and appreciate the value of ethical practice.
Marking criteria
You will be graded by your peers! The more questions you attempt and provide feedback on, the more accurate the marks of your class mates will be. Your mark will be based on participation (see below), not the individual questions scores.
To achieve a high score, it’s much better to write good quality questions that directly and clearly address the learning objectives. This can be difficult at first, but as you start writing questions on each topic, it will get easier. If you are having difficulty, I suggest drafting the question first on paper before adding it to PeerWise.
When rating a question, you should be judging three things:
1. Does the question address one or more of the subject learning outcomes?
2. Is the question of high enough quality that it could appear in the final exam?
3. Is the explanation provided with the question sufficient so that if someone answered the question incorrectly the explanation would help them to understand what they have done wrong?
When making these judgments consider the following:
1. The quality of a question relates to how well it is composed. It should be clear in its intent, that is the question should not be ambiguous. It should be phrased so that it has only one possible answer. The question should directly and clearly relate to a key concept covered in the subject learning outcomes.
2. You should not rate questions differently based on their difficulty – an easy question is just as useful at helping others understand the material as a hard question.
3. Be fair with your ratings – you MUST justify a poor rating with a comment to the author of the question, or by agreement with a previously written comment making sure any comments you provide are constructive – you are rating questions written by your peers so provide the kind of feedback that you would find useful and encouraging yourself.
As you contribute to PeerWise, you will accumulate a reputation score which is composed of three components:
the first component is for question authoring; the second component is for answering questions; and the third component is for rating questions you have answered.
A student's reputation score increases whenever the actions of other students generally agree with that student's earlier decisions. To accumulate high reputation scores, you are encouraged to make thoughtful contributions as early as possible (which are therefore more likely to agree with the decisions that other students make later on).
The total score is calculated using a formula that combines the component scores such that to achieve a high total score it is much better to have good scores for each component rather than a very high score in just one (or two) components. You will also earn badges, details of the badges that you can
earn are listed below and more details about each badge are available on the PeerWise site.
You will gain a mark out of 10% that will appear in Grade Centre after the assignment has closed. This will be calculated as follows:
749 and have 10 distinct badges. Note that you can see your total reputation score in the top right hand corner of the PeerWise screen when you are logged in. There is also a badge icon on the bottom of the page, clicking on this will take you to the page that lists the badges that you have earned.
If you find a question that you feel is not related to a subject learning objective or you feel is offensive you can, within the software, mark the question as inappropriate. Do send an email to me to alert me about this.
Just a reminder, plagiarised material is not acceptable. If you have copied a question from a website or another source directly, you must reference the material you have used. Word for word copying is not acceptable and will be detected by Turnitin. We will be downloading all questions from the site and checking these for plagiarised material. This only applies to material copied from external sources, we are aware that there may be similar questions in PeerWise that have been authored separately.
Assessment item 2
Case Study and Report
Value: 10 %
Due date: 27- Mar -2016
Return date: 19- Apr -2016
Length: 2 ,000 words
Submission method options
Alternative submission method
Task
Question 1 5%
Report
You will prepare a report on audit independence. The report should include the following information:
A discussion as to why independence is important to an auditor.
A brief identification and explanation of the statutory, regulatory and Code of Ethics for Professional Accountants requirements that enhance audit independence.
A critical evaluation of whether the provision of non-audit services by auditors impairs the independence of the auditor. As part of this evaluation consider the impact that corporate collapses have had on regulation of non-audit services that can be provided. This evaluation should result in a reasoned decision about the appropriate level of regulation of non-audit services in Australia.
Presentation
The report should follow a standard business report format. Please see the Faculty of Business Writing Skills site at http://bit.ly/FoBAcademic-Writing-Skills as this will help you with the format.
Question 2 5%
You are the senior auditor undertaking the audit of a steel supply merchant. As part of your duties you are verifying the acquisition of property, plant and equipment. The major acquisition was a newly constructed steel warehouse. As you scan the invoices for materials that were included in the building of the warehouse you notice that there are a number of invoices for bathroom and plumbing fittings. The amounts on these invoices are not material. You have walked through the warehouse and have not found any bathroom facilities in the warehouse. All bathroom facilities are in the office block, a short walk from the warehouse. You have used the bathroom facilities in the office block and while these are in good condition they do not appear to be new. You have identified that the company accountant has approved these invoices for payment.
The budget is tight on this audit. On your last audit you were over budget and so you feel that there is pressure on you to complete this audit within budget. The invoices that you selected to check are only a sample of the invoices making up the cost of the new warehouse.
Required
Using the Code of Ethics for Professional Accountants and the American Accounting Association Model, identify and discuss the ethical issues involved. Describe the action that you should take.
Presentation
The best way to present your answer is in a table as below:
Rationale
This assessment has been designed to assess your ability to:
Be able to explain and critically evaluate influences on audit and assurance services including: Australian and international professional standards, statutory and common laws, regulatory bodies, and public expectations within a global market;
Be able to exercise critical and reflective judgment and appreciate the value of ethical practice.
Marking criteria
Question 1
High Distinction Distinction Credit Pass
Criteria
(42-50) (37-41) (32-36) (25-31)
Explanation and evaluation of Complex and highly Clear and Clear Basic
need for audit independence. (10 detailed explanation detailed explanation with explanation with Marks). and clear critical explanation and some evaluation little evaluation
evaluation of need evaluation of of need for audit of need for audit for audit need for audit independence. independence. independence. independence.
Brief identification and Logical and Clear and largely Clear description Basic explanation of the statutory, comprehensive comprehensive of the statutory, description of regulatory and Code of Ethics for description and description and regulatory and the statutory, Professional Accountants explanation of explanation of Code of Ethics regulatory and requirements that enhance audit statutory, regulatory statutory, for Professional Code of Ethics independence. (10 Marks). and Code of Ethics regulatory and Accountants for Professional
for Professional Code of Ethics requirements that Accountants Accountants for Professional enhance audit requirements requirements that Accountants independence. that enhance enhance audit requirements that audit independence. enhance audit independence.
independence.
Critical evaluation of whether the Well-structured and Clear and A reasonable Some attempt to provision of non-audit services by highly detailed detailed evaluation of evaluate auditors impairs the independence evaluation of evaluation of whether the whether the of the auditor. As part of this whether the whether the provision of provision of evaluation consider the impact that provision of provision of non-audit non-audit corporate collapses have had on non-audit services non-audit services by services by regulation of non-audit services by auditors impairs services by auditors impairs auditors impairs that can be provided. This the independence of auditors impairs the independence the evaluation should result in a the auditor the independence of the auditor independence of reasoned decision about the demonstrating a of the auditor demonstrating a the auditor appropriate level of regulation of deep understanding demonstrating a moderate demonstrating non-audit services in Australia. (25 of the influences on clear understanding of some
Marks). audit services. understanding of the influences on understanding
the influences on audit services. of the influences
audit services. on audit
services.
Professional communication in the Work is in a report Work is in a Work is in a Some spelling, format of a business report. (Note: format and contains report format and report format. grammar and you are required to space between distinct contains distinct There are minor punctuation paragraphs; use Arial 10pt or TNR understandable understandable spelling, errors found but 12 pt; use 1.5 or double line statements with no statements with grammar and the work is spacing) (3 Marks). errors. There is a minimal errors. punctuation readable and sophisticated use of Answer is well errors. Work structured.
language. organised. shows evidence Some attempt at Extremely well Content is of proofreading. a report format.
Question 2
High Distinction Distinction Credit Pass
Criteria
(42-50) (37-41) (32-36) (25-31)
Application of Sophisticated Logical application Minor problems with the Ethical decision the ethical application of the of the ethical application of the ethical guide partially decision guide ethical decision guide decision guide decision guide. There are applied that you are demonstrating deep demonstrating clear some relevant references to including some using. (45 Marks) understanding of the understanding of the ethical and auditing references to
use of the guide. There use of the guide. standards. ethical and are extensive relevant There are a number auditing references to ethical of relevant standards. and auditing standards. references to ethical and auditing standards.
Professional Work contains distinct Work contains Minor spelling, grammar Some spelling, communication understandable distinct and punctuation errors. grammar and (Note: you are statements with no understandable Work shows evidence of punctuation required to space errors. There is a statements with proofreading.Well-structured errors found but between sophisticated use of minimal errors. with one main idea or the work is paragraphs; use language. Extremely Answer is well argument provided per readable and Arial 10pt or well organised. organised. Content paragraph. structured.
TNR 12 pt; use Content is structured in is structured in a Work may 1.5 or double line a manner that manner that include too
spacing) (3 facilitates the reader’s facilitates the many ideas in
Marks) understanding. reader’s one paragraph.
understanding.
Appropriate Used four or more Used two or more Used one or more sources. No additional resources and sources. All work has sources. All work All work has been sources other correct been referenced has been referenced referenced within the body than the text referencing. (2 correctly as per APA correctly as per of the answer and in the used. Others’ Marks). (6th edn) requirements. APA (6th edn) reference list, with some work is not
requirements. omissions or errors in terms. always
acknowledged
Requirements
Assignments must be submitted through Turnitin. Further details about submission are provided in Appendix 1.
Assessment item 3
Case Study
Value: 20 %
Due date: 01- May -2016
Return date: 24- May -2016
Length: 2 ,000 words
Submission method options Alternative submission method
Task
Case Study – the information below applies to Questions 1, 2 and 3.
You are the senior in charge on the audit of Fine Chem Pty Ltd (FCPL), a private company controlled by three pharmacists; Janine Cole, Peter Davis and Warren Banks, who form the Board of the company. You firm has just been appointed to complete this audit. FCPL operates 10 pharmacies in the Sydney region. Each of these pharmacies employs one or more pharmacists and a number of sales staff. Janine Cole, Peter Davis and Warren Banks work in each pharmacy on a rotational basis and fill in when there are staff absences. FCPL is looking to expand its operations to Melbourne, and is currently negotiating the finance for and purchase of two additional pharmacies.
As part of the planning stage you have calculated following financial ratios:
As you continue in your work on this company you discover the following information about the purchases, accounts payable, sales, cash and inventory systems.
FCPL has a centralised buying operation, managed by Eva Thomson, and a climate controlled storage area attached to the shop at Parramatta. Each week the chemist/store manager at each of the pharmacies provides details of stock required to Eva Thomson. Eva checks if the goods are in the storage area. If they are not currently available she then logs in to the appropriate supplier web site and orders the required goods. Eva emails a copy of the online order to all pharmacies indicating the amount ordered for each pharmacy.
Some goods are delivered directly to the individual pharmacies. On receipt, they are checked against the online order copy sent by Eva and entered into the inventory system by one of the shop sales staff.
Other goods such as cosmetics, perfumes, vitamins and other supplements are only directly delivered to the Parramatta pharmacy and later distributed to the individual pharmacies. Eva checks all goods received at the Parramatta pharmacy against the order that she has placed, enters the goods into the perpetual inventory system and files the order alphabetically. Once a week, FCPL uses a contract courier with a climate controlled van to deliver this stock to the other pharmacies. Eva receives all the invoices and enters them into the accounting software, a comprehensive cloud based accounting system.
The company accountant, David Wells, is a contractor working 2 or 3 days as required. He approves the invoices for payment and loads the payment batch file up to the bank. This triggers a record of the payments being made in the accounting system. David reconciles the bank account each week. When David is unavailable to approve payments Warren Banks approves the payments. The payment system records who approves the payments based on the login identification used to access the system. Access to the system can be from any computer connected to the internet. Login is through a login identification and password system. There is no automated system to regularly change the passwords. You noted that last year this cloud based system was hacked. Tax file details were stolen from a number of clients of the cloud based system, false tax returns were lodged and tax refunds stolen by the hackers. Fortunately FCPL employees were not targeted by these hackers.
All sales are either cash or EFTPOS transactions. The cash registers are linked to the accounting software updating the perpetual inventory system and cash at the end of each day’s trading. As a perpetual inventory system is used no physical stocktakes are undertaken.
Cash is banked daily by the pharmacist at each pharmacy. As part of the weekly bank reconciliation process David reconciles the daily banking to the cash register/accounting system records. David downloads a balance sheet and profit and loss statement each month and provides these to the Board for their monthly meetings. The accounting system includes a dashboard which can be customised by David to meet the needs of the Board. David has not customised the dashboard as only Warren has expressed an interest in it. Although all Board members have access to the accounting system Warren is the only Board member who regularly accesses the system.
You have noted that one of FCPL's major suppliers is Banks Supplements Ltd. You have further discovered that the CEO of this company is Melinda Banks, the wife of Warren Banks. Banks Supplements Ltd is a large organisation supplying supplements to a growing Asian market.
Question 1 (6 Marks)
Analyse the ratios in conjunction with the additional information and identify from your analysis, implications for the audit and any particular audit steps that need to be undertaken to reduce audit risk. For example if there was a worsening debtor’s turnover, one of the audit steps would include a review of the provision for doubtful debts. Ensure that you also identify any potential weaknesses in this ratio analysis and any additional information that you will need to make a judgement about the business risk facing the company.
Question 2 (8 Marks)
Identify the strengths and weaknesses in the internal control system described above. For each control weakness, identify the financial report assertions that may not be met. Suggest a control to correct any of the deficiencies identified. Identify how this weakness will affect your audit, indicating the additional audit steps and audit evidence that you will need to collect to reduce audit risk.
Question 3 (6 Marks)
The COBIT framework identifies seven categories of threats to the computer information system. Consider each of these categories to evaluate the audit and business risks that arise from the information system. Suggest changes that could be made to minimise these risks and identify how these risks will impact on the audit that you will undertake.
Rationale
This assessment has been designed to assess your ability to:
be able to demonstrate risk management methodologies and the role of internal controls in a audit context;
be able to design an audit plan and select and apply appropriate audit procedures for a financialstatement audit; be able to exercise critical and reflective judgment.
Marking criteria
Question 1
High Distinction Distinction Credit Pass
Criteria
(50-60) (44-49) (38-43) (30-37)
Deep analysis of ratios Correct Correct Most interpretations Demonstrated demonstrating business interpretation interpretation correct. understanding of risk assessment skills provided provided Demonstrating a some of the ratios and critical and demonstrating a demonstrating a developing and their use in
reflective judgement. (25 sophisticated good understanding understanding of identifying the risks
Marks). understanding of of how the ratios how the ratios can that a business how the ratios can can be used to be used to analyse faces.
be used to analyse analyse the risks the risks that a the risks that a that a business business faces. business faces. faces.
All additional Most of the Some additional
Much of the
information taken additional information taken
additional
Weakness in analytical into consideration information taken into consideration
information taken
review and additional when developing into consideration when developing
into consideration
information identified. correct when developing correct
when developing
This demonstrates the interpretation of correct interpretation of
correct interpretation
ability to use business ratios. Further interpretation of ratios. This
of ratios
risk analysis in a novel demonstrating the ratios demonstrates a
demonstrating a
situation and to use high level of demonstrating a basic level of
moderate level of
critical and reflective understanding of good level of understanding of
understanding of
judgment. (10 Marks). business risk understanding of business risk
business risk
analysis. business risk analysis.
analysis. analysis.
Identification of audit All appropriate Most appropriate Many appropriate Some appropriate tests that will need to be audit tests identified audit tests audit tests identified. audit tests completed to minimise with a clear identified. Evidence Evidence of some identified. audit risk identified statement as of some understanding as to Basic
through the analysis of to how these will understanding as to how these will understanding of the ratios and the minimise audit risk. how these will minimise audit risk. how these will additional information. This demonstrates a minimise audit risk. minimise audit risk. This demonstrates the sophisticated level ability to design an audit of audit planning. plan (20 Marks).
Professional Work contains Work contains Minor spelling, Some spelling, communication (Note: distinct distinct grammar and grammar and
you are required to space understandable understandable punctuation errors. punctuation errors between paragraphs; use statements with no statements with Work shows found but the work Arial 10pt or TNR 12 pt; errors. minimal errors. evidence of is readable and use 1.5 or double line Extremely well Answer is well proofreading. structured. Work
spacing) (3 Marks). organised. organised. Content Well-structured with may include too
Content is is structured in a one main idea or many ideas in one structured in a manner that argument provided paragraph. manner that facilitates the per paragraph.
facilitates the reader's reader’s understanding. understanding.
High Distinction Distinction Credit Pass
Criteria
(50-60) (44-49) (38-43) (30-37)
Appropriate resources Used a range of Used two or more Used one or more No additional and correct referencing. resources. All sources. All work sources. All work sources used other
(2 Marks).
Question 2
Criteria
Identification of absent or weak and strong controls. This demonstrates the level of understanding of the role of internal controls. (30 Marks).
Identification of financial report assertions not met.
(10 Marks)
Identification of the control to correct the deficiency (15 Marks).
Development of a series of audit steps to overcome the audit risk resulting from the weak controls. (20 Marks).
Professional
work has been has been referenced has been referenced than the text. referenced correctly correctly as per within the body of Others’ work is not as per APA (6th APA (6th edn) the answer and in always
edn) requirements. requirements. the reference list, acknowledged and with some omissions there are a number
or errors in terms. of errors or
non-compliance
with the APA (6th edn).
High Distinction Distinction Credit Pass
(67-80) (59-66) (51-58) (40-50)
Identification of all Identification of Identification of some Identification of only absent or weak and most of the absent or of the absent or weak a few of the absent or
strong controls weak and strong and strong controls weak and strong demonstrating a controls demonstrating a controls
deep understanding demonstrating a moderate level demonstrating a very of the role of good level understanding of the basic level internal controls. understanding of the role of internal understanding of the role of internal controls. role of internal controls. controls.
Identification of all Identification of Identification of some Identification of a few unmet financial most unmet financial of the unmet financial unmet financial report report assertions report assertions report assertions assertions demonstrating a demonstrating a demonstrating a demonstrating a basic sophisticated good level of moderate level of level of understanding understanding of the understanding of the understanding of the of the development of development of an development of an development of an an audit plan. audit plan. audit plan. audit plan.
Identification of all Identification of Identification of some Some attempt to of the controls to most of the controls of the controls to identify the controls correct the to correct the correct the to correct the deficiencies, deficiencies, deficiencies, deficiencies, demonstrating demonstrating demonstrating a demonstrating a basic critical and critical and reflective moderate level of level of critical and reflective thinking thinking and a good critical and reflective reflective thinking
and a deep understating of the thinking and and understating of understating of the role of internal understating of the the role of internal role of internal controls. role of internal controls. controls. controls.
Development of a Development of Development of some Some attempt to comprehensive most of the audit of the audit steps develop the audit series of audit steps steps designed to designed to overcome steps designed to designed to overcome the audit the audit risk. This overcome the audit overcome the audit risk. This demonstrates a risk. This risk. This demonstrates a good moderate level demonstrates a demonstrates a deep understanding of the understanding of the moderate level
understanding of the audit process. audit process. understanding of the audit process. audit process.
Work contains Work contains Minor spelling, Some spelling,
High Distinction Distinction Credit Pass
Criteria
(67-80) (59-66) (51-58) (40-50)
communication distinct distinct grammar and grammar and
(Note: you are understandable understandable punctuation errors. punctuation errors required to space statements with no statements with Work shows evidence found but the work is
between errors. minimal errors. of proofreading. readable and
paragraphs; use Extremely well Answer is well Well-structured with structured. Work may
Arial 10pt or TNR organised. Content organised. Content is one main idea or include too many
12 pt; use 1.5 or is structured in a structured in a argument provided per ideas in one double line manner that manner that paragraph. paragraph.
spacing) (3 Marks). facilitates the facilitates the reader’s reader’s understanding. understanding.
Appropriate Used a range of Used two or more Used one or more No additional sources resources and sources. All work sources. All work sources. All work has used other than the correct referencing has been referenced has been referenced been referenced within text. Others’ work is (2 Marks). correctly as per correctly as per APA the body of the answer not always
APA (6th edn) (6th edn) and in the reference acknowledged and
requirements. requirements. list, with some there are a number of
omissions or errors in errors or
terms. non-compliance with the APA (6th edn).
Question 3
High Distinction Distinction Credit Pass
Criteria
(50-60) (44-49) (38-43) (30-37)
Each category of All categories used to All categories used Most categories used Some categories used threat used as a comprehensively to evaluate business to identify some to identify a few framework to evaluate business and and audit risk business and audit business and audit evaluate business audit risk demonstrating a risks demonstrating a risks demonstrating a and audit risk (30 demonstrating a deep good understanding moderate basic understanding
Marks). understanding of of business and audit understanding of of business and audit business and audit risk. business and audit risk. risk. risk.
Identification of Identification of a Identification of Identification of Identification of a few changes needed in comprehensive range most changes some of the changes changes needed in the the computer of changes needed in needed in the needed in the computer system to system to minimise the computer system computer system to computer system to minimise business business risk.(10 to minimise business minimise business minimise business risk demonstrating a
Marks). risk demonstrating a risk demonstrating a risk demonstrating a basic understanding sophisticated good understanding moderate of business risk.
understanding of of business risk. understanding of business risk. business risk.
Comprehensive Development of a Development of a Development of an Some attempt to assessment of the comprehensive good assessment of assessment of the develop an impact of the assessment of the the impact of the impact of the assessment of the computer related impact of the computer related computer related impact of the business risk on the computer related business risk on the business risk on the computer related audit plan. (5 business risk on the audit plan. This audit plan. This business risk on the
Marks). audit plan. This demonstrates a good demonstrates a audit plan. This demonstrates a deep understanding of the moderate level demonstrates a basic
understanding of the audit process. understanding of the level understanding of audit process. audit process. the audit process.
High Distinction Distinction Credit Pass
Criteria
(50-60) (44-49) (38-43) (30-37)
Professional Work contains Work contains Minor spelling, Some spelling, communication distinct distinct grammar and grammar and
(Note: you are understandable understandable punctuation errors. punctuation errors required to space statements with no statements with Work shows found but the work is
between errors. minimal errors. evidence of readable and
paragraphs; use Extremely well Answer is well proofreading. structured. Work may
Arial 10pt or TNR organised. Content is organised. Content is Well-structured with include too many 12 pt; use 1.5 or structured in a manner structured in a one main idea or ideas in one double line that facilitates the manner that argument provided paragraph. spacing). (3 reader’s facilitates the per paragraph. Marks). understanding. reader’s understanding.
Appropriate Used a range of Used two or more Used one or more No additional sources resources and sources. All work has sources. All work sources. All work has used other than the correct been referenced has been referenced been referenced text. Others’ work is referencing. (2 correctly as per APA correctly as per APA within the body of not always
Marks). (6th edn) (6th edn) the answer and in the acknowledged and requirements. requirements. reference list, with there are a number of
some omissions or errors or
errors in terms. non-compliance with the APA (6th edn).
Requirements
Assignments must be submitted through Turnitin. Further details about submission are provided in Appendix 1.
Assessment item 4
Final Exam
Value: 60 %
Date: To be advised
Duration: 2 hours plus 10 minutes reading time
Submission method options
N/A - submission not required/applicable
Rationale
This assessment task has been designed to assess your ability to:
Be able to explain and critically evaluate influences on audit and assurance services including: Australian and international professional standards, statutory and common laws, regulatory bodies, and public expectations within a global market;
Be able to evaluate the expanding scope of assurance services and providers in today's international business environment;
Be able to demonstrate risk management methodologies and the role of internal controls in an audit context;
Be able to design an audit plan and select and apply appropriate audit procedures for a financial statement audit; and
Be able to exercise critical and reflective judgment and appreciate the value of ethical practice.
Requirements
The final examination is an open book - restricted materials exam. It will be sat within the official
examination period.
The examination consists of three short answer questions in Part A worth five marks each (for a total of 15 marks) and three problem questions in Part B worth 15 marks each (for a total of 45 marks). Marks for requisite parts of questions in Part B will be clearly stated on the paper. A sample exam paper (with solutions) has been provided in this subject outline.
Marking criteria
Marks will be awarded for correct answers and no marks deducted for incorrect answers. All questions must be answered.
Criteria High Distinction Distinction Credit Pass
Short answer questions (15 marks) In response to each of the short answer questions, students will be required to demonstrate, for a range of scenarios, their abilites in achieving some of the following subject outcomesk: explain and critically evaluate influences on audit and assurance services including: Australian and international professional standards, statutory and common laws, regulatory bodies, and public expectations within a global market; evaluate the expanding scope of assurance services and providers in today's international business environment;
demonstrate risk management
methodologies and the role of internal controls in an audit context; design an audit plan and select and apply appropriate audit procedures for a financial statement audit; and exercise critical and reflective judgement and appreciate the value of ethical practice.
To meet this level you will attain a cumulative mark between 85%-100% for this section of the examination. A mark in this range (no less than 12.75 marks) indicates that you have answered the three questions to a high or exceptional level. Overall, in meeting this level you will demonstrate exceptional knowledge, understanding, and ability across the majority of topics in this subject.
To meet this level you will attain a cumulative mark between 75%-84% for this section of the examination. A mark in this range (no less than 11.25 marks) indicates that you have answered at least two of the three questions to a high level or above and no more than one question is answered to a basic or limited level. Overall, in meeting this level you will demonstrate a comprehensive knowledge, understanding, and ability across the majority of topics in this subject.
To meet this level you will attain a cumulative mark between 65%-74% for this section of the examination. A mark in this range (no less than 9.75 marks) indicates that you have answered at least one of the three questions to a high level or above and no more than two questions are answered to a basic or limited level. Overall, in meeting this level you will demonstrate a sound knowledge, understanding, and ability across the majority of topics in this subject.
To meet this level you will attain a cumulative mark between 50 %-64% for this section of the examination. A mark in this range (no less than 7 marks) indicates that you have answered at least two of the three questions to a basic level or above and no more than two questions are answered to a limited level. Overall, in meeting this level you will demonstrate a basic knowledge, understanding, and ability across the majority of topics in this subject.
Part B To meet this level you To meet this level you will To meet this To meet this
Problem questions will attain a cumulative attain a cumulative mark level you will level you will
(45 marks) mark between between 75%-84% for this attain a attain a
In response to each of 85%-100% for this section of the examination. A cumulative mark cumulative mark the problem section of the mark in this range (no less between between
questions, students examination. A mark than 33 marks) indicates that 65%-74% for 50 %-64% for this Criteria High Distinction Distinction Credit Pass
may be required to in this range (no less you have answered at least this section of section of the demonstrate, for a than 38 marks) two of the three questions to the examination. examination. A range of scenarios, indicates that you a high level or above and no A mark in this mark in this their: have answered two of more than one question is range (no less range (no less - understanding of: the three questions to a answered to a basic or than 29 marks) than 22.5 marks) explain and critically high or exceptional limited level. Overall, indicates that indicates that you evaluate influences on level and no more than in meeting this level you will you have have answered audit and assurance one question is demonstrate a comprehensive answered at one or two of the services including: answered at a basic knowledge, understanding, least one of the three questions to Australian and level. Overall, and ability across the three questions a basic level or international in meeting this level majority of topics in this to a high level or above and no
professional you will demonstrate subject. above and no more than two standards, statutory exceptional knowledge, more than two questions are and common laws, understanding, and questions are answered to a regulatory bodies, and ability across the answered to a limited public expectations majority of topics in basic or limited level. Overall, within a global this subject. level. Overall, in meeting this market; evaluate the in meeting this level you will expanding scope of level you will demonstrate a assurance services demonstrate a basic knowledge, and providers in sound understanding,
today's international knowledge, and ability across business environment; understanding, the majority of demonstrate risk and ability topics in this management across the subject.
methodologies and majority of the role of internal topics in this controls in an audit subject. context; design an audit plan and select and apply appropriate audit procedures for a financial statement audit; and exercise critical and reflective judgement and appreciate the value of ethical practice.
Material provided by the University
2 x 12 page answer booklets
Material required by the student
As listed in Exam Conditions.
Textbooks - as specified (annotations permitted) Auditing, Assurance and Ethics Handbook published by Wiley and Chartered Accountants Australia and New Zealand (or ICAA if prior to 2015). Unmarked except for highlighting, underlining and or tagging. Brief captions allowed on tags only.
Appendix 1 Assessment Information
Sample exam
Sample Exam
School of Accounting and Finance
Examination Session 1, 2016
ACC568 Auditing
EXAM CONDITIONS:
This is an open book – restricted materials exam
Bilingual Dictionary permitted (printed copy only, unmarked and unanotated) The student may NOT retain the question paper
WRITING TIME: 2 hours plus 10 minutes reading time
Writing is permitted during reading time
MATERIALS SUPPLIED BY UNIVERSITY: 2 x 12 page answer booklets
MATERIALS PERMITTED IN EXAMINATION: As listed in Exam Conditions
( No electronic aids are permitted e.g. laptops, phones )
ICAA or CAANZ Financial Reporting Handbook 2014 or 2015 (bound version only – loose leaf version not permitted, unmarked except for highlighting, underlining or tagging. Brief captions allowed on tags only)
NUMBER OF QUESTIONS: Part A 3 short answer questions
Part B 3 Problem Questions
VALUE: 60 %
INSTRUCTIONS TO CANDIDATES:
1. Write your name and student number and sign in the space at the bottom of this page and on all answer booklets used.
2. Answer ALL questions in the answer booklet provided.
PART A 15 Marks
ALL Questions to be answered.
QUESTION 1 5 Marks
Identify functions of generalised audit software and explain how these can be applied in audit testing.
QUESTION 2 5 Marks
Briefly discuss the role that auditors can play in forensic accounting. Identify any similarities and differences between forensic accounting and financial statement auditing.
QUESTION 3 5 Marks
Internal and external documentation are two forms of audit evidence.
Required:
a. Describe and provide an example of each form of evidence. (2 marks)
b. Evaluate the reliability of each form of evidence. (3 marks)
PART B 45 Marks
ALL Questions to be answered.
QUESTION 1 15 Marks
You are the audit manager assigned to the audit of Seagreen Pharmaceuticals Pty. Ltd. (SP) a wholly owned subsidiary of Universal Pharmaceuticals Inc. (UP), a company listed on the New York Stock Exchange. SP was established in 2006 to provide UP with access to the Australian and South East Asian markets. Since establishment SP have found trading conditions difficult.
The audit evidence obtained and final review of this evidence suggests that unless SP receives a significant cash flow injection or trading conditions improve, it will be bankrupt within three months. You have approached the CEO of SP with your concerns and he has indicated that there is nothing for you to worry about. The company’s owners have guaranteed financial support of the company for as long as it takes to establish a market presence.
Required:
(a) Evaluate the impact of the parent company’s support on your assessment of the going concern at SP. (4 marks)
(b) What further evidence will you require to assess the appropriateness of going concern at SP? (4 marks)
(c) Explain the reason for assessing the probability that any company will continue as a going concern. (7 marks)
QUESTION 2 15 Marks
One Stop Supplies Pty Ltd is a single-store retailer that sells a variety of tools, garden supplies, lumber, small appliances, and electrical fixtures to the public, although about half of One Stop Supplies’ sales are to construction contractors on account.
Retail customers pay for merchandise by cash or credit card at cash registers when merchandise is purchased. A contractor may purchase merchandise on account, if approved by the credit manager, based only on the manager’s familiarity with the contractor’s reputation. After credit is approved, the sales associate files a prenumbered charge form with the accounts receivable supervisor to set up the receivable.
The accounts receivable supervisor independently verifies the pricing and other details on the charge form by reference to a management-authorised price list, corrects any errors, prepares the invoice, and supervises a part-time employee who mails the invoice to the contractor. The accounts receivable supervisor electronically posts the details of the invoice in the accounts receivable subsidiary ledger; simultaneously the transaction’s details are transmitted to the bookkeeper. The accounts receivable supervisor also prepares a monthly computer-generated accounts receivable subsidiary ledger without a reconciliation with the accounts receivable control account, and a monthly report of overdue accounts.
The cash receipts functions are performed by the cashier, who also supervises the cash register clerks. The cashier opens the mail, compares each cheque with the enclosed remittance advice, stamps each cheque “for deposit only”, and lists cheques for deposit. The cashier then gives the remittance advices to the bookkeeper for recording. The cashier deposits the cheques daily, separate from the daily deposit of cash register receipts. The cashier retains the verified deposit slips to assist in reconciling the monthly bank statements, but forwards to the bookkeeper a copy of the daily cash register summary. The cashier does not have access to the journals or ledgers.
The bookkeeper receives the details of transactions from the accounts receivable supervisor and the cashier for journalising and posting to the general ledger. After recording the remittance advices received from the cashier, the bookkeeper electronically transmits the remittance information to the accounts receivable supervisor for subsidiary ledger updating. Upon receipt of the monthly report of overdue balances from the accounts receivable supervisor, the bookkeeper sends monthly statements to contractors with unpaid balances. The bookkeeper authorises the accounts receivable supervisor to write off accounts as uncollectible when six months have passed since the initial overdue notice was sent. At this time, the credit manager is notified by the bookkeeper not to grant additional credit to that contractor.
Required:
Describe five internal control weaknesses in One Stop Supplies’ internal control for the cash receipts and billing functions. Explain why each is a weakness.
QUESTION 3 15 Marks
Buggsy Ltd is a mattress manufacturer that achieved a net profit before income tax of $1,842,000 for the year ended 30 June 2014.
You have identified the following matters from your audit work:
1. Buggsy Ltd’s inventory amounted to $1,941,000 at 30 June 2014. In order to move some of its old stock, in July 2014 the company sold 25 per cent of its finished goods inventories held at 30 June 2014 for $82 ,189 below their original cost. Management has indicated that as the sales occurred after 30 June 2014, it believes that the value of finished goods at that date should remain at cost. The remainder of the inventory has only been purchased recently and is in great demand.
2. Buggsy Ltd’s accounts payable at 30 June 2014 amounted to $1,726,000. Subsequent payments testing revealed that in July 2014, invoices totalling $53,751 were paid that related to June 2014 purchases of inventories. The relevant invoices were omitted from the balance of accounts payables at 30 June 2014. Management has indicated that it does not intend to adjust the financial report in relation to this issue.
3. Buggsy Ltd’s accounts receivable balance at 30 June 2014 amounted to $2,540 000. Your testing has revealed that the accountant used an incorrect exchange rate to translate overseas debtors at 30 June 2014. As a result, the balance of the accounts receivable account was overstated by $75,650. Again, management has indicated that it does not intend to adjust the financial report in relation to this issue.
Required:
(a) Explain the two circumstances under which a modified audit opinion is issued and explain the three different types of modified opinions.
(6 marks ) (b) Explain whether the issues arising from you
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