ASSURANCE AND AUDIT ACCO 465, Lecture notes of Cost Accounting

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ACCO465 - Lecture 1

1 Prepared by Dr. Audousset-Coulier / F

Outline of the lecture

 Course introduction

 (^) Course outline

 Presentation of the case method

 (^) MD Sample Case p.12-

 Review of audit planning concepts

 Application

 (^) MD Sparky’s Auto Parts p. 70

MD Case Framework 1/

1. Scan the case

 (^) Brief overview (what is this case about?)

2. Identify your role

 (^) Junior auditor? Engagement partner?

3. Locate the “required”, identify the “who”

 (^) What are you expected to do?  (^) Who are you writing to?

4. Read case, identify important case facts

 (^) Important to know what you are looking for  (^) Use highlighters  (^) Most sentences include important data, however, long cases sometimes include unimportant data

MD Case Framework 2/

5. Identify the case type

 (^) Assurance only  (^) Or assurance and accounting combined cases ACCO465: focus on assurance cases (Some accounting components are present in the background but will not constitute a core required)

6. Identify the audit phase

 (^) Client acceptance, pre-plan  (^) Audit Planning  (^) Execution of audit tests  (^) Quality control  (^) Issuance of audit report  (^) Interim period (between two year-end audits)

Case method

 Writing tips

 (^) DO NOT include the preparation work in your final response (steps 1 to 10), only submit the final outcome corresponding to the required (e.g. email written to the audit partner)  (^) Roleplay MATTERS  (^) Format MATTERS (professional writing)  (^) Headings MUST be used  (^) Bullet points CAN be used (when appropriate)  (^) Tables and graphs CAN be included  (^) Are the issues material? specific or pervasive?  (^) Is there an impact on the audit report? on the rest of the audit? Read MD Sample case p. 12-15 (includes solution)

Review of audit planning

concepts Audit risk model: AR = IR x CR x DR

RM

M

Review of audit planning

concepts

Materiality

 Overall materiality (OM). e.g.

5% IBIT

Definition: A misstatement in F/S is considered

material if it is probable that the decision of a

user would be changed or influenced by such

misstatement. Estimated by auditors based on

quantitative and qualitative factors. A lot of

professional judgment involved.

 Performance materiality (PM) e.g 70%

OM

Used to perform audit testing (tolerable

misstatement)

 Trivial (Non-significant) amounts e.g

10