Auditing Syllabus
- Reasons for auditing. The concept of accountability. Economic demand for auditing. Auditing as a monitoring device.
- Principles and postulates of auditing. Conditions for auditing to be possible. The concept of independence.
- The legal and professional environment. Approaches to the regulation of auditing practice, in particular legal rules and professional guidelines. International regulation of auditing. (Note: candidates will be expected to be aware of the range of different approaches to auditor regulation and the general content of such regulations but will not be expected to know the detailed requirements of any specific country’s audit regulations.)
- The duties of auditors. The changing responsibilities of auditors for fraud detection and financial statement attestation. The extent of auditors’ duties to primary clients and third parties. The ‘expectations gap’ between what users of financial statements believe the audit provides and what the audit is capable of offering. Auditor liability and the case for and against limiting liability. Different levels of assurance that may be expressed.
- Audit planning. Initial assessment of the client. The engagement letter. Risk-based approaches. Identification of key areas of audits and assurance services. Analytical procedures.
- Conduct of audits and assurance services. The concept of evidence. Compliance and substantive testing. The concept of internal control. Identifying key controls and testing them. Statistical and other sampling approaches to testing. Specific audit techniques, such as observation, directional testing, cut-off tests, third-party confirmations. The application of techniques in the context of the main revenue and cost activities of the enterprise. Auditing the balance sheet. The significance of management representations. Assessment of errors and weaknesses. Documenting the audit or assurance service, preparation and review of working papers.
- Computer-based systems. Auditing ‘round’ and ‘through’ the computer. Internal control in a computer environment. Computerassisted audit techniques. The use of computers in conducting the audit or assurance service, in particular spreadsheets, word-processing and automated working papers.
- The report of the auditors or assurance service providers. The form and content of the auditors’ report. The qualified auditors’ report (also referred to as the modified report or opinion). The hidden meanings behind an auditors’ report. The report as an educational document.
- Current developments in auditing and assurance services. Audit committees. Internal audit. Management audit. The economic value of auditing to society. The spread of auditing and other assurance services into non-financial contexts: the ‘Audit Society’. The role of auditors in the banking crisis and other scandals. Possible changes to enhance auditor independence and competence.
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