Lahore University of Management Sciences

ACT 352 – Advanced Auditing

Spring Semester 2018
Instructor Waqar Ali
Room No. 422
Office Hours TBC
Email waqar_ali@lums.edu.pk
Telephone TBC
TA TBA
TA Office Hours TBA
Course URL (if any) http://suraj.lums.edu.pk/

COURSE BASICS
Credit Hours 3
Lecture(s) Nbr of Lec(s) Per Week 2 Duration One hour and fifty minutes, each.
Recitation/Lab (per week) Nbr of Lec(s) Per Week N/A Duration N/A
Tutorial (per week) Nbr of Lec(s) Per Week On need basis Duration Appropriate to cover the content.

COURSE DISTRIBUTION
Core
Elective Elective
Open for Student Category
Close for Student Category

COURSE DESCRIPTION

Advanced Auditing aims to build on students’ principles level understanding by delving deeper into its key assurance/audit
dynamics, critically analyzing auditing practices, and understanding the role of assurance in enhancing governance of businesses
and managing their risks. The course revisits the stages (acceptance, planning, managing through to conclusion) of the audit process
with an emphasis on case‐lets.

The course introduces a conceptual regulatory framework by elucidating key legal, professional and social/ethical concerns and
then discusses how pre‐audit and planning phases must comply with cautious quality and independence concerns on part of the
assurance provider. This pursuit is governed by a set of professional procedures which the course highlights.

Students shall apply learned International Auditing Standards (ISAs) and International Accounting Standards (IASs) under an IFRS
(International Financial Reporting) framework to business scenarios, thereby invoking specialist knowledge gained from auditing
and financial reporting courses.

Whilst statutory audit, a pivotal sub‐set of assurance will feature majorly in the course, a variety of other engagements, also falling
under the umbrella of assurance will be surveyed. These entail other audit‐related assurances, forensic audits, review of prospective
information and internal audit genres.

COURSE PREREQUISITE(S)

 Auditing
 Corporate Financial Reporting (CFR)
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LEARNING OUTCOMES & OBJECTIVES

On completion of this course, students should be able to:

 understand and advise on regulatory, professional and ethical issues relevant to those carrying out assurance
engagements;
 understand the processes involved in accepting and managing assurance engagements and how quality
assurance processes mitigate risks;
 plan assurance engagements in accordance with the terms of the engagements and appropriate standards;
 formulate the work required to meet the objectives of audit assignments and apply the International Standards
on Auditing;
 conclude and report on audit and various other assurance engagements in accordance with the terms of the
engagements and appropriate standards; and
 discuss current assurance/auditing developments (financial press / specialist publications by industry experts).

UNDERGRADUATE PROGRAM LEARNING GOALS & OBJECTIVES

General Learning Goals & Objectives
Goal 1 –Effective Written and Oral Communication
Objective: Students will demonstrate effective writing and oral communication skills
Goal 2 –Ethical Understanding and Reasoning
Objective: Students will demonstrate that they are able to identify and address ethical issues in an
organizational context.
Goal 3 – Analytical Thinking and Problem Solving Skills
Objective: Students will demonstrate that they are able to identify key problems and generate viable solutions.
Goal 4 – Application of Information Technology
Objective: Students will demonstrate that they are able to use current technologies in business and
management context.
Goal 5 – Teamwork in Diverse and Multicultural Environments
Objective: Students will demonstrate that they are able to work effectively in diverse environments.
Goal 6 – Understanding Organizational Ecosystems
Objective: Students will demonstrate that they have an understanding of Economic, Political, Regulatory, Legal,
Technological, and Social environment of organizations.

Major Specific Learning Goals & Objectives

Goal 7 (a) – Program Specific Knowledge and Understanding
Objective: Students will demonstrate knowledge of key business disciplines and how they interact including
application to real world situations (Including subject knowledge).
Goal 7 (b) – Understanding the “science” behind the decision‐making process (for MGS Majors)
Objective: Students will demonstrate ability to analyze a business problem, design and apply appropriate
decision‐support tools, interpret results and make meaningful recommendations to support the decision‐maker
 Lahore University of Management Sciences
PROGRAM LEARNING GOALS AND
OBJECTIVES
Goal 1 –Effective Written and Oral
Communication
Goal 2 –Ethical Understanding and
Reasoning
Goal 3 – Analytical Thinking and Problem
Solving Skills
Goal 4 – Application of Information
Technology
Goal 5 – Teamwork in Diverse and
Multicultural Environments
Goal 6 – Understanding Organizational
Ecosystems
Goal 7 (a) – Discipline Specific Knowledge
and Understanding
COURSE LEARNING OBJECTIVES COURSE ASSESSMENT
ITEM
 understand and advise on regulatory, professional and CP, Quizzes, Mid Term
ethical issues relevant to those carrying out assurance Exam, Final
engagements;
 plan assurance engagements in accordance with the
terms of the engagements and appropriate standards;
 formulate the work required to meet the objectives of
audit assignments and apply the International Standards
on Auditing;
 conclude and report on audit and various other
assurance engagements in accordance with the terms of
the engagements and appropriate standards; and
 discuss current assurance/auditing developments
(financial press / specialist publications by industry
experts).
 understand and advise on regulatory, professional and CP, Quizzes, Mid Term
ethical issues relevant to those carrying out assurance Exam, Final
engagements;
 understand the processes involved in accepting and
managing assurance engagements and how quality
assurance processes mitigate risks;
 discuss current assurance/auditing developments
(financial press / specialist publications by industry
experts).
 formulate the work required to meet the objectives of CP, Quizzes, Mid Term
audit assignments and apply the International Standards Exam, Final
on Auditing;
 conclude and report on audit and various other
assurance engagements in accordance with the terms of
the engagements and appropriate standards; and
 discuss current assurance/auditing developments
(financial press / specialist publications by industry
experts).
 understand and advise on regulatory, professional and CP, Quizzes, Mid Term
ethical issues relevant to those carrying out assurance Exam, Final
engagements,
 understand and advise on regulatory, professional and CP, Quizzes, Mid Term
ethical issues relevant to those carrying out assurance Exam, Final
engagements;
 understand the processes involved in accepting and
managing assurance engagements and how quality
assurance processes mitigate risks;
 plan assurance engagements in accordance with the
terms of the engagements and appropriate standards;
 formulate the work required to meet the objectives of
audit assignments and apply the International Standards
on Auditing;
 Lahore University of Management Sciences
 conclude and report on audit and various other
assurance engagements in accordance with the terms of
the engagements and appropriate standards; and
 discuss current assurance/auditing developments
(financial press / specialist publications by industry
experts).
Goal 7 (b) – Understanding the “science”
behind the decision‐making process

GRADING BREAKUP / COURSE MOTIVATION / PEDAGOGY

Class Participation: 10%
Quizzes: 25%
Midterm: 25%
Presentation: 5%
Final: 35%

Course Motivation
The role of audit has evolved as a pivotal risk mitigating discipline. The skills of an auditor are highly valued in industry and various
commercial roles that go beyond mainstream accountancy/assurance work.

This course bears direct relevance to students aspiring for chartered accountancy and will also consolidate learning of students
having interned at one of the accounting firms or looking forward to it in the coming year. There may also be a supportive case for
exemptions with professional examination bodies such as the ACCA/ICAP in Pakistan and ICAEW internationally towards Audit
modules.

Further there is a strong commercial dimension to the course which lends efficacy to students intending to pursue a career in
industry (businesses and not an advisory firm). This is because business analysts and managerial accountants are in direct liaison
with auditors; and this course would equip students with business risk‐related vocabulary and strong analytical skills.

Pedagogy
There will be emphasis on class participation due to the nature of the course content requiring comprehensive application of
standards and audit methodology to business specific scenarios. Audit discussions would extend to group audits, financial
instruments, and similar and more applied reporting areas. Exercising professional judgment and skepticism will be key towards
demonstrating a cogent understanding of the assurance/audit methodology.

Greater than three absences would tantamount to an enrolment review by the instructor due to the inter‐related nature of
subsequent lectures that build on the previous sessions. Quizzes would help develop strong assurance vocabulary and technical
understanding of the content which will be more rigorously tested in the midterm and the final using a mix of structured and
scenario based questions.

Core technical material will be applied to key practitioner case‐lets and augmented by contemporary developments in the
assurance and audit profession using readings from the Economia magazine/ICAEW publications, Accountancy Age and ACCA
articles in addition to the ISAs and mainstream reading material.
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Examination Detail

Yes/No: Yes
Midterm Combine Separate: Combined
Exam Duration: 1.5 hours
Exam Specifications: Structured written‐response questions (scenario based)

Yes/No: Yes
Combine Separate: Combined
Final Exam
Duration: 2 hours
Exam Specifications: Structured written‐response questions (scenario based)

COURSE OVERVIEW
SESSION OBJECTIVES / PARTICULARS
WEEK TOPICS / READINGS (Please not there may be overlap between weekly
sessions in terms of session objectives.)
1 Introduction: Legal & Regulatory Framework  What are auditing and assurance services and
Session 1: what role do they play in society?
Outline Overview  Discuss the purposes and consequences of laws
Enlightening Professions (Audit Futures Article: Abridged) and other regulatory requirements surrounding
Session 2: assurance work.
Chapter 1 (Kaplan)  Money Laundering ‐ Judge when to raise legal
Chapter 7 (Kaplan) and ethical matters arising from assurance work
with senior colleagues for review and possible
referral to external parties.
 Describe audit considerations of compliance with
laws and regulations and plan audit procedures.
2 Introduction: Legal & Regulatory Framework (continued)  IFAC, IAASB & Standard setting procedures
Session 3:  Management & Auditor Responsibilities in a
Chapter 8 p151‐152, 153‐156 (Kaplan) Financial Statements’ Audit when possible
noncompliance is discovered
Professional Ethics  Recognize the professional and ethical issues that
Session 4: may arise during an assurance engagement,
The Expectation Gap in Auditing (ResearchGate Article) explain the relevance and importance of these
issues and evaluate the relative merits of
different standpoints taken in debate.
 Assess whether an engagement has been
planned and performed with an attitude of
professional skepticism.
3 Professional Ethics (continued)  Describe the principal causes of audit failure and
Session 5 & 6: their effects and the gap between outcomes
Chapter 8 remainder (Kaplan) delivered by audit engagements and the
Chapter 2 (Kaplan) expectations of users of audit reports.
 When companies fail shortly after receiving an
unmodified auditors’ report, there is nearly
always criticism of the auditors. To what extent
do you think such criticism may be valid?
 Compare and contrast the respective
responsibilities of management and auditors for
fraud and error.
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 Identify the sources of liability (including
professional negligence) arising from an
assurance engagement and their impact upon
the conduct of the engagement.
4 Accepting & Managing Engagements  Procedures for accepting new appointments
Session 7 & 8:  Discuss the issues which underlie the agreement
Chatpers 3 – 6 (Kaplan) of the scope and terms of an assurance
engagement (new or continuing).
 Explain the principles and purpose of quality
control of audit and other assurance
engagements.
 Discuss the reasons why entities change their
auditors/professional accountants.
5 Advanced Topics: Audit Planning  Identify the components of audit risk for a
Sessions 9 & 10: specified audit engagement, including the
Chapter 9 (Kaplan) breakdown of audit risk into inherent risk, control
risk and detection risk.
 Define materiality and performance materiality
and demonstrate how it should be applied in
financial reporting and auditing.
 Evaluate the impact of risk and materiality in
preparing the audit plan, including the nature,
timing and extent of audit procedures.
 Recognize matters that are not relevant to the
planning of an assignment.
 Discuss the benefits and limitations of analytical
procedures at the planning stage.
6 Advanced Topics: Fieldwork ‐ Gathering Audit Evidence  Identify and describe audit procedures to obtain
Sessions 11 & 12: sufficient audit evidence from identified sources.
Chapter 11, 12 (Kaplan)  Identify and evaluate the audit evidence
expected to be available to (i) support the
financial statement assertions and accounting
treatments (ii) support disclosures made in the
notes to the financial statements.
 Apply analytical procedures to financial and non‐
financial data.
 Evaluate, quantitatively and qualitatively
(including use of analytical procedures), the
results and conclusions obtained from assurance
procedures.
 Explain the specific audit problems and
procedures concerning related parties and
related party transactions.
 Evaluate the use of written management
representations to support other audit evidence.
 Recognize when it is justifiable to place reliance
on the work of an expert and internal auditors.
 Describe the nature and timing of specific
procedures designed to identify subsequent
events that may require adjustment or
disclosure.
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 Describe the nature and timing of specific
procedures designed to identify the
appropriateness of the going concern assumption
7 Advanced Topics: Fieldwork ‐ Gathering Audit Evidence  Demonstrate comprehensive application of
(cont’d) & Responses to Assessed Risk IFRS/IAS to audit of key areas of audit.
Session 13:  Evaluate audit implications (e.g. materiality, risk,
Chapter 22 (Kaplan) relevant accounting standards, audit evidence)
Midterm relating to specialist FS line items: inventory,
statement of cash flows, changes in accounting
policies, post‐balance sheet events, PPE and
leases.
7/8 Advanced Topics: Fieldwork ‐ Gathering Audit Evidence  Demonstrate comprehensive application of
(cont’d) & Responses to Assessed Risk IFRS/IAS to audit of key areas of audit.
Session 14/15:  Evaluate audit implications (e.g. materiality, risk,
Chapter 22 (remainder) (Kaplan) relevant accounting standards, audit evidence)
Session 16: relating to specialist FS line items: segmental
Chapter 10 (Kaplan) reporting, fair value, revenue from contracts with
customers, impairments, contingencies,
intangible assets, financial instruments,
investment properties, share‐based payment
transactions and business combinations.
 Consider how the group auditor should evaluate
the audit work performed by a component
auditor.
9 Non‐audit Assurance Engagements  Audit‐related and assurance services: Interim
Session 17 & 18: Review, Treasury Assurance & Due Diligence
Chapters 15 & 16 (Kaplan)  Levels of Assurance
 Prospective Financial Information
10 Non‐audit Assurance Engagements (continued)  Forensic Audits
Session 19 & 20:  Internal Audits
Chapters 18, 19, 21 (Kaplan)  Outsourcing
 Public Sector Audits
11 Advanced Topics: Reporting  Demonstrate understanding of miscellaneous
Session 21 & 22: concluding activities such as review checklist,
Chapter 12 (remainder) (Kaplan) quality reviews, concluding analytics and close‐
Chapter 13 (Kaplan) out meetings.
 Make reasoned decisions toward efficacy of
controls testing and substantive work.
 Recognize factors to be taken into account when
forming an audit opinion in a given situation and
justify audit opinions that are consistent with the
results of audit procedures.
 Recognize when the use of an emphasis of
matter paragraph and other matter paragraph
would be appropriate.
 Draw conclusions on the ability to report on an
audit engagement, including the opinion for a
statutory audit, which are consistent with the
results of the audit work.
12 Advanced Topics: Concluding Activities & Reporting  Critically assess the quality of a report to those
(continued) charged with governance and management.
Session 23 & 24:
Chapter 13 (Kaplan) cont’d
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Chapter 14 (Kaplan)  Advice on the content of reports to those charged
with governance and management in a given
situation.
 Analyze the form and content of the professional
accountant’s report for an assurance
engagement as compared with an auditor’s
report.
13 Contemporary Issues surrounding Assurance/Auditing  Explain, in non‐technical language, significant
Session 25 & 26: current assurance issues being dealt with by the
Chapter 17 (Kaplan) national standard‐setting body and the IAASB.
Chapter 32 (Alan Millichamp & John Taylor)  Explain the auditor’s main considerations in
respect of social and environmental matters and
how they impact on entities and their financial
statements (e.g. impairment of assets, provisions
and contingent liabilities).
 Explain current developments in auditing
standards including the need for new and revised
standards and evaluate their impact on the
conduct of audits.
14 Contemporary Issues surrounding Assurance/Auditing  Review of assorted literature
(continued)  Review of assorted literature from
Session 27: ICAEW/Economia magazine, ACCA articles and
Enlightening Professions (Audit Futures Article: Full Accountancy Age to assess current issues around
Version) assurance/auditing.
Revision and Consolidation of Learning  Review and consolidation of learning
Session 28

TEXTBOOK(S)/SUPPLEMENTARY READINGS
Text Books
 Alan Millichamp & John Taylor. (2014) Auditing (10th Edition). Cengage Learning EMEA (Selected Chapters)
[Optional Reading]
 Kaplan Publishing UK (2015) Advanced Audit and Assurance (Selected Chapters)

Other Texts
 International Standards on Auditing

Recommended Supplementary Readings

 The Economia Magazine excerpts
 Assorated articles (ICAEW & ACCA websites)
 Accountancy Age website
 AuditFutures website