University of Texas at Austin Auditing and Control. ACC 362 Fall 2009

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1 University of Texas at Austin Auditing and Control General Information Instructor: Marcy L. Shepardson Office: 5.334Y CBA Phone: (please only use in case of emergency) Class Time: Tuesday & Thursday 2:00 3:30 Location: UTC Office Hours: Tuesday & Thursday 3:30 5:00 (or by appointment) Required Materials Text: Auditing: A Business Risk Approach, 7th ed. by Rittenberg, Johnstone & Gramling Course Documents: You will have access to my PowerPoint files for class via blackboard. Additionally, there will be readings (not many) supplemental to the text for certain class days, which will also be available via blackboard. Please see the Readings columns of the schedule at the end of this syllabus for specific reference to supplemental readings. Course Objectives It is my hope that we will spend the semester engaged in interactive learning on the following (non-exhaustive list of) topics: 1. The role of auditing and assurance services in a market economy. 2. The status of the current regulated U.S. audit market and (briefly) how we got here. 3. Auditor independence and the ethical responsibilities of auditors. An important component of this objective is individual integrity as it applies to auditors and students in. 4. Audit risk, including risk assessment at the entity and account level. 5. Internal control design, integrated auditing and internal control testing. 6. Basics of audit sampling. 7. Framework for auditing the revenue and purchasing cycles. 8. Auditor reporting. 9. Entity-wide audit considerations (going-concern, subsequent events evaluation, related party transactions) 1

2 10. Evaluating and correcting errors. 11. Auditor responsibilities for detection of fraud. 12. Throughout these course objectives, you will also develop critical thinking thinking skills that will encompass higher level learning skills, above and beyond memorization and regurgitation of fact. Grading Course grades will be based upon a 550-point scale: Points Possible Examination 1, Thursday, October Examination 2, Tuesday, November Final examination during finals week 120 Cases 85 End-of-semester group presentation 75 In-class end-of-semester presentation summaries 20 Participation and professionalism 50 Total possible points 550 Examinations As noted above, there will be two midterms and one final examination in this course. The focus of these examinations will be in class and textbook learning, as well as any supplemental readings assigned. The exams will likely be a combination of multiple choice and short answer/essay questions. I reserve the right to change the format of the examinations and will give you sufficient notice in the event of such a change. There will be no exam makeups for the midterms in this course. If you have a medical or family emergency or university-sponsored conflict, you will receive the percentage score you attain on the final examination for the previously approved missed midterm. Please note that you must speak to me before the examination for this to apply; if you simply do not show up to an exam without letting me know, the consequences will likely be dire. 2

3 Cases I have selected cases for this course based upon topics that I think will be most beneficially supplemented by an assignment. Audits are performed in teams and I encourage thinking about your cases in teams as well. However, I would like each of you to prepare your own memos/solutions, etc., for grading. Business writing is a learned skill, and I believe that you will each benefit from preparing your own audit documentation and having me critically evaluate your documentation. While I will not be grading on format per se, I will provide constructive criticism regarding your documentation style, including clarity and succinctness of documentation, in addition to content related corrections. Group Projects The group project at the end of the semester will involve four or five students (to be determined). Each group will investigate a major accounting / auditing scandal that occurred within the last ten years to identify (1) the underlying financial reporting issue(s), (2) why the audit failed to uncover the problem and what might have been done differently, and (3) the consequences to management and to the auditors. Groups will present the results from these investigations in 20-minute presentations at the end of the semester. Specific dates and times will be determined randomly. Each group must also submit the Powerpoint or similar file used to facilitate their presentation, as well as a list of references. Secondly, to encourage your attendance at and learning during others presentations, you will be graded on presentation summaries to be prepared during the class. I will provide a form for each of you to fill out, so you basically have to show up on the presentation days, and fill out the forms (adequately) to receive full credit for this component of the course. Further details on this assignment will be provided later in the semester. Participation I expect you to participate actively in this course. We have a small enough section that I hope that certain of our learning modules will be more discussion than lecture based. I therefore respectfully request that you come prepared to class, having read and thought about the material assigned for each class day. Included within participation is respect for others. Disrespect of others will not be tolerated and will be negatively reflected in your participation score for this course. Half of your participation score will be granted due to regular attendance while the other half will be based upon in-class participation. By simply showing up on a regular basis, 3

4 you will receive half of the participation points available to you. The remaining half will be allocated based upon my assessment of your participation in the classroom. Policy on Students with Disabilities Students with disabilities may request appropriate academic accommodations from the Division of Diversity and Community Engagement, Services for Students with Disabilities, Dishonesty (and some brief thoughts thereon) Accounting (and auditing) as a profession is useless without honesty. If the accountants (and auditors) who companies (and audit committees) employ to provide fair and accurate disclosures to investors are not honest and lack integrity, we can never be sure of the reliability of those financial disclosures. I require honesty and integrity at all times in my course. As noted in the case section above, I believe that auditing (and therefore learning about auditing) is best done in a group setting. I will therefore allow you to work on your cases together, and a large component of your grade (end of semester presentations) will be performed on a group basis. Regarding your casework, as I have stated, you may think through cases together but I expect that each of you will turn in your own written copy of the assignment. This is an integral part of the learning process, to show not only that you understand the concepts but that you are able to communicate and document that understanding as well. I expect that each of you will prepare and hand in your own memos/answers, etc. This does not mean you pass your answers around to friends and let them take what they want from your answers. This does not mean that you offer to proofread your friend s solution and then paraphrase it. What this does allow is collaborative thinking, but individual documentation. Regarding examinations. Examinations are completely individual exercises. If I have any indication that you are attempting to collaborate (either with answer keys, answers in calculators, cheat sheets or neighbors during tests) I will not hesitate to take action. I reserve the right to modify this syllabus at any time and will provide you ample notification of any such changes. 4

5 Class Date Topic Rittenberg Other Assignment 1 8/27 Welcome and Overview 2 9/1 History of the profession and its role in a market economy Chapter1 Zeff (2003) - Skim 3 9/3 Corporate Governance and Auditing Standards (Day 1) Chapter 2 SOX Summary - Skim 4 9/8 Corporate Governance and Auditing Standards (Day 2) 5 9/10 Independence Chapter 3 6 9/15 Professional Ethics Glover, Prawitt & Taylor (2009) Copeland (2005); Cassidy (2002) skim Case 1: SEC Independence Case 7 9/17 Audit Planning and Risk Assessment Chapter 4 8 9/22 Audit Planning and Risk Assessment 9 9/24 Materiality Read Toy Central Case Brody et al (2003) Case 2: Elite Running 10 9/29 Catch-up or begin Fraud Chapter /1 EXAM / / /13 Auditor Responsbility for Fraud Detection Chapter 9 Internal Controls and the Integrated Audit (Day 1) Chapter 5 Internal Controls and the Integrated Audit (Day 2) Chapter 6 Bellovary & Johnstone (2007) Case 3: City of Toledo Audit 15 10/15 Audit Evidence - Framework Chapter /20 Audit Evidence - Gathering and assessing (Day 1) Chapter /22 Audit Evidence - Gathering and assessing (Day 2) 18 10/27 Substantive Testing - the Revenue Cycle Chapter 10 Substantive Testing - the Purchasing 19 10/29 Cycle Chapter /3 EXAM 2 Case 4: Total Computer 5

6 Class Date Topic Rittenberg Other Assignment 21 11/5 Additional advanced topics: Related parties, professional judgment and auditing fair values Chapter 14 (p ); Chapter 18 (p and p ) 22 11/10 Engagement wrap-up Chapter 15 Chapter /12 Evaluating materiality and errors (p ) Case 5: Computone 24 11/17 Auditors' Reports Chapter /19 Auditor Legal Liability Chapter /24 Group Presentations and/or Catch-up 27 11/26 Thanksgiving - NO CLASS 28 12/1 Group Presentations 29 12/3 Group Presentations FINAL EXAM DURING EXAM WEEK 6