Auditing and Assurance Services Accounting 5330, Summer II - 2007 Cashion Building 209 M-F 12:30 2:00 Professor:

Phone: Office Hours: E-mail: Textbook Knapp, Michael C., Contemporary Auditing Real Issues & Cases, Fifth Edition, South-Western Publishing, 2006. Other readings to be assigned. Course Objectives 1. 2. 3. 4. 5. 6. Grading Activity Final examination Homework (Written cases and other materials) Internal Control Project Daily class participation (includes attendance and engaging classmates in discussions) Total Final Examination The final exam is the only examination in the course. It will consist of objective, short answer, and essay type questions. It will be heavily weighted toward material covered in class, but may cover all material assigned, whether explicitly discussed in class or not. The exam is to be taken in class at the scheduled time unless acceptable arrangements are made in advance with the instructor. Homework Homework consists of reading audit cases and completing the questions at the end of each case, reading other assigned cases and/or researching/summarizing a variety of audit-related topics. Be prepared to discuss in class. Homework will be reviewed 15 times during the summer session for completeness and effort, and will be self-corrected. Scores are self reported with a maximum of 10 points earned for each daily homework assignment for a total possible 150 points. You must have proof of your work (i.e., in your possession) in order to give yourself a score and you will turn in your homework at the end of class for the instructors audit. Students missing class for excusable absences can still receive the homework points if the homework is either shown to the instructor or handed in to the instructor prior to the homework due date. Points will not be given for homework received after the class period in which it is due. All homework assignments are required to be type-written to receive credit. Points 200 150 100 50 500 To enhance understanding of the fundamental concepts of auditing such as materiality, audit risk, and judgment. To discuss and analyze problem situations auditors have dealt with in the past to obtain a better understanding of how to face such scenarios in the future. To increase awareness of key ethical issues auditors may encounter. To interpret independent auditor reports. To increase understanding of the Sarbanes-Oxley Act of 2002 and its implications for the auditing practice. To further develop reading, writing, and oral communications skills. Juan Alejandro 710-6458 By appointment Juan_Alejandro@ baylor.edu

Internal Control Project Purpose: To integrate and operationalize important concepts and issues. The project requires that you select a department from Baylor University and perform a preliminary assessment of internal controls. You are to assume the role of an audit senior of a public accounting firm who is attempting to assess the risks associated with the department and its functions. Requirements: This is an open-ended assignment, which means that you can choose to structure your report in any way you deem appropriate. However, at a minimum, your report should cover the following points: 1. Present a brief profile of the department that comments on, among other things, where the department fits in Baylors organizational structure, the number of personnel, its major process (s), and other background information that you believe is important. Discuss the environment and internal control strengths and weaknesses noted during your preliminary assessment. Conclude with your report your preliminary assessment of internal control and how it will impact your testing of internal controls and the overall audit. Include with your report the internal control questionnaire you developed and used during the interview and the responses from your client.

2. 3. 4.

Feel free to use all references that may be available in the library including your undergraduate textbook in completing the project. I would expect that coverage of the above (minimum) items would require a report of approximately six to eight pages double-spaced, not including appropriate exhibits -- maximum length = 10 pages, not including exhibits. The internal control project consists of two parts, a research paper (50 points) and presentation (50 points) for a total possible 100 points. Your presentation will be graded based on the following criteria (1) Presentation (professional presence, eye contact, volume level (10 points) (2) Content (organization, visual aids, knowledge of subject, thoroughness, accuracy) (20 points) (3) Creativity and/or ability to engage the audience (10 points) (4) The degree to which your conclusion is supported by your analyses (10 points) Class Participation This class is a seminar structured primarily around the discussion of audit cases. Accordingly, I will lecture at times, but the quality of the class is highly dependent on advanced preparation and class participation. I strongly encourage you to ask questions, add comments, etc., during class and have provided for 50 points in the final grade as an additional incentive. Please share your questions and comments with the entire class. Keep side conversations to minimum to allow the class to focus on the discussions, to show respect to your classmates, and allow you to earn the class participation points. Class Schedule (Tentative) We will attempt to follow the schedule, but need to be flexible. In addition to other cases and projects that may be assigned, a couple of guest speakers are still being planned.

Date

Audit Topic Introduction, assignment of groups, and selection of projects/ dates

Assignment Due Bring a copy of the syllabus to class. Case 7.3 BAAN Company N.V. Read the article on the following website: http://www.time.com/time/business/article/0,8599,194573,00.html Case 3.1 The Trolley Dodgers Case 3.2 Howard Street Jewelers, Inc. Case 3.3 Saks Fifth Avenue Write a two page, double-spaced summary addressing the question What are advantages and limitations of outsourcing the Internal Audit function? Case 3.4 Triton Energy Ltd. Case 3.5 Gooder Brothers Case 3.6 Troberg Stores Write a two page, double-spaced paper addressing the question What is auditor independence? Case 6.1 Leigh Ann Walker, Staff Accountant Case 6.2 Bill DeBurger, In-Charge Accountant Case 6.4 Tommy OConnell, Audit Senior Write a two page, double-spaced paper on factors you should consider in planning for a financial statement audit. Case 6.5 Avis Love, Staff Accountant Case 6.6 Charles Tollison, Audit Manager Case 6.7 Hamilton Wong, In-Charge Accounting Case 1.5 The Leslie Fay Companies Case 1.11 United States Surgical Corporation Case 2.1 Jack Greenberg, Inc. Case 2.2 Golden Bear Golf, Inc. Case 2.3 Happiness Express, Inc. Case 2.5 General Technologies Case 2.8 Perry Drug Store, Inc. Case 2.4 CapitalBanc Corporation Case 2.7 Campbell Soup Company Case 2.9 SmarTalk Teleservices, Inc.

Group

Class Presentation

July 5 Thursday

Internal Control

9 Monday

Internal Control

1, 2 and 3

Internal Audit - Each group will prepare a list of what it considers to be the top 5 key points.

10

Work on Project Professional Role of Auditors Work on Project Professional Role of Auditors Analytical Procedures Audit of High Risk Accounts Audit of High Risk Accounts High Risk Accounts

11

1, 2 and 3

Auditor Independence Each group will prepare a list of what it considers to be the top 5 key points.

12

1, 2 and 3

13 16 Monday 17 18 19

Audit Planning Each group will prepare a list of what it considers to be the top 5 key points.

1, 2 and 3 20 23 Monday 24 Fraud Write a two page, double-spaced summary addressing the question What are the auditors responsibilities to detect fraud during a financial statement audit? Case 5.1 Cardillo Travel Case 5.8 NextCard, Inc. Case 4.2 Jamaica Water Property Case 4.3 Suzette Washington, Accounting Manager Case 4.6 Laurel Valley Estates Case 6.8 David Meyers, Controller Case 5.2 PTL Club Case 8.1 Fred Stern & Company, Inc. Case 8.2 First Securities Company of Chicago Case 8.3 Equity Funding Corporation of America

Auditor Responsibility Each group will prepare a list of what it considers to be the top 5 key points.

Auditor Ethics

Auditor Ethics

25 26

Legal Liability Legal Liability

27

Financial Institutions Related Party Transactions Individual Case Presentations, And Other Issues Individual Case Presentations, And Other Issues

Write a two page, double-spaced summary addressing the question What is the difference between consulting services, attestation services, and assurance services? Case 1.7 Lincoln Savings & Loan Case 1.10 OAM Gazprom PROJECTS DUE.

1, 2 and 3

Audit Services Each group will prepare a list of what it considers to be the top 5 key points.

30 Monday

31

Case 7.4 Hopkins v. Price Waterhouse (read and be prepared to discuss if called upon; no written summary is required) Group 1 Group 2 Group 3 SAS 104 106 SAS 107 109 SAS 110-111 Each group will provide a brief back ground on the assigned SAS and explain its requirements.

August 1

Risk Standards Statement on Auditing Standards - Risk Assessment Write a summary of each SAS and explain its requirements? Write 2-3 page paper explaining PCAOB, AICPA, and GAO standards? What are they and when do they apply? Others SASs 1, 2 and 3

2 3 August 6 Monday

Audit Standards Audit Standards Recent Developments Catch-up Day and Review for Final Exam FINAL EXAM

Log onto the AICPA, PCAOB, GAO, and write a two-page, double-spaced summary on audit exposure drafts and other pending changes to standards, etc.

Recent Developments Each group will summarize and explain the recent developments it has identified.

7 8

Wednesday 12:30 2:00