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Name of Course: Risk Mathematics For Auditing


Course Code: BMIA 32106
Status: Core
Name of Academic Staff: Ms. Tengku Hizam YM Tengku Izham
Course Rationale:
In this unique course students learn to integrate knowledge and skills from mathematical discipline and apply
them to solve real world problems from various auditing segments. The course's setting mimics a business
environment, where students learn a variety of problem solving techniques for uncertain scenarios, are
presented with problems and are asked to make decisions or recommendations based on a series of
assumptions.
Year and Semester offered: Year 2 Semester 1
Total Student
Face-to-Face (by
Total Guided and Independent Learning
Learning Time
hours)
L = Lecture
L
T
P
I
SLT
T = Tutorial
42
14
64
Learning Activities
(Hours)
P = Practical
1
Lectures
63
O = Others
a Attending Lectures
42
b Pre, Post Preparation and Independent
21
Learning
2 Tutorial/Discussions
36
a Attending Discussions
18
b Preparation for Discussions
18
3 Assignments
12
a Assignment Preparation and
Submission.
12
6 Hours Per Assignment.
2 Assignments
4 Assessments
25
a 3 Continuous Assessment (2 Hour + 3
15
Hours Preparation)
b 1 Final Examination (3 Hours +
10
7 Hours Preparation)
Total
136
3
Subject Credit (136 40 =3.4)
Credit Value: 3
Prerequisite (if any): Nil
Course Outcomes:
Upon successful completion of the course, the student will be able to:
CO1: Understand the mathematical application relates finance and risk management.
CO2: Derive and apply the fundamental formulae of financial mathematics.
CO3: Verifying the mathematical accuracy of companies
CO4: Demonstrate ability to use decision-making processes in making financial decisions

10

Learning Outcome Transferable Skills:


8 MQF Learning Outcomes (LO)

COURSE OUTCOMES
11

12

LO8

Managerial & Entrepreneurial Skills (K/P/A)

Information Management and Life Long Learning Skills (P/A)

Problem Solving and Scientific Skills

Values, Attitudes & Professionalism (A)

Social skills & Responsibility

Practical Skills (P)

Knowledge (K)

CO 8 MQF Learning Outcomes (LO)

Communication, Leadership and Team Skills

LO1 LO2 LO3 LO4 LO5 LO6 LO7

CO1

Understand the mathematical application


/
relates to finance and risk management.

CO2

Derive and apply the fundamental formulae


/
of financial mathematics.

CO3

Verifying the mathematical accuracy of


/
companies

CO4

Demonstrate ability to use decision-making


/
processes in making financial decisions

Transferable skills:
Communication Skills
Critical Thinking and Problem Solving Skills
Teamwork Skills
Lifelong Learning and Management Skills
Managerial & Entrepreneurial Skills
This course is aimed to ensure learners equipped with knowledge that give them the confidence and
skill to determine appropriate management understanding for maximum efficiency.
1. Teaching, Learning and Assessment Strategy:
Lectures and Tutorials
Mid Semester Exam and Final Examination

Report Writing
Written Assessment

Assignments based learning


Assessment of Assignment

Both summative and formative assessments are employed for this course.
1. Continuous Assessment
a. Case Study
b. Assignments
c. Group Projects

2.

14
15

Synopsis:
This course will help students recognize that there is some uncertainty when an auditor provides an opinion
on whether an entity's information are fairly presented. This uncertainty is referred to as audit risk. This
course introduces the audit process within the context of business risk--teaching students why it is important
to first understand the organization's business environment and how students can apply the risk models. It also
prepares students to succeed amidst today's numerous auditing changes with the latest look at audit
regulations, concepts, and practices as they apply in today's technological, systems-oriented environment
based on mathematical models
Mode of Delivery: Lectures and Tutorials.
Assessment Methods and Types:
Mode of
Assessment
AssessmentFormative Summative Assessment

13

d. Mid Semester Exam


Closed Book Final Examination
a. Short answer question
b. Problem based long questions
Essay Question
c. Mid Semester Exam

Total

Percentag
e (%)

Final
Examination

Programme Outcomes
PO PO PO PO
1
2
3
4
C
A
C,P C,P

60%

Mid Semester
Examination
Assignments
Tutorials

PO
5
C,P

PO
6
A

PO
7
C,P

PO
8
A

10

10

PO9
A

PO1
0
A

10

10%

10%

20%

100%

Course Outcomes
Learning
Domains
Marks
Allocation
Total Marks

15

15

1,3

2,3

2,3

Cognitive
25

Affective
55
100 %

20
1,2,3,
4

Psychomotor
20

25
1,2,3,
4

16

Mapping of the Course Outcomes to the Programme Educational Objectives:


LEARNIN
PROGRAMME EDUCATIONAL
G
OBJECTIVES
COURSE
DOMAINS
OUTCOME
PE PE PE PE PE PE PE
C A P
O1 O2 O3 O4 O5 O6 O7
Understand
the
mathematical
application relates to, /
/
/
/
/
/
/
finance
and
risk
management.
Derive and apply the
fundamental formulae
/
/
/
/
/
/
of
financial
mathematics.

TEACHING
ASSESSMEN
METHODOL
T
OGY

Lecture and
Tutorial

Lecture and
Tutorial

Verifying
the
mathematical accuracy /
of companies

Lecture and
Tutorial

Demonstrate ability to
use
decision-making
/
processes in making
financial decisions

Lecture and
Tutorial

Assignment,
Mid Semester
and Final
Exam
Assignment,
Mid Semester
and Final
Exam
Assignment,
Mid Semester
and Final
Exam
Assignments,
Project and
Final Exam

Programme Educational Objectives (PEO)


PEO1
PEO2
PEO3
PEO4
PEO5
PEO6
PEO7

To produce graduates who possess fundamental knowledge, principles and skills in


Internal Auditing and Management.
To produce graduates who have strong analytical and critical thinking skills to solve
problems by applying knowledge, principles and skills in Internal Auditing and
Management.
To produce graduates who possess the ability to exercise judgment, express opinion,
recommend desirable solutions and to recognize the impact of internal auditing on
individuals institutions.
To produce graduates who possess skills to integrate various auditing solutions.
To produce graduates who have communication, teamwork, leadership, interpersonal
skills, and aware of the social, ethical and legal responsibilities.
To produce graduates who possess skills for lifelong learning, research and career
development.
To produce graduates who have entrepreneurial skill and a broad business and real
world perspective.

17

Mapping of the Course Outcomes to the Programme Outcomes:


COURSE
OUTCOME

LEARNIN TEACHING
ASSESSME
G
METHODOLO
NT
DOMAINS
GY

PROGRAMME OUTCOMES

PO PO PO PO PO PO PO PO PO PO
C
1 2 3 4 5 6 7 8 9 10

Understand
the
mathematical
application relates /
to finance and risk
management.
Derive and apply
the fundamental
formulae of
/
financial
mathematics.

Verifying the
mathematical
accuracy of
companies

Demonstrate
ability to use
decision-making
processes in
making financial
decisions

Lecture and
Tutorial

Lecture and
Tutorial

Lecture and
Tutorial

Lecture and
Tutorial

Assignment,
Mid Semester
and Final
Exam
Assignment,
Mid Semester
and Final
Exam
Assignment,
Mid Semester
and Final
Exam
Assignments,
Project and
Final Exam

Programme Outcomes (PO)


Demonstrate knowledge and understanding of essential facts, concepts, principles, and
theories relating to Internal Auditing and Management.
(Cognitive)
Communicate effectively with peers, clients, superiors and maintain and strengthen
PO2
professional relationship with management and external auditors. (Affective)
Exercise judgment, express opinion and recommend desirable changes to existing
PO3
policies. (Cognitive, Psychomotor)
Examine records, processes and documents in order to arrive at reasoned conclusions
PO4
as to adequacy of internal control as a contribution to the proper and effective use of
resources. (Cognitive, Psychomotor)
PO5
Evaluate the institutions financial operation and risk. (Cognitive, Psychomotor)
Determine the level of compliance with rules and procedures of Corporate Governance
PO6
and recommend desirable changes to existing policies. (Affective)
Investigate cases of misappropriation, misconduct and fraud. (Cognitive,
PO7
Psychomotor)
Demonstrate the standard professional practices of internal auditing and code of
PO8
ethics. (Affective)
Apply skills and principles of lifelong learning in academic and career
PO9
development (Affective)
Apply broad business and real world perspectives daily and demonstrate
PO10
entrepreneurial skills. (Affective)
CO
PO
L
T
P
Content Outline as per SLT topic:
PO1

18

(Hours of LLectures, T-Tutorials,


P-Practicals)
Auditing simple risk assessments.
- Probablilities
- Probabilities forecaster
- Calibration & Resolution
- Proper score Function.
- Audit point: Mismatched Interpretations of probability
- Audit point: Ignoring uncertainty about probabilities
- Audit point: Not using data to illuminate probabilities
- Outcomes represented without number and with number
Probability Distribution
- Discrete uniform distribution
- Audit point: Benfords Law
- Non-parametric distribution
- Type of Distributions Bernouli, Binomial, Poisson,
- Multinomial, Pareto, Triangular Distribution
- Audit Point
Auditing the design of business prediction models.
- Process
- Population
- Mathematical Model & Model Structure
Auditing the design of business prediction models.
- Optimization
- Prediction intervals
- Monte Carlo Simulation
- Regression
- Audit Point
Auditing model fitting and validation.
- Bayesian Model
- Hypothesis Testing
- Estimators
- Sampling Distribution
Auditing and Samples
- Sample
- Accessible population
- Sampling frame
- Types of sampling Method
Auditing in the world of high finance
- Extreme Values
- Stress Testing
- Portfolio Models
- Risk Metrics Variance Model
- Hedge
- Black-Scholes

19

1,2,3,4

1,2,3,4

1,2,4

1,2,4

1,2

1,2

1,2,3

1,2,3,4,5

1,2,3,9,
10

1,2,3,9,
10

1,2,3,9,
10

1,2,3,9,
10

9,10

TOTAL 30
18
References
1. Matthew Leitch (2010). A Pocket Guide to Risk Mathematics: Key Concepts Every Auditor Should
Know
Additional References

1.

20

Andrew Chambers & Graham Rand. (2010). The Operational Auditing Handbook: Auditing Business
and IT Processes, 2nd Edition

Others:
Nil