three_0580-auditing

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ALLAMA IQBAL OPEN UNIVERSITY ISLAMABAD

(Department of Business Administration)

AUDITING (MBA-580)

CHECKLIST

SEMESTER: AUTUMN 2010

This packet contains the following material:

1. Text books

2. Course outline

3. Assignment no. 1, 24. Assignment forms ( 2 sets)

In this packet, if you find anything missing out of the above mentioned

material, please contact at the address given below:-

Director,

Admission & Mailing,

Allama Iqbal Open University,

H-8, ISLAMABAD.

Phone: 051-9057611-12

Course Coordinator


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ALLAMA IQBAL OPEN UNIVERSITY ISLAMABAD

(Department of Business Administration)

WARNING1. PLAGIARISM OR HIRING OF GHOST WRITER(S) FOR SOLVING

THE ASSIGNMENT(S) WILL DEBAR THE STUDENT FROM AWARD

OF DEGREE/CERTIFICATE, IF FOUND AT ANY STAGE.

2. SUBMITTING ASSIGNMENTS BORROWED OR STOLEN FROM

OTHER(S) AS ONES OWN WILL BE PENALIZED AS DEFINED IN

AIOU PLAGIARISM POLICY.

Course: Auditing (580) Semester: Autumn 2010

Level: MBA

Total Marks: 100

Pass Marks: 40ASSIGNMENT No. 1

(Units: 14)Note: Attempt all questions. All questions carry equal marks.Q. 1 Explain the term auditing. What are the main differences between accounting and

auditing? Discuss with examples. (20)

Q. 2 Critically discuss the term internal control system. Explain internal control systemfor the following items in the light of manufacturing organization. (20)(a) Remuneration of employees(b) Trading transactions(c) Stock control(d) Investment

Q. 3 Explain the term sampling and its advantages in audit. Discuss the probabilitysampling methods using for conducting audit of trading organization. (20)

Q. 4 Explain the difference between vouching and routine checking. Discuss thevouching process of receipts side of cash book in the light of audit of non-tradingorganization. (20)

Q. 5 Explain the different types of audit. Critically evaluate the relationship betweeninternal audit and external audit in the light of a commercial organization. (20)

GUIDELINES FOR ASSIGNMENT # 1

You should look upon the assignments as a test of knowledge, management skills, andcommunication skills. When you write an assignment answer, you are indicating yourknowledge to the teacher:

Your level of understanding of the subject; How clearly you think; How well you can reflect on your knowledge & experience; How well you can use your knowledge in solving problems, explainingsituations, and describing organizations and management;

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How professional you are, and how much care and attention you give to whatyou do.

To answer a question effectively, address the question directly, bring important related

issues into the discussion, refer to sources, and indicate how principles from the coursematerials apply. You must also be able to identify important problems and implicationsarising from the answer.

For citing references, writing bibliographies, and formatting the assignment, APA formatshould be followed.

ASSIGNMENT No. 2(Units: 19) Total Marks: 100

Pass Marks: 40

This assignment is a research-oriented activity. You are required to obtain informationfrom a business/commercial organization and prepare a report of about 1000 words onthe issue allotted to you to be submitted to your teacher for evaluation.

You are required to select one of the following issues according to the last digit of yourroll number. For example, if your roll number is P-3427180 then you will select issue # 1(the last digit): -

List of Issues/Topics0. Internal audit is one of the important procedures of audit. Students are required to

visit a commercial bank to observe the process of internal audit and evaluate it.

1. Internal control system in one compulsory activity of audit. Students are advised tostudy the internal control system of fixed assets of a manufacturing organization.

2. Statistical sampling is one of the key activities in audit process. Students are

advised to visit a commercial organization and evaluate the sample selectionprocess of that organization.

3. There are different techniques used for vouching. Students are advised to study aservices organization and analyze the techniques used by that organization forvouching activities.

4. Verification is one of the essential parts of audit. Students are advised to visit abusiness organization and evaluate the verification process used for goodwill.

5. Audit Report is an important document. Students are required to visit and analyzethe audit report of a financial institution.

6. Auditors lien is one of the important concepts used in auditing. Students arerequired to study a business organization and collect information regarding the

auditors lien and evaluate them.

7. Management audit program is an important activity in audit process. Students arerequired to visit a banking organization and evaluate the management auditprogram.

8. EDP is one of the important concepts used in auditing. Students are required tostudy the nature and process of EDP taking the example of a manufacturingorganization.

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9. Investigation is one of the important concepts used in audit. Students are requiredto visit a manufacturing organization to study and evaluate the different stages ofinvestigation.

The report should follow the following format:1. Title page2. Acknowledgements3. An abstract (one page summary of the paper)4. Table of contents5. Introduction to the issue (brief history & significance of issue assigned)6. Practical study of the organization (with respect to the issue)7. Data collection methods8. SWOT analysis (strengths, weaknesses, opportunities & threats) relevant to the

issue assigned9. Conclusion (one page brief covering important aspects of your report)10. Recommendations (specific recommendations relevant to issue assigned)11. References (as per APA format)

12. Annexes (if any)

GUIDELINES FOR ASSIGNMENT # 2 1.5 line spacing Use headers and subheads throughout all sections Organization of ideas Writing skills (spelling, grammar, punctuation) Professionalism (readability and general appearance) Do more than repeat the text Express a point of view and defend it.

Workshops:The workshop presentations provide you an opportunity to express their communication

skills, knowledge & understanding of concepts learned during practical study assigned inassignment # 2.

You should use transparencies and any other material for effective presentation. Thetransparencies are not the presentation, but only a tool; the presentation is thecombination of the transparencies and your speech. Workshop presentationtransparencies should only be in typed format.

The transparencies should follow the following format:1) Title page2) An abstract (one page summary of the paper)3) Introduction to the issue (brief history & significance of issue assigned)4) Practical study of the organization (with respect to the issue)5) Data collection methods

6) SWOT analysis (strengths, weaknesses, opportunities & threats) relevant to theissue assigned

7) Conclusion (one page brief covering important aspects of your report)8) Recommendations (specific recommendations relevant to issue assigned)

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Guidelines for workshop presentation: Make eye contact and react to the audience. Don't read from the transparencies or

from report, and don't look too much at the transparencies (occasional glances are

acceptable to help in recalling the topic to cover). A 15-minute presentation can be practiced several times in advance, so do that until

you are confident enough. Some people also use a mirror when rehearsing as asubstitute for an audience.

Weightage of theory & practical aspects in assignment # 2 & workshop presentations:Assignment # 2 & workshop presentations are evaluated on the basis of theory & itsapplicability. The weightage of each aspect would be:Theory: 60%

Applicability (practical study of the organization): 40%

COURSE OUTLINEAUDITING (MBA-580)

UNIT 1: INTRODUCTION TO AUDITING

1.1. Historical development of auditing

1.2. Various definitions of auditing

1.3. Objectives of an audit

1.4. Auditing distinguished from book keeping and accounting

1.5. Qualification of an auditor

1.6. Professional ethics

1.7. Types of audit

1.8. Consideration to begin a new audit

UNIT 2: INTERNAL CONTROL, INTERNAL CHECK AND INTERNAL AUDIT2.1. The system of internal control

2.2. Evaluation of internal control

2.3. Types of internal control

2.4. Internal check

2.5. Internal audit

2.6. Practical applications

2.6.1 Overall financial control

2.6.2 Receipt and payments of cash

2.6.3 Control of funds

2.6.4 Balances held

2.6.5 Cheque payments

2.6.6 Remuneration of employees2.6.7 Trading transactions

2.6.8 Stock control

2.6.9 Fixed assets2.6.10 Investment

UNIT 3: AUDIT SAMPLING

3.1. Introduction to sampling

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3.2. The basis for sample selection

3.3. The sample size

3.4. Methods of sample selection

3.5. Sample evaluation3.6. Sampling in practice

UNIT 4: VOUCHING AND EXAMINATION OF GENERAL RECORDS

4.1 Vouching its meaning

4.2 Distinction between vouching and routine checking

4.3 Audit and vouching

4.4 Vouching technique

4.5 Vouching of cash book

4.4.1 Receipt side

4.4.2 Payment side

UNIT 5: VERIFICATION OF ASSETS AND LIABILITIES5.1 Meaning of verification5.2 Problems in the valuation of assets

5.3 Fixed assets

5.4 Floating assets and mode of their valuation

5.5 Wasting assets

5.6 Intangible assets and their valuation

5.7 Auditors position as regards the valuation of assets

5.8 Verification of liabilities

UNIT 6: THE COMPANYS AUDITOR

6.1 Appointment of auditor

6.2 Qualifications of an auditor6.3 Remuneration of auditor

6.4 Removal of auditor

6.5 Status of an auditor

6.6 Rights, powers and duties of an auditor

6.7 Auditors lien

6.8 Preliminaries before the actual work

6.9 Audit of share capital

6.10 The auditors report

UNIT 7: MANAGEMENT AND PERFORMANCE AUDIT

7.1 Definition of management audit

7.2 Importance of management audit7.3 Objective of management audit

7.4 Criticism on management audit7.5 Distinction between statutory audit and management audit

7.6 Who should conduct the management audit

7.7 Preliminary to the conduct of management audit

7.8 Management audit program

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7.9 Work and duties of the management auditor

7.10 Management auditors report

UNIT 8: COMPUTER CONTROLS AND AUDIT TECHNIQUES8.1 Nature of EDP system

8.8.1 Hardware

8.8.2 Soft ware

8.2 Computer controls

8.8.2. General control

8.3. Organization of an EDP Department8.3.1 Program documentation

8.4 Security contorts

8.5 Application controls

8.6 Input controls

8.7 Processing controls

8.8 Out put controls8.9 On-line, real time system (OLRT)

8.10 EDP and the audit process

8.10.1. Flow chart analysis

8.10.2. Test Decks

8.10.3. Generalized computer audit programs.

UNIT 9: SPECIAL AUDIT AND INVESTIGATIONS.

9.1. Introduction of special audit

9.1.1. Non profit institutions

9.1.2. Specialize audit under other status

9.2. Investigations

9.2.1. Events necessitating an investigation9.2.2. Stages of an investigation

9.2.3. Difference between investigation and auditing

9.2.4. Business purchases

9.2.5. Profit forecasts

9.2.6. Investigation on behalf of a prospective lender

9.2.7. Fraud

9.2.8. Investigation under the companies act.

Book Recommended:

Saeed Amjad Khawaja (Revised edition 2007), Auditing Principles andProcedures Lahore. Institute of Business Management.

Additional Reading:

(1) Auditing Principles and Practice by DN Tripatty.

(2) Auditing and Assurance Services by Jack C. Robertson and TimothyJ. Louwers.

(3) The Audit Process, principles, Practice and Cases by Iain Gray andSturt Manson.

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(4) Auditing Concepts and methods; A Guide to Current Theory and practice byDouglas R. Carmichael, John J. Willingham and Caral A. Schaller.

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