Module Information

This elective module contributes to the contextual, conceptual and applied knowledge base specified in the QAA 2007 Benchmark Statement for degree schemes in Accounting. It introduces undergraduates to one of the main pillars of the accounting profession, and is designed to achieve further accreditation from professional accountancy bodies, specifically the Institute of Chartered Accountants in England and Wales; the Institute of Chartered Accountants of Scotland and the Association of Chartered Certified Accountants (ACCA).

Insofar as a rationale is required for continuing to teach auditing at all, it is as follows:

As economic and social life has become more complex, there has been a growth in the demand for transparency and accountability in a number of areas. Auditing in its most general sense is an important mechanism for addressing these demands. Historically, financial auditing of some kind has existed wherever economic resources have been entrusted to third parties. Today it has evolved into a significant tool for regulating economic activity in both the private and the public sector, and at entity and broader levels.

Financial auditing in the private sector takes place at the level of the client entities (PLCs etc) but at another level underpins the credibility of the financial infrastructure itself, the financial markets. High-profile failings in private sector accounting and auditing in North America and Europe have highlighted both the importance of audit within the context of corporate governance and also its strengths and weaknesses. As a result, an interest in the practices and context of auditing is far from being confined to the auditing firms and profession: regulators, legislators, company directors, analysts, lenders and shareholders all have direct interests in effective audit.

Audit, including forms of audit beyond financial audit, has also become increasingly important in the public sector. Here financial audit often meets value-for-money or performance audits, raising issues about the extension of the role of audit and potential tensions between the accountability and managerial functions of these more broadly defined audit functions.

The following broad areas will be covered:

Audit framework and regulation

• The nature of audit and other assurance engagements
• Statutory and public sector audits
• The audit regulatory environment, including auditing standards and corporate governance
• Auditing Practices Board (APB) ethical standards for auditors
• Other codes of ethics and conduct (e.g., ACCA'r code)

Internal audit

• Internal audit and corporate governance
• The interface between the external auditor and the internal auditor
• The internal audit function and its limitations
• Outsourcing the internal audit function
• Other internal audit assignments (VFM, IT audits, etc.)

Planning an audit and risk assessment

• Scope and general principles
• Assessing the risks of material misstatement
• Understanding the entity and its environment
• Materiality, fraud, laws and regulations
• Performing analytical procedures
• Audit planning
• Audit documentation

Internal Control

• Understanding the internal control system
• Auditor'r reliance on the internal control system
• Transaction cycles and tests of controls
• The components of internal control environment
• Evaluation of the internal control system
• Internal control report

Obtaining audit evidence

• Understanding and use of assertions by auditors
• Performing audit procedures
• Substantive procedures on specific items of FS
• Transactional testing using audit sampling techniques
• Computer Assisted audit techniques
• The work of experts in audit

Audit reporting

• Types of audit reports
• Management reports/ or letters of weakness
• Other audit reports i.e. internal audit reports

• Review

• Exam revision and coaching