Audit of the Expenditure Cycle: Tests of Controls 6 and Substantive Tests of Transactions - II  Audit of Payroll Transactions  Audit of Production Cycle Transactions  Audit of Inventory Warehousing 5

(1)

Course Name: XAAUDIT

Course Title: Applied Auditng Instructors: Magat and Tipay

Required Text: Applied Auditing by Cabrera

Course Description: It covers detailed approaches to problems and situations normally encountered in the independent examination of cash, accounts receivables, inventories, investments, prepaid expenses, deferred charges, property, plant and equipment, intangibles liabilities, owner’s equity, and revenue and expenses. It deals specifically with the application of auditing standards, techniques, and procedures; internal control evaluation; preparation of audit working papers; introduction of computer application in auditing;

audit adjustment; and audit reports pertaining to a medium-sized manufacturing or a trading concern. The determination of audit objectives and audit programs, evaluation of internal control, and determination of substantive procedures as applied to various accounts are better appreciated as the transaction cycle approach is employed in the course. Audit working papers and audited financial statements are the natural outputs of this course leading the preparation of audit reports.

Topic Outline: Estimated No of Hours

1. Fundamentals of Auditing and Overview of the Audit Process: 3

 Audit Planning

 Overview of Auditing

 Auditing Defined

 Objective and General Principles of Auditing (PSA 100

 Major Steps in the Systematic Process of Financial Statements

 The Audit Process

 Audit Planning

 The Audit Process and Purposes

 Audit Planning Considerations

 Planning (PSA 300)

 Knowledge of the Business (PSA 310)

(2)

 Audit materiality (PSA 320)

2. Evidence Accumulation and Evaluation – 6 Interim Audit Phase: Tests of Controls and

Substantive Tests of Transactions (PSA 500-599)

 Audit of the Revenue and Collection Cycle:

 Tests of Controls and Substantive Tests of Transactions

 Nature of the Revenue and Collection Cycle

 Documents Used in the Revenue and Collection Cycle

 and their Audit Significance

 Accounting Records in the Revenue and Collection Cycle

 Audit of Significant Sales Transactions

 Audit of Sales Adjustments Transactions

 Audit of Cash Receipts Transactions

3. Audit of the Expenditure Cycle:

Tests of Controls and Substantive Tests of Transactions 6

 Nature of the Expenditure Cycle

 Documents Used in the Expenditure Cycle and their Audit Significance

 Accounting Records Involved in the Expenditure Cycle

 Audit of Acquisitions and Cash Disbursements Transactions

4. Audit of the Expenditure Cycle: Tests of Controls 6 and Substantive Tests of Transactions - II

 Audit of Payroll Transactions

 Audit of Production Cycle Transactions

 Audit of Inventory Warehousing

5. Audit of the Financing and Investing Cycle: 6 Tests of Controls and Substantive Tests of Transactions

 Nature

(3)

 Financing Cycle Transactions

 Investing Cycle Transactions

 Documents and Records

 Auditing the Financing Cycle

 Auditing the Investing Cycle

6. Evidence Accumulation and Evaluation – Final Audit Phase: 6 Substantive Tests of Balances and Analytical Procedures

 Substantive Tests of Cash

 Audit of Cash on Hand and in Bank

 Audit Objectives and Procedures

 Discussion of Substantive Audit Procedures

 Proof of Cash (Four-Column Reconciliation)

 Substantive Tests of Receivables and Sales

 Audit of Trade Receivables and Sales Balances

 Discussion of Audit Procedures

7. Substantive Tests of Inventories and Cost of Goods Sold 6

 Substantive Tests of Inventories and Cost of Goods Sold Balances

8. Substantive Tests of Investments 6

9. Substantive Tests of Property and Equipment 6

10. Substantive Tests of Intangible Assets 6

(4)

11. Substantive Tests of Prepaid Expenses and Deferred Charges 6

 Audit Objectives

 Substantive Audit Procedures

12. Substantive Tests of Liabilities 3

 Audit of Current Liabilities

 Audit of Long-term Liabilities

13. Substantive Tests of Owners’ Equity Accounts 6

 Audit of Sole Proprietorship and Partnership

 Audit of Stockholders’ Equity Accounts

14. Substantive Tests of Income Statement Accounts 6

 Substantive Audit of the Revenue and Expense Accounts

 Audit Objectives

 Auditor’s Approach in the Examination of Revenues and Expenses

 Analytical Review of Operations

 Account Analysis

15. Completing the Audit and Report Preparation 6

 Completing the Audit

 Related Party Transactions (PSA 550)

 Subsequent Events Review (PSA 560)

 Letters of Inquiry / Review for Contingent Liabilities

 Evaluation of Going Concern assumption (PSA 570)

 Management Analytical Procedures

 Evaluating Findings, Formulating an Opinion

 and Drafting the Audit Report (PSA 700

(5)

16. Preparation of Audited Financial Statements 6

 Summary of Principles and Guidelines in

 Financial Statements Preparation

17. Comprehensive Audit of Balance Sheet and 5 Income Statement Accounts

 Evaluating Audit Findings

18. Writing the Audit Report 4

 The Standard Unqualified Auditor’s Report

 Requirements of the Standard Unqualified Audit Report

 Basic Elements of the Standard Unqualified Audit Report (PSA 700)

 Explanatory Language Added to the Standard Audit Report

 Accounting Principles

 Long-form Reports

 Circumstances Requiring a Departure from an Unqualified Opinion

 Summary of Auditor’s Report

 Report Modifications

 Different Opinions on Different Statements

 Reports on Comparative Statements (PSA 710)

 Comparative Financial Statements in Audit Reports (PSA 710)

 Other Information in Documents Containing

 Audited Financial Statements (PSA 720)

 Summary of Departures from an Unqualified Opinion

 Summary of Other Circumstances Affecting the Standard Unqualified Audit Report

TOTAL SESSION EXPRESSED AS CONTACT HOURS 108

(6)

Recap

Identification of CPC Topics Covered in this Course Estimated Contact Hours

Accounting 95

Marketing 1

Finance 1

Management 1

Organizational Behavior 1

Human Resource Management 1

Operations Management 1

Legal Environment of Business 1

Economics 1

Ethics 4

Information System 2

Quantitative Methods/ Statistics 1

International/ Global Dimensions of Business 3

Integrative Experience 24

Total Estimated Contact Hours 137