ST MARY’S UNIVERSITY
FACULTY OF ACCOUNTING AND FINANCE
COURSE OUTLINE
Course Title: Auditing Principles and Practices I
Course No.: Acct 401
Credit Hours: 3
Prerequisite: Acct 302
Status of Course: Major
Delivery Time: Year III Semester I
COURSE DESCRIPTION
The emphasis of this course is on conceptual, theoretical and practical aspects of auditing financial
statements. The course is designed to develop knowledge, understanding, and practical application of
core external audit processes based on the principles of international auditing standards.
The course commences with an introduction to assurance and auditing and proceeds to the discussion
of audit profession and regulatory organizations, International Auditing Standards (ISAs), professional
ethics and legal liability issues for auditors. Next is a discussion that helps the student to recognize
statement assertions, the evaluation of the risks to which these assertions are susceptible, and the
methodology of planning to assess the degree to which these risks give rise to error or fraud in
financial information. The course also covers issues of audit evidence, audit methodology, and
emphasizes assessment of the internal control system and its impact on audit risk. The last part of the
course examines the content of an audit report and the reason for issuing varying types of reports.
COURSE OBJECTIVES
After studying this course, the student should be able to:
Describe the nature of an audit and explain the economic and legal basis for auditing.
Demonstrate ability in the use of International Auditing Standards in various audit issues.
Assess professional ethics with respect to the audit function and review the main
components of Code of Professional Conduct.
Examine the auditor's legal liability to clients and third parties.
Demonstrate expertise in planning and carrying out audit procedures in accordance with
International Auditing Standards and demonstrate how an auditor documents his work.
Demonstrate how the auditor obtains an understanding of the entity and its environment
and assesses the risk of material misstatement.
Explain how materiality and various risk assessments impact the audit program.
Determine the audit procedure needed to audit any assertion.
Relate management assertions to general and specific audit objectives, relate audit
evidence, and audit objectives to evidence-gathering decisions.
Demonstrate ability in carrying out functions of internal control systems and examine the
elements of an internal control structure and their components.
Describe the audit report and explain conditions for qualifications in the audit report.
COURSE CONTENTS
CHAPTER 1. The Nature, Purpose, Scope of Audit and Assurance Services
Meaning Of Audit
Assurance Services: Overview
Why Audits are Conducted
Types of Audit and Auditors
ISA Reference(s)
IAASB framework
ISA 200, Overall Objectives of the Independent Auditor and the Conduct of an Audit in
Accordance with International Standards on Auditing
1
CHAPTER 2. The Auditing Profession
The Regulatory Framework Governing Auditing
International Standards on Auditing (ISA)
Professional Ethics: Fundamental Principles, Threats and Safeguards
Legal Liability of Auditors
Rights and Duties, Appointment, Dismissal and Resignation of an Auditor
ISA Reference(s)
ISA 200, Overall Objectives of the Independent Auditor and the Conduct of an Audit in
Accordance with International Standards on Auditing
ISA 250, Consideration of Laws and Regulations in an Audit of Financial Statements
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CHAPTER 3. Materiality and Risk Assessment
Audit Risk
Materiality
ISA Reference(s)
ISA 320, Materiality in Planning and Performing an Audit
ISA 330, The Auditor's Responses to Assessed Risks
CHAPTER 4. Client Acceptance and Planning the Audit
Client Acceptance and Continuance
Planning the Audit
Appointment, Remuneration, and Removal of Auditors
ISA Reference(s)
ISA 210, Agreeing the Terms of Audit Engagements
ISA 300, Planning an Audit of Financial Statements
ISA 315, Identifying and Assessing the Risks of Material Misstatement through
Understanding the Entity and Its Environment
ISA 320, Materiality in Planning and Performing an Audit
ISA 330, The Auditor's Responses to Assessed Risks
ISA 520, Analytical Procedures
ISA 550, Related Parties
CHAPTER 5. Audit Responsibility, Objectives, Evidence and Recording the
Audit
Audit Responsibility
Management Assertions
Audit Objectives
Audit Evidence
Audit Documentation
ISA Reference(s)
ISA 240, The Auditor's Responsibilities Relating to Fraud in an Audit of Financial
Statements
ISA 250, Consideration of Laws and Regulations in an Audit of Financial Statements
ISA 260, Communication with Those Charged with Governance
ISA 265, Communicating Deficiencies in Internal Control to Those Charged with
Governance and Management
ISA 230, Audit Documentation
ISA 500, Audit Evidence
ISA 501, Audit Evidence-Specific Considerations for Selected Items
ISA 505, External Confirmations
2
CHAPTER 6. Internal Control
Meaning and Objectives
The Basic Elements
Recording Internal Control System
Internal Control and External Auditor
Internal Control and Internal Auditor
Inherent Limitations
ISA Reference(s)
ISA 260, Communication with Those Charged with Governance
ISA 265, Communicating Deficiencies in Internal Control to Those Charged with
Governance and Management
ISA 315, Identifying and Assessing the Risks of Material Misstatement through
Understanding the Entity and Its Environment
CHAPTER 7. Audit Reports
Types of Audit Reports
Basic Contents of a Standard Audit Report
Audit Opinion
ISA Reference(s)
ISA 700, Forming an Opinion and Reporting on Financial Statements
ISA 705, Modifications to the Opinion in the Independent Auditor's Report
ISA 706, Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Independent
Auditor's Report
ISA 710, Comparative Information-Corresponding Figures and Comparative Financial
Statements
ISA 720, The Auditor's Responsibilities Relating to Other Information in Documents
Containing Audited Financial Statements
REFERENCES
Arens, A. A., Elder, R. J., Beasley, M. S., & Hogan, C. E. (2017). Auditing and
assurance services an integrated approach. 17th edition .Boston, MA: Pearson.
Arens, A. A., Elder, R. J., Beasley, M. S., & Hogan, C. E. (2016). Auditing and
assurance services. 16th edition .Boston, MA: Pearson.
Whittington, R., & Pany, K. (2016). Principles of auditing & other assurance
services. 20th edition . New York: McGraw-Hill Education.
Hayes R., Wallage P., and Gortemake H., Principles of Auditing: An Introduction to
International Standards on Auditing, 3rd Edition, 2014
2018 Handbook of International Quality Control, Auditing, Review, Other Assurance, and
Related Services Pronouncements: Volume I, II & III (the handbook).
Evaluation Item Points
Project work 20%
Midterm exam 30%
Final Exam 50%