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Initiatives in Auditing Kurt Pany Arizona State University

ASU Background. 1991 Accounting Curriculum Grant--ResultsTeaming skillsCooperative learningTechnologyCourses with a lab"1997Merger of CIS and Accounting2002Reassessment. Undergraduate AuditingOverall. An attempt to integrate concepts and applicationsConceptstext, readings, lectureApp

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Initiatives in Auditing Kurt Pany Arizona State University

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    1. Initiatives in Auditing Kurt Pany Arizona State University 26th Annual Meeting of the Federation of Schools of Accountancy October 18, 2002

    2. ASU Background 1991 Accounting Curriculum Grant--Results Teaming skills Cooperative learning Technology Courses with a “lab” 1997 Merger of CIS and Accounting 2002 Reassessment

    3. Undergraduate Auditing—Overall An attempt to integrate concepts and applications Concepts—text, readings, lecture Applications of those concepts—generally computerized

    4. Organization of Auditing Class twice per week—100 minutes each Session 1—Discuss new material Session 2—Case and exercise studies emphasis Lab session—ordinarily less than 2 hours

    5. Lab SEC filings, Professional Standards Analytical procedures Excel based assignment Scanning of data through multiple regression Generalized audit software (ACL or IDEA) Expert speakers Exams

    6. Today’s Coverage Generalized Audit Software Ethics Integration Professional Standards Implementation

    7. 1. Generalized Audit Software What is it? Computer programs used to locate and process data in a client’s computer-based records. Typical functions include extraction of data, comparison of records, and selection and analysis of samples.

    8. Why Use Generalized Audit Software in the Classroom? Software is used in practice Changes in technology have made auditing through the computer much easier Software is available for classroom use Supplement a concepts based approach

    9. Why Use Generalized Audit Software in the Classroom? (ctd) Our Goal IS to supplement auditing concepts through the use of a number of electronic applications IS NOT to replace concepts coverage IS NOT worry about “which software is best”

    10. Generalized Audit Software (GAS) ACL IDEA Proprietary

    11. Our Assignments Seven relatively structured assignments Integrated throughout course Skills (examples) Extracting data from a file Testing integrity of file Sampling—plan, perform, and evaluate Age receivables Access a relational database Understand file structure Join files Search for fraud in a relational database

    12. GAS Availability IDEA and ACL are available to instructors and students at a very low cost. IDEA software: www.audimation.com ACL software: www.acl.com Both make available network and individual PC versions; you may choose to use either or both.

    13. Sample GAS Application—Structured 1/2 Test valuation and existence of receivables Prepare an aged trial balance, list of accounts over a specific age Estimate expected future credit losses to test client’s allowance for doubtful accounts

    14. Sample GAS Application—Structured 2/2 Monetary unit/PPS sampling Plan Perform Evaluate Provide a realistic view of substantive procedures and the need for judgment

    15. Sample GAS Application—Unstructured 1/3 NOTE LEFT ON YOUR WINDSHIELD: Audit, audit, audit. That's all you dumb bean counters do and you worry about the littlest things and don't even realize that we've got a crook or several working for this company. Wake up and smell the frauds, dumbos.

    16. Sample GAS Application—Unstructured 2/3 Microsoft Access based—but few, if any, Access skills are needed by either instructor or student Northwind Database that is included with Access provides underlying data Northwind has 8 tables with various inter-relationships We modify it each semester to include “fraud.”

    17. Sample GAS Application—Unstructured 3/3 Involves application of skills learned in structured assignments, e.g., Joining various tables Extracting data Assignment: May be completed using only GAS skills OR Students with relational database skills may be “pushed” to use a combination of GAS and SQL

    18. GAS Summary Assignments can easily be modified for specific needs They work best when integrated with classroom topics Easily altered across semesters

    19. 2. Ethics Integration Overall Approach—Still have a chapter on ethics, but also integrate scenarios with ethical connotations throughout the course. The cases are very short and meant to be read and covered in class.

    20. Overall Background of Cases 9 cases You are a staff auditor Depending on the case, your experience goes from 1 month to a little over a year Overall, you seem to be doing relatively well But, meeting the time budget is difficult for you

    21. Cases Be Fit—friend wants an audit—independence issues BizCaz-You may purchase product at a discount Kinuso (I and II)—We will go through Universal Air (I and II)—GAAP departure, client and your superiors argue it is immaterial

    22. Cases Sarah’s Advice—Signing off audit steps without having performed them is suggested, but, of course, only when step is “unimportant.” Return of Universal Air—Universal is involved in a scheme that it probably not illegal, but very questionable relating to cancellations of reservations Vandella—CPE problem, you don’t have quite enough

    23. Example Case—Background 6 months experience The economy is terrible, Joke at lunch “Less congestion around the cubicles if they lay a few staff off.” You have just had a 6 month review that “seemed OK.” Thorough and conscientious Sometimes “worry about the wrong things,” should think about materiality Meeting budget is not the critical concern, but it matters

    24. Example Case—Details You overhear CFO take a call Apparently from Lingo, a major customer Lingo questions a $10,000 A/R confirmation. CFO says: Little differences happen every year…. In fact, thanks for letting me know so we can straighten things out Just sign the confirmation and I’ll give you a copy of the new version 3.5 software.

    25. Example Case—Details What to do? The amount, by itself, is clearly immaterial, $10,000 out of year end receivables of $1,000,000 and income of $3,000,000 No one knows you overheard the conversation In-charge is out of town Making budget is a problem for you as is worrying about the “wrong things” Confirmation is returned with no exception

    26. Professional Standards Implementation Years ago course included coverage of the auditing standards themselves Until recently coverage has not been not included Changes affecting me ASB—Several practitioners suggested to me that they wished that ACC grads had “research skills” CPA Exam—Will soon include research

    27. Professional Standards Issues Electronic or paper? Auditing and accounting? How thorough on the auditing?

    28. Our Approach Electronic Auditing only at this point Added to several of the lab assignments.

    29. AICPA reSOURCE electronic database of the AICPA’s literature. Organization Professional Standards Technical and Practice Aids AICPA Audit and Accounting Guides (including Audit Risk Alerts) About 60 schools have the software

    30. AICPA Cost? $395 each for license (first year) $295 annual charge each (after first year) How? Contact—Leticia B. Romeo Academic and Career Development Team AICPA (212) 596-6221 phone Lromeo@aicpa.org

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