ALLAMA IQBAL OPEN UNIVERSITY, ISLAMABAD (Department of Business Administration)

AUDITING (MBA-5545) CHECKLIST SEMESTER: SPRING 2012

This packet contains the following material: 1. 2. 3. 4. 5. Text books Course outline Assignment no. 1, 2 Assignment forms ( 2 sets) Schedule for submitting the assignments

In this packet, if you find anything missing out of the above mentioned material, please contact at the address given below:Mailing Officer, Services Block No. 28, Allama Iqbal Open University, H-8, Islamabad Phone: 051-9057611-12

Course Coordinator

ALLAMA IQBAL OPEN UNIVERSITY ISLAMABAD (Department of Business Administration) WARNING

1.
2. 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. SUBMITTING ASSIGNMENTS BORROWED OR STOLEN FROM OTHER(S) AS ONES OWN WILL BE PENALIZED AS DEFINED IN AIOU PLAGIARISM POLICY.

Course: Auditing (5545) Level: MBA

ASSIGNMENT No. 1
(Units: 14)

Semester: Spring 2012 Total Marks: 100

Q. 1 Define audit and its objectives with examples. Critically discuss professional ethics in the audit profession with examples. (20) Q. 2 Explain the term internal audit and its advantages. Discuss the relationship and differences between internal control system and internal audit with examples. (20) Q. 3 Discuss the term sampling used in audit profession. Also discuss the advantages of probability sampling methods over non-probability sampling methods in the audit prospective. (20) Q. 4 What is routine checking? Explain in detail. Discuss the advantages and disadvantages of routine checking in detail. (20) Q. 5 Explain the term vouching. Critically discuss the various techniques used for vouching in detail. (20)

GUIDELINES FOR ASSIGNMENT No. 1

You should look upon the assignments as a test of knowledge, management skills, and communication skills. When you write an assignment answer, you are indicating your knowledge to the teacher: Your level of understanding of the subject; How clearly you think; How well you can reflect on your knowledge and experience; How well you can use your knowledge in solving problems, explaining situations, and describing organizations and management;

 How professional you are, and how much care and attention you give to what you 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 course materials apply. You must also be able to identify important problems and implications arising from the answer. For citing references, writing bibliographies, and formatting the assignment, APA format should be followed.

ASSIGNMENT No. 2
Total Marks: 100 This assignment is a research-oriented activity. You are required to obtain information from a business/commercial organization and prepare a report of about 1000 words on the 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 your roll number. For example, if your roll number is P-3427180 then you will select issue # 0 (the last digit): List of Topics: 0. There are various consideration points while conducting a new audit. You are advised to study and analyze one approach keep in view business organization. 1. Internal check is one of the key methods used to minimize fraud and missappropriation. You are advised to study and analyze the process of internal check in a manufacturing organization. 2. Internal control over stock is one of major activities in the organization. You are advised to study and analyze the internal control system over the stock in manufacturing organization. 3. Sample selection is one of the key activities in audit profession. You are advised to study and analyze the method of sample selection in a business organization. 4. Vouching is one of the important activities in the organization. You are advised study and analyze the vouching process of cash book. 5. Verification of liabilities is one of the essential parts of audit. You are advised to study and evaluate the verification process of current liabilities in business organization. 6. Share capital is one of the most important items in the company. You are advised to study and analyze the audit process of share capital in the company.

7. 8. 9.

Company audit is one the most important area of audit profession. You are advised to study and evaluated the appointment process of company auditor(s) in a business organization. Management audit is one of the most important areas of audit profession. You are advised to study and evaluate the work and duties of management auditor(s) in a business organization. Special audit is one of the types of audit. You are advised to study and evaluate the special audit process in non-profit organization.

The report should follow the following format: 1. Title page 2. Acknowledgements 3. An abstract (one page summary of the paper) 4. Table of contents 5. Introduction to the issue (brief history & significance of issue assigned) 6. Practical study of the organization (with respect to the issue) 7. Data collection methods 8. SWOT analysis (strengths, weaknesses, opportunities & threats) relevant to the issue assigned 9. 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 No. 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 students opportunity to express your communication skills, knowledge and understanding of concepts learned during practical study assigned in assignment No. 2.

You should use transparencies and any other material for effective presentation. The transparencies are not the presentation, but only a tool; the presentation is the combination of the transparencies and your speech. Workshop presentation transparencies should only be in typed format. The transparencies should follow the following format: 1) Title page 2) 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 the issue assigned 7) Conclusion (one page brief covering important aspects of your report) 8) Recommendations (specific recommendations relevant to issue assigned) 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 a substitute for an audience. WEIGHTAGE OF THEORY & PRACTICAL ASPECTS IN ASSIGNMENT No. 2 AND WORKSHOP PRESENTATIONS: Assignment No. 2 and workshop presentations are evaluated on the basis of theory and its applicability. The weightage of each aspect would be: Theory: 60% Applicability (practical study of the organization): 40%

COURSE OUTLINE
AUDITING (MBA-5545)
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 AUDIT 2.1. 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 employees 2.6.7 Trading transactions 2.6.8 Stock control 2.6.9 Fixed assets 2.6.10 Investment UNIT 3: AUDIT SAMPLING 3.1. Introduction to sampling 3.2. The basis for sample selection 3.3. The sample size 3.4. Methods of sample selection 3.5. Sample evaluation 3.6. 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 LIABILITIES 5.1 Meaning of verification 5.2 Problems in the valuation of assets

5.3 5.4 5.5 5.6 5.7 5.8

Fixed assets Floating assets and mode of their valuation Wasting assets Intangible assets and their valuation Auditors position as regards the valuation of assets Verification of liabilities

UNIT 6: THE COMPANYS AUDITOR 6.1 Appointment of auditor 6.2 Qualifications of an auditor 6.3 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 audit 7.3 Objective of management audit 7.4 Criticism on management audit 7.5 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 7.9 Work and duties of the management auditor 7.10 Management auditors report UNIT 8: COMPUTER CONTROLS AND AUDIT TECHNIQUES 8.1 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 Department 8.3.1 Program documentation 8.4 Security contorts 8.5 Application controls 8.6 Input controls

8.7 Processing controls 8.8 Out put controls 8.9 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 investigation 9.2.2. 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. Recommended Books: (1) Carmichae R Douglas (2009). Auditing Concepts and Methods: A Guide to Current Theory and Practice. California: The University of California. (2) Meigs R. L. (2010). Auditing Principles. New York: McGraw Hill Publications (3) Saeed Amjad Khawaja (Latest edition), Auditing Principles and Procedures Lahore. Institute of Business Management. ========