Chapter 8 Materiality Decisions and Analytical Procedures

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					                                    TROY UNIVERSITY
                              SORRELL COLLEGE OF BUSINESS

                                                                  ACT 4497

                                                                   Fall 2009

Prerequisites: ACT 3392.


2009-2010 Catalog: Auditing theory as contained in the official pronouncements with emphasis on professional ethics, audit engagement, internal
control, audit sampling, evidence gathering, business cycles and auditors’ reports.


On completion of the course, the student should be able to:

1.      Demonstrate an understanding of essential audit standards, objectives, compliance, and substantive procedures.
2.      Demonstrate an understanding of the professional guidance and issues related to the major facets of the attest function as it is performed by
        independent, internal, and governmental auditors.
3.      Demonstrate an understanding of the transaction cycles, revenue cycles, expenditure cycles, and cash balances.
4.      Demonstrate an understanding of professional ethics as it relates to the activities of independent auditors.


To introduce students to the fundamental concepts of auditing.

Approved Texts

Boynton, W. C., & Johnson, R. N. Modern auditing: Assurance services and the integrity of financial reporting (8th ed. or current). Hoboken, NJ:

Supplements (Optional)

AICPA (Current). Codification of statements on auditing standards. New York, NY: American Institute of Certified Public Accountants. Use the
AICPA web site when you need additional reading materials.

Mission & Vision Statements

Troy University Mission Statement: Troy University is a public institution comprised of a network of campuses
throughout Alabama and worldwide. International in scope, Troy University provides a variety of educational programs at
the undergraduate and graduate levels for a diverse student body in traditional, nontraditional and emerging electronic
formats. Academic programs are supported by a variety of student services which promote the welfare of the individual
student. Troy University's dedicated faculty and staff promote discovery and exploration of knowledge and its application
to life-long success through effective teaching, service, creative partnerships, scholarship and research.

SCOB Mission Statement: Through operations that span the State of Alabama, the United States, and the world, Sorrell
College of Business equips our students with the knowledge, skills, abilities and competencies to become organizational
and community leaders who make a difference in the global village and global economy. Through this endeavor, we serve
students, employers, faculty, and Troy University at large as well as the local and global communities.

SCOB Vision Statement: Sorrell College of Business will be the first choice for higher business education students in
their quest to succeed in a dynamic and global economy. Sorrell College of Business will create the model for 21st
century business education and community service.

School of Accountancy Mission Statement: The mission of the School of Accountancy is to advance the accounting
profession by providing quality accounting education to both undergraduate and graduate students, publishing quality
research and providing service to the professional community. We prepare students for successful careers with increasing
professional and managerial responsibility in public accounting as well as government and industry and prepare
undergraduate students for admission to graduate programs in accounting and business.
Instructor:                Stan Lewis, DBA, CPA, CFE, CCEA

Office Location & Hours:   McCartha Hall 201. Weekly you may contact me in person during the following
                           days and time periods: Monday – 9am – 2pm and Wednesday – 9am – 2pm. I'm
                           available by email at any time or by telephone during my office hours (US

Contact Information        Telephone: 334-808-6164; 334-670-3136 (Administrative Assistant Ms. Patsy
                           Brown); and 334-670-3592 (FAX). Email:

Class Location & Time:     GAB 303, 2:00 to 3:30 p.m. MW

Exams:                     There are three exams for the course. The dates are provided in the Course
                           Schedule section (see below). Each exam will be closed book/closed notes and
                           will consist of multiple choice questions. You may use a calculator and/or an
                           English translation dictionary during the exam. You may not talk to other
                           students, look on other students exams and answer sheets, exchange
                           information, etc. during the exam.

Assignments:               These assignments are provided to you in the Course Schedule section below.
                           Each assignment should be prepared in a style consistent with that used in your
                           undergraduate accounting and business courses and with expectations for
                           documentation that are found in the professional workplace.

Grading Methods:           Exams- 60 points (60 percent) divided among the listed exams. Assignments
                           (which includes attendance, completion of the senior assessment exam and
                           class participation) – 40 points (40 percent). These assignment points are only
                           recorded at the conclusion of the course. Bonus Points/Extra Credit – Comes
                           only from one source - attendance, participation & assignments (includes usage
                           of any supplement). Your efforts are monitored throughout the course and bonus
                           points/extra credit is assigned on that basis only at the end of the course. A base
                           of sixteen weeks is used. The Total Percent possible is 100 percent (the
                           maximum percent that can be achieved is 100% by an individual). The Grading
                           Scale used is: 90%-100% A; 80%- 89% B; 70%- 79% C; 60%- 69% D; and
                           below 60% F

Class Procedure
and Requirements:          The student will be expected to: (a) punctually attend all scheduled lectures (class
                           periods). Students who arrive at class after roll call will be counted absent and (b)
                           be penalized on the assignment portion of your course grade including the bonus
                           points/extra credit component.

Americans With
Disabilities Act (ADA):    Any student whose disabilities fall within ADA must inform the instructor at the
                           beginning of the term of any special needs or equipment necessary to
                           accomplish the requirements for this course. Students who have or may be
                           dealing with a disability or learning difficulty should speak with the instructor and
                           contact the Office of Adaptive Needs Program at call 670-3221/3222. Various
                           accommodations are available through the Adaptive Needs Program.

Attendance Policy:         Physical class meetings are part of this course; participation is expected and is
                           integral to any bonus points available in the course.

Make-up Work Policy:       In general you do not make up exams or assignments. If there are exceptional
                           circumstances such as a hospitalization, an exception may be made at the
                           instructor’s discretion only.

                           Assignments - These are submitted each class period. If you are not in
                           attendance you cannot submit assignments. Attendance and submissions are
                           matched. A failure to take the senior assessment exam or to complete the exam
                           without your best effort will result in a one letter grade reduction of your course

                           Exams – Not made up. I will average your other exam scores for the
                           replacement of a missed exam less a 10% penalty. You may not use an average
                                       of the first two exams for the final or third exam. You must take the final exam or
                                       a grade of F will be recorded.

Incomplete Grade Policy:               Any incomplete work at the end of the term will not be accepted unless the
                                       student can provide acceptable and clear documentation prior to the last class

Cheating Policy:                       If you are caught cheating, you will get a course grade of "F." See Student
                                       Handbook for the definition and university policy on cheating. Plagiarism is a
                                       form of cheating as is copying another’s assignments.


      Dates                                            Activities & Assignments (Listed below)

     Week 1         Chapter 1 – Auditing and the Public Accounting Profession-Integrity in Financial Reporting
     Aug 12
     Week 2         Chapter 2 -Auditors Responsibilities and Reports
   Aug 17 & 19      Chapter 3 – Professional Ethics

     Week 3         Chapter 4 – Auditor’s Legal Liability
   Aug 24 & 26      Chapter 5 – Overview of the Financial Statement Audit

    Week 4          Chapter 6 – Audit Evidence
 Aug 31 & Sep 2     Chapter 7 – Accepting the Engagement and Planning the Audit

     Week 5         Review Chapters 1-7
     Sep 9
     Week 6         Exam 1: Chapter 1 – 7
   Sep 14 & 16      Chapter 8 – Materiality Decisions and Analytical Procedures

     Week 7         Chapter 9 – Audit Risk, Including the Risk of Fraud
   Sep 21 & 23      Chapter 10 – Understanding Internal Control

     Week 8         Chapter 11 – Audit Procedures in Response to Assessed Risks: Tests of Controls
   Sep 28 & 30      Chapter 12 – Auditing Procedures in Response to Assessed Risks: Substantive Tests

    Week 9          Chapter 13 – Audit Sampling
    Oct 5 & 7       Chapter 14 – Auditing the Revenue Cycle

    Week 10         Review Chapters 8 – 14
   Oct 12 & 14      Exam 2: Chapters 8 – 14

    Week 11         Chapter 15 – Auditing the Expenditure Cycle
   Oct 19 & 21
    Week 12         Chapter 16 – Auditing the Production and Personnel Services Cycles
   Oct 26 & 28      Chapter 17 – Auditing the Investing and Financing Cycles

    Week 13         Chapter 18 – Auditing Investments and Cash Balances
    Nov 2 & 4       Chapter 19 – Completing the Audit/Post-audit Responsibilities

     Week 14        Chapter 20 – Attest and Assurance Services and Related Reports
    Nov 9 & 11      Chapter 21 – Internal, Operational, and Governmental Auditing

    Week 15         Review Chapter 15 – 21
   Nov 16 & 18      Exam # 3 – Chapters 15 – 21
    Week 16         Fall Break & Thanksgiving Day Holiday
   Nov 23 & 25
    Week 17         Bad Weather Day (if needed)
     Nov 30
    Week 18         Senior Assessment Exam (8-10 am)
     Dec 7

      Chapter                                                           Assignments
         1           1 – 20, page 37 and Professional Simulation on page 41.
         2           2-8, page 55; 2-10, page 63; 2-21, page 81; and 2-24, page 94
 3   3-30, page 138 and 3-33, page 140
 4   4-2, page 154; 4-16, page 167; 4-17, page 167; and 4-21, page 174
 5   5-3, page 201; 5-10, page 205; 5-13, page 209; 5-22, page 213; and 5-27, page 219
 6   6-2, page 236; 6-3, page 236; 6-10, page 246; 6-13, page 250; and 6-17, page 261
 7   7-2, page 282 and 7-15, page 302
 8   8-1, page 323 and 8-10, page 335
 9   9-8, page 372; 9-9, page 372; and 9-10, page 373
10   10-3, page 395; 10-10, page 418; 10-21, page 429; and 10-23, page 435
11   11-2, page 475
12   12-1, page 519 and 12-6, page 534
13   13-1, page 558 and 13-5, page 558
14   14-28, page 676
15   Professional Simulation, page 738
16   Professional Simulation, page 801
17   Professional Simulation, page 844
18   Professional Simulation, page 888
19   Professional Simulation, page 929
20   Professional Simulation, page 980
21   None

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