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INTERNATIONAL Senate endorsement ref.

:
ISLAMIC UNIVERSITY Senate endorsement date:
MALAYSIA Version no:
Version effective date:

COURSE OUTLINE
1. Course Title: AUDIT FUNDAMENTALS

2. Course Code: ACC 3531

3. Credit Value: 3

4. MQF Level: LEVEL 6

5. Affected Batch: 2007/2008

6. Centre of Studies: KULIYYAH OF ECONOMICS AND MANAGEMENT SCIENCES

7. Department/Unit: DEPARTMENT OF ACCOUNTING

8. Course Synopsis: This course is mainly concerned with the introduction of the external audit of
financial statements, mainly statutory financial audits. It is intended to show students the nature
of audit procedures, legal requirements, audit theory and its practical application. At the end of
this course, students should be able to perform an audit of a small or medium size company by
applying the substantive approach.

9. Course Classification within the Curriculum: CORE COURSE

10. Prerequisite(s) (if any): ACC 2501 COMPANY ACCOUNTING

11. Course Learning Outcomes

Blooms Soft skills Programme


No Taxonomy Outcomes
Outcomes (KI) (PO)
.
C A P
Distinguish between auditing and
1. accounting and differentiate 2 2 2 CT1 1
among the various assurance
services.
Describe the relevant regulators, 1
2. authorities and professional 2 2 2 CT2
bodies in the Malaysian auditing
environment and AAOIFI.
3. Distinguish the auditors and
managements responsibilities on 4 3 2 CT2 1
audit of the financial statement,
and explain regarding materiality,
risks and various components of
the audit risk model.
4. Perform a statutory audit of a
small business in accordance with 4 5 2 CT5 2,3,4,6,7,8
relevant accounting and auditing
standards, as well as the code of
professional conduct and ethics
taking into account the more
comprehensive requirements in
Islam.
5. Identify, based on management
assertions, appropriate audit 6 5 2 CT5 1
objectives, types of audit
procedures and apply relevant
audit procedures on balance sheet
and income statements of a small
company.
6. Critically analyze (including from
an Islamic perspective) practical 5 5 2 CT2 3,4,6,7,8
auditing problems and ethical
dilemmas.
7. Apply the proper standard
sampling methods and prepare the 3 3 2 CT5 1,2,6,8
appropriate audit report.
8. Demonstrate basic presentation
skills, as well as intermediate 3 2 2 CS3 5,9
tertiary level communication and
team-work skills.

12. LO - Instruction Method - Assessment Alignment:

Outcomes Teaching-Learning Methods Assessment Methods


LO1 L07 Lecture, group exercise Quiz, Group exercise, Mid
Term test
LO8 Group assignment, presentation Case Presentation and
Report
LO4 - LO7 Lecture, group exercise Final examination

13. Assessment Methods Weightage:


Methods Percentage
Quiz 10
Group assignment 15
Report presentation 10
Mid-term examination 15
Final examination 50
TOTAL 100

14. Student Learning Time:

1. Instruction Component Total Allocated Hours


1.1. Teacher-oriented methods
Lecture 28
In class exercises 7
1.2. Student-oriented methods
Quiz 1
Group exercise 3
Presentation 3
Total Instructor Contact Hours:
2. Independent Learning Component Total Estimated Hours
2.1. Reading and revision
Learning hours to grasp prescribed topics 42
2.2. Estimated hours for preparation toward assessments
Quiz and group exercise 6
Case presentation and report 8
Mid-term test 8
Final examination 14
3. Assessment Outside Instruction Hours Total Allocated Hours
Not applicable

TOTAL SLT 120

15. Course Contents and Related SLT:


Learning Task/ Reading
Week TOPICS Hours
FF IL
1 Introduction to auditing 3 4 Chapter 1&2
Nature of auditing
(31 Jan Auditing vs Accounting
3 Feb Demand for auditing services
2017) Type of audits
Types of auditors
The auditing profession
The auditing framework

2 Rights, Duties, Liabilities of Auditors in Malaysia 3 4 Supplementary


Audit profession and regulatory environment in reading
(6 10 Malaysia
February Appointments, resignation and termination of
2017) auditors
Regulation of the Accounting profession
*9 Feb - MIA by Laws
Thaipusa Professional ethics
m Professional independence
Corporate Governance

3 Objectives and scope of financial statement audit 3 4 Chapter 6


Objectives of conducting and audit of
(13 to 17 financial statement
Feb 2017) Auditors responsibility for fraud and
breaches of laws and regulations
Management assertions
Transaction related audit objectives
Balance related audit objectives
Presentation and disclosure related audit
objectives

QUIZ 1 (TOPIC 1&2)

4 Audit evidence, audit procedure and 3 4 Chapter 5


documentation
(20 to 24 Nature of audit evidence
Feb 2017) Types of audit evidence
Quality and adequacy of audit evidence
Relationship between procedures and audit
objectives
Types of audit procedures
Compliance and substantive test
Test of transaction and balance

Audit documentation
Importance of audit working papers
Types of audit working paper
Types of audit files
Indexing
Control and rights to the audit working
papers
Confidentiality

Group Work 1

5 Audit planning and audit risk 3 4 Chapter 3 and


Steps in planning an audit 4
(27 Feb to Understanding the clients business and
3 March accounting system
2017) Analytical procedures in planning
Risk assessment and financial statement
assertions
Business risk assessment and risk assessment
procedures
Audit risk model

6 Materiality 1.5 3 Chapter 4


Preliminary judgments about materiality
(6 to 10 Materiality for the financial statement as a
March 20 whole
17) Materiality for particular classes of
transactions, account balances or disclosure
Factors influencing determination of
materiality
Relationship of materiality, audit risk and
audit evidence

7 Audit sampling 1.5 3 Chapter 7 & 8


Statistical and non-statistical sampling
(13 to 18 Sampling risk and non-sampling risk
March Test of control: attribute sampling
2017) Test of substantive: PPS sampling
Quiz 2 (Chapter 4)

MID TERM EXAM (9.00 11.30 am) 1.5 8 Chapters :


FRIDAY (17 March 2017) (1,2,3,4,5,7,&8)

8
(20 to 24 SEMESTER BREAK
March
2017)

9 Internal Control System 3 4 Chapter 6


(27 to 31 Fundamental concepts
March Components of internal control
2017) Internal control and audit evidence
Strengths and weaknesses of internal control
Management letter

10 Auditing the revenue cycles 3 4 Chapter 9


Overview on revenue cycles and classes of
(3 to 7 transactions
April Understand the revenue activities, documents
2017) and procedures
Management assertions and audit objectives for
internal control
Substantive test for accounts receivables

11 Auditing The Purchase Cycle 3 4 Chapter 10


Overview on purchase cycles and classes of
(10 to 14 transactions
April Understand the purchase activities, documents
2017) and procedures
Audit of Purchase and Purchase Return-
Analytical Procedures (AP) and Substantive
Testing (ST)
Audit of Accounts Payable AP & ST
Audit of Other Payable & Provision AP & ST

Group Work 2 (Chapter 9)


12 Auditing the Payroll and Personnel Cycle 1.5 3 Chapter 11
(17 to 21 Test of controls
April Substantive testing
2017) Analytical procedure

Audit of long term liabilities, shareholders 1.5 3 Chapter 14


equity and income statement
Auditing long term liabilities
Auditing dividend
Auditing shares capital account
Auditing reserves and retained profits
Auditing income statement item

13 Auditing the Inventory Cycle 1.5 3 Chapter 12


(24 to 28 Business functions and flow of documents
April Components of the cycle
2017) Major controls and audit procedure
Analytical procedures
Stock take
Audit of pricing
1.5 3 Chapter 13
Audit of property plant and equipment
Assessing inherent and control risks
Substantive test of transactions

Quiz 3 (Chapter 14)

14 Audit of cash balances 3 4 Chapter 15


(1 to 5 Types of cash accounts
May Auditing the general cash account
2017) Fraud related audit procedure extended
bank rec, proof of cash and test of kiting
*1 May-
Labour Group work 3 (Chapter 13)
day

15 Audit Reports 3 4 Chapter 17


Objectives and format of audit report
(8 to 12 The needs for an audit report
May Standard unqualified audit report
2017) Unqualified audit report with explanatory
paragraph
Departures from unqualified audit report
Disclaimer of responsibility
Key Audit Matters (KAM)

Presentation of Audit report

16. References:

16.1. Required
Eilifsen,A., Messier, W.F, Glover,S.M, Prawitt, D.F.,Samsuwatd Zuha Mohd Abbas,
Sharifah Nazatul Faiza Syed Mustapha Nazri, Kalsom Salleh, Nawal Kasim,
Nahariah Jaafar, Aida Hazlin Binti Ismail and Razana Juhaida Binti Johari (2017)
Princples of Auditing & Assurance Services in Malaysia, 3 rd Ed, McGraw Hill,
Kuala Lumpur

16.2. Recommended
1. Arens, A.A, Elder, R.J., Beasley, M.S., Amran, N.A., Fadzil, F.H., Yusof, N.M., Nor,
M.N.M. and Shafie., R. (2014) Auditing and Assurance Services in Malaysia: An
integrated approach, 3rd Ed., Pearson, Kuala Lumpur.
2. Gul. F. and Mahzan, M, (2015) Auditing: Theory and Practice in Malaysia, 2nd Ed.,
CCH Asia Pte Limited.
3. Malaysian Approved standards on Auditing
4. Companies Act 1965
5. Accountants Today, various volumes

Prepared by: Checked by: Approved by:

Signature: Signature: Signature:

Name: Assoc. Prof. Dr Muslim Name:


Name: Dr Julia Mohd Said Har Sani Mohammad Dean/Director,
Department/Unit: Accounting Head, Date:
Date: 27 January 2017 Date:
ANNEX

I. Course Instructor Details

Semester: 1 Academic Year: 2016/17

No. Name Email Department


1. Dr Julia Mohd Said julia@iium.edu.my Accounting (Room no 337)
2. Dr Maslina Ahmad maslina@iium.edu.my Accounting (Room no 336)
3. Mdm Fatimah Yasin fatimahmy@iium.edu.my Accounting (Room no 332)

II. Programme Learning Outcomes

At the end of the programme, students are expected to be able to:

No.
Outcomes
Outcome Domain
1
Distinguish between auditing and accounting and differentiate among the various assurance services.

2
Describe the
relevant regulators, authorities and professional bodies in the Malaysian auditing environment

3
Distinguish the auditors and managements responsibilities on audit of the financial statement, and
explain regarding materiality, risks and various components of the audit risk model.

4
Perform a statutory audit of a small business in accordance with relevant accounting and auditing
standards, as well as the code of professional conduct and ethics.

5
Identify, based on management assertions, appropriate audit objectives, types of audit procedures and
apply relevant audit procedures on balance sheet and income statements of a small company.

6
Critically analyze (including from an Islamic perspective) practical auditing problems and ethical
dilemmas.

7
Apply the proper standard sampling methods and prepare the appropriate audit report.

8
Demonstrate basic presentation skills, as well as intermediate tertiary level communication and team-
work skills