Business Assurance ,Ethics and Audit

Module Name: KB 04 Syllabus Structure: Main Syllabus Area 01. Fundamentals of Risk Based Auditing 02. Auditing Principles, Ethics and Regulatory Environment 03. Governance risk Controls 04. Audit Planning and Risk Assessment 05. Gathering Audit Evidence 06. Audit Reporting Weightings 10% 15% 20% 15% 30% 10%

Main Topic: 01 Fundamentals of Risk Based Auditing Syllabus Weighting: 20% Knowledge Component 1.1. Audit Planning and Risk Assessment Knowledge Dimension /Level Factual Knowledge Process Remember Learning Outcome 1.1.1. State the benefits of audit planning. 1.1.2. Identify the activities connected with setting the overall audit strategy. 1.1.3. Define overall materiality, performance and materiality level. 1.1.4. Define risk assessment procedures. 1.1.5. Identify the procedures used in risk assessment. 1.1.6. Identify aspects of the business relevant to audits including industry, nature of the entity, objectives, strategies, business risk and KPIs. Lecture Hours

1.2. Risk of material misstatement at assertion level and at financial statement level 1.3. Analytical Procedures 1.4. External Confirmation 1.5. Audit Report

Procedural

Comprehension

1.2.1. Demonstrate the difference between risk of material misstatements at assertion level and at financial statement level.

Factual

Remember

1.3.1. Define analytical procedures 1.3.2. Discuss use of analytical procedures at different stages of the audit. 1.4.1. Explain the use of external confirmation in gathering audit evidence. 1.5.1. State; (i) elements of an audit report (ii) the difference between general purpose and special purpose audit report (iii) the difference between Fair presentation and compliance framework

Conceptual

Comprehension

Factual

Remember

Main Topic: 02 Auditing Principles, Ethics and Regulatory Environment Syllabus Weightings: 15% Knowledge Component Knowledge Knowledge Learning Outcome Dimension/ Process Level 2.1. Fundamental Procedural Application 2.1.1. Demonstrate the need to comply with fundamental & ethical principles applicable to Ethical Principles all members of the Institute of Chartered Accountants of Sri Lanka.

Lecture Hours

2.2.

Threats to compliance with fundamental & ethical principles

Procedural

Analysis

2.2.1. Analyze threats in complying with fundamental ethical principles including independence of auditors in an audit of financial statements. 2.2.2. Outline safeguards to mitigate threats in complying with fundamental & ethical principles. 2.3.1. Demonstrate the legal and regulatory factors affecting an audit of financial statements. 2.3.2. Demonstrate an auditors responsibility and requirements in complying with laws and regulations.
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2.3. Laws and Regulations

Procedural

Application

2.4. Terms of engagement

Procedural

Application

2.4.1. Explain the type of matters that should be communicated through an engagement letter

2.5. Audit Documentation

Conceptual /Procedural

Comprehension /Application

2.5.1. Discuss the different types of audit documentation which should be maintained. 2.5.2. Assess the adequacy of audit documentation in a given scenario.

Main Topic: 03 Governance risk and Controls Syllabus Weightings: 20% Knowledge Component Knowledge Dimension/ Level 3.1 Corporate governance best practices and internal auditing Conceptual Comprehension 3.1.1. Discuss the key aspects of corporate governance including the responsibilities of the Board, role of non-executive directors etc. 3.1.2. Explain the need for an audit committee including the benefits of an audit committee to the shareholders of a listed entity Knowledge Process Learning Outcome Lecture Hours

3.2 Control activities in different business process - Design effectiveness - Implementation - Operating effectiveness

Procedural

Comprehension

3.1.1 Analyze non-complex business processes and identify internal controls in place in the context of the main business, such as: - Order to Receipt - Procurement to Pay - Payroll - Cash Management and Investment - PPE and Inventory Management 3.1.2 Recognize the importance of IT controls in an audit, including IT general controls and IT application controls. 3.1.3 Analyze design, implementation, and operating effectiveness of identified controls 3.1.4 Outline significant and subtle deficiencies in control activities 3.1.5 Analyze activities of a service organization when a significant part of the IT process has been outsourced

Main Topic: 04 Audit Planning and Risk Assessment Syllabus Weightings: 15% Knowledge Component 4.1 Business risk and risk of material misstatements 4.2 Fraud Risk in an audit of financial statements Knowledge Dimension/Level Conceptual Knowledge Process Learning Outcome Lecture Hours

Comprehension 4.1.1 Discuss how business risk could result in risk of material misstatements in financial statements. Comprehension 4.2.1 Discuss auditors responsibility for preventing and detecting fraud s in an audit of financial statements. 4.2.2 Discuss factors/conditions generally present in a situation of fraud.

Conceptual

4.3 Materiality

Procedural

Application

4.3.1 Examine the appropriateness of different benchmarks when calculating materiality level. 4.4.1 Analyze financial statements using analytical procedures to identify any unusual relationships which

4.4 Risk of material misstatements

Procedural

Analysis

require further investigation. 4.4.2 Analyze financial and nonfinancial information of a given engagement to identify risk of material misstatements (inherent and control risk). 4.4.3 Outline the overall response of the auditor to identified risk of material misstatements.

Main Topic: 05 Gathering Audit Evidence Syllabus Weightings: 30% Knowledge Component 5.1. Sufficient appropriate audit evidence Knowledge Dimension/ Level Conceptual Knowledge Process Comprehension Learning Outcome 5.1.1. Discuss different audit procedures which can be used as audit evidence. 5.1.2. Discuss how auditor consider the relevance and reliability of audit evidence. 5.1.3. Discuss the audit procedures in relation to the work performed by a managements expert and auditors expert. 5.2. Opening Balances Conceptual Comprehension 5.2.1. Discuss the requirements to be considered by an auditor in an initial engagement. Lecture Hours

5.3.

Audit evidence specific items

Conceptual

Comprehension

5.3.1. Discuss the responsibility of an auditor in the verification of physical inventory.

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5.4. Selecting items for testing and the use of audit sampling

Conceptual

Comprehension

5.4.1. Explain different methods of selecting items for audit testing. 5.4.2. Explain the meaning of audit sampling. 5.4.3. Explain different methods used for selecting samples in audit sampling.

5.5. Accounting estimates and fair value accounting estimates 5.6. Related parties and related party transactions

Conceptual

Comprehension

5.5.1. Explain how the auditor obtains sufficient & appropriate evidence on accounting estimates.

Conceptual

Comprehension

5.6.1. Explain how related party transactions can affect the true and fair view of the financial statements. 5.6.2. Explain procedures that should be performed to reduce the risk arising from related party transactions.

5.7. Written Conceptual Representation

Comprehension

5.7.1. Discuss the use of written representation as audit evidence , including its limitations.

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5.8. Test of controls Conceptual and substantive procedures

Comprehension

5.8.1. Explain the difference between test of controls and substantive procedures. 5.8.2. Explain the use of Computer Assisted Audit Techniques (CAAT) in performing audit procedures.

5.9. Auditors Response to assessed risk of material misstatements 5.10. Subsequent events

Procedural

Analysis

5.9.1. Outline substantive audit procedures to be performed in relation to account balances and classes of transactions.

Procedural

Analysis

5.10.1. Outline procedures required to identify events occurring between the date of financial statements and the date of the audit report.

5.11. Going Concern

Procedural

Application/ Analysis

5.11.1. Assess events and conditions that may cast significant doubt about the going concern assumption. 5.11.2. Outline procedures required to evaluate the validity of the going concern assumption.

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Main Topic: 06 Audit Reporting Syllabus Weightings: 10% Knowledge Component 6.1. Modified Audit Report (SLAuS 705) Knowledge Dimension/ Level Conceptual Knowledge Process Comprehension Learning Outcome 6.1.1 Explain the meaning of perverseness in the context of modified audit report. 6.1.2 Explain the type of modified opinion provided under SLAuS 705. 6.2 Emphasis of Matters and Other Matters (SLAuS 706) Conceptual Comprehension 6.2.1 Explain the differences between an emphasis of matter and other matter. Lecture Hours

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6.3 Other information in Conceptual documents containing auditors report (SLAuS 720) 6.4 Modified Audit Report (SLAuS 705) 6.5 Emphasis of Matters and Other Matters Procedural Procedural

Comprehension

6.3.1 Explain auditors' responsibility towards other information included in documents containing auditors report. 6.4.1 Analyze a non-complex audit engagement and propose appropriate modifications with sufficient justification. 6.5.1 Analyze non-complex audit engagements and determine whether emphasis of matter or other matter should be included.

Analysis Analysis

Recommended Reading Core reading Sri Lanka Auditing Standards (SLAuSs) and Sri Lanka Standard on Quality Control 1 2011 Code of Ethics Code on corporate governance and audit committee

Supplementary reading: - Sri Lanka Accounting Standards (LKAS and SLFRS) Sri Lanka Auditing Practice Statements Website referencing Periodicals: Journal Articles of CA Sri Lanka

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