ALLAMA IQBAL OPEN UNIVERSITY, ISLAMABAD

(Department of Commerce
ADVANCED AUDITIN! ("#$$
C%EC&LIST
SEMESTER SPRIN! '()*
This packet comprises the following material:
1. Text Book (one)
2. Course Outline
3. ssignment !o. 1" 2
#. ssignment $orms ( 2 sets )
%n this packet" if &ou fin' an&thing missing out of the a(o)e mentione' material"
please contact at the a''ress gi)en (elow:
*ailing Officer
llama %+(al Open ,ni)ersit&
-./" %slama(a'
0h: 121.3124511.12
M+,amma- M+n.r A,ma-
(Course Coor'inator)
1
Final on 31-1-
2014
ALLAMA IQBAL OPEN UNIVERSITY, ISLAMABAD
(Department of Commerce
6
/ARNIN!
)0 PLA!IARISM OR %IRIN! O1 !%OST /RITER(S 1OR SOLVIN!
T%E ASSI!NMENT(S /ILL DEBAR T%E STUDENT 1ROM A/ARD
O1 DE!REE2CERTI1ICATE, I1 1OUND AT ANY STA!E0
'0 SUBMITTIN! ASSI!NMENTS BORRO/ED OR STOLEN 1ROM
OT%ER(S AS ONE3S O/N /ILL BE PENALI4ED AS DE1INED IN
5AIOU PLA!IARISM POLICY60
ASSI!NMENT No0 )
Co+r7e8 A-9ance- A+-.t.n: ("#$$ Seme7ter8 Spr.n: '()*
Le9e;8 M0 Com Mar<78 )((
Pa77 Mar<78 #(
NOTE8 !IVE T%E ANS/ER O1 EAC% QUESTION /IT% RE1ERENCE TO
INTERNATIONAL STANDARDS ON AUDITIN! (ISA, ALSO MENTION
T%E RELEVANT ISA0
7.1 8hat 'o &ou un'erstan' (& 9go)ernance:; 8ho is normall& charge' with
go)ernance in an organi<ation; ()(
7. 2 =iscuss the importance of +ualit& of working papers for an au'it firm. 8hich are some
of the metho's use' (& au'it firms to ensure high +ualit& of working papers; ()#
7. 3 8hat are the responsi(ilities of an au'itor in compliance with laws an' regulations
in respect of au'it of financial statements of an entit&; ()#
7. # 8rite notes in 'etail on the followings: ('(
i. 8in'ow 'ressing
ii. Teeming an' la'ing
7. 2 =escri(e the a')antages of au'it work program. 8hich factors are consi'ere' for
its preparation; ()(
7. 5 8rite 'own an' explain some of the pre)enti)e an' 'etecti)e internal control
proce'ures in connection with 'uplicate pa&ments to parties. ()(
7. 4 =ifferentiate (etween compliance an' su(stanti)e au'it proce'ures. ()(
7. / >xplain the proce'ure to i'entif& the existence of relate' parties in context of
au'it of a firm. ()(
2
!UIDELINES 1OR ASSI!NMENT = )
The stu'ent shoul' look upon the assignments as a test of knowle'ge" management skills"
an' communication skills. 8hen &ou write an assignment answer" &ou are in'icating &our
knowle'ge to the teacher:
?our le)el of un'erstan'ing of the su(@ectA
-ow clearl& &ou thinkA
-ow well &ou can reflect on &our knowle'ge B experienceA
-ow well &ou can use &our knowle'ge in sol)ing pro(lems" explaining situations"
an' 'escri(ing organi<ations an' managementA
-ow professional &ou are" an' how much care an' attention &ou gi)e to what &ou
'o.
To answer a +uestion effecti)el&" a''ress the +uestion 'irectl&" (ring important relate'
issues into the 'iscussion" refer to sources" an' in'icate how principles from the course
materials appl&. The stu'ent must also (e a(le to i'entif& important pro(lems an'
implications arising from the answer.
$or citing references" writing (i(liographies" an' formatting the assignment" 0 format
shoul' (e followe'.
ASSI!NMENT No0 '
Tota; Mar<78 )((
Pa77 Mar<78 #(
This assignment is a practical acti)it&. ?ou are re+uire' to prepare a report of a(out 1111
wor's on the topic allotte' to &ou. The report is to (e su(mitte' to &our teacher for
e)aluation.
Celect one of the following topics accor'ing to the last 'igit of &our roll num(er. $or
example" if &our roll num(er is 0.3#241/1 then &ou will select issue D 1 (the last 'igit): .
TOPICS 8
1 8-? ,=%T; E T-> ,=%T%!F >!G%HO!*>!T
1 ,=%T B>-G%O,H E %!=>0>!=>!T != >T-%CC
2 H>0OHT%!F ! ,=%T O0%!%O!
3 ,=%T H%CI != *T>H%J%T?
# %!->H>!T != %!T>H!J CO!THOJ H%CI
2 ,=%T C*0J%!F
5 C,BCT!T%G> T>CTC
4 CO*0,T>H E CC%CT>= ,=%T T>C-!%7,>C
/ T>CTC O$ CO!THOJ
3 ,=%T CJ>H!C> 0HOC>=,H>C
3
The report shoul' follow the following format:
1. Title page
2. cknowle'gements
3. n a(stract (one page summar& of the paper)
#. Ta(le of contents
2. %ntro'uction to the issue ((rief histor& B significance of issue assigne')
5. 0ractical stu'& of the organi<ation (with respect to the issue)
4. =ata collection metho's
/. C8OT anal&sis (strengths" weaknesses" opportunities B threats) rele)ant to the
issue assigne'
3. Conclusion (one page (rief co)ering important aspects of &our report)
11. Hecommen'ations (specific recommen'ations rele)ant to issue assigne')
11. Heferences (as per 0 format)
12. nnexes (if an&)
!UIDELINES 1OR ASSI!NMENT = '8
1.2 line spacing
,se hea'ers an' su(hea's throughout all sections
Organi<ation of i'eas
8riting skills (spelling" grammar" punctuation)
0rofessionalism (rea'a(ilit& an' general appearance)
=o more than repeat the text
>xpress a point of )iew an' 'efen' it.

/OR&S%OPS
The workshop presentations pro)i'e stu'ents opportunit& to express their communication
skills" knowle'ge B un'erstan'ing of concepts learne' 'uring practical stu'& assigne' in
assignment D 2.
?ou shoul' use transparencies an' an& other material for effecti)e presentation. The
transparencies are not the presentation" (ut onl& a toolA the presentation is the
com(ination of the transparencies an' &our speech. 8orkshop presentation transparencies
shoul' onl& (e in t&pe' format.
The transparencies shoul' follow the following format:
1) Title page
2) n a(stract (one page summar& of the paper)
3) %ntro'uction to the issue ((rief histor& B significance of issue assigne')
#) 0ractical stu'& of the organi<ation (with respect to the issue)
2) =ata collection metho's
5) C8OT anal&sis (strengths" weaknesses" opportunities B threats) rele)ant to the
issue assigne'
4) Conclusion (one page (rief co)ering important aspects of &our report)
/) Hecommen'ations (specific recommen'ations rele)ant to issue assigne')
4
!UIDELINES 1OR PRESENTATION8
*ake e&e contact an' react to the au'ience. =onKt rea' from the transparencies or
from report" an' 'onKt look too much at the transparencies (occasional glances are
accepta(le to help in recalling the topic to co)er).
12.minute presentation can (e practice' se)eral times in a')ance" so 'o that until
&ou are confi'ent enough. Come people also use a mirror when rehearsing as a
su(stitute for an au'ience.
/EI!%TA!E O1 T%EORY > PRACTICAL ASPECTS IN ASSI!NMENT = ' >
/OR&S%OP PRESENTATIONS
ssignment D 2 B workshop presentations are e)aluate' on the (asis of theor& B its
applica(ilit&. The weightage of each aspect woul' (e:
Theor&: 51L
pplica(ilit& (practical stu'& of the organi<ation): #1L
Note8 A77.:nment7 an- pre7entat.on carr? $(( Mar<78
ssignment 11 (Submission) 111 *arks
ssignment 12 (Submission) 111 *arks
ssignment 12 (Presentation) 111 *arks
ADVANCED AUDITIN!
COURSE OUTLINE ("#$$
UNIT )8 !ENERAL PRINCIPLES O1 !OVERNIN! AN AUDIT O1 1INANCIAL
STATEMENTS AND TERMS O1 AUDIT EN!A!EMENTS (ISA '((
>')(
A. O9era;; O@Aect.9e7 of t,e In-epen-ent A+-.tor an- t,e Con-+ct of an
A+-.t .n Accor-ance B.t, Internat.ona; Stan-ar-7 on A+-.t.n:
1.1 %ntro'uction
1.1.1 Ccope of this %C
1.1.2 n u'it of $inancial Ctatements
1.2 O)erall O(@ecti)es of the u'itor
1.3 =efinitions
1.# He+uirements
1.#.1 >thical He+uirements Helating to an u'it of $inancial
Ctatements
1.#.2 0rofessional Ckepticism
1.#.3 0rofessional Mu'gment
1.#.# Cufficient ppropriate u'it >)i'ence an' u'it Hisk
1.2 Con'uct of an u'it in ccor'ance with %Cs
B0 A:ree.n: t,e Term7 of A+-.t En:a:ement7
5
1.5 %ntro'uction
1.5.1 Ccope of this %C
1.5.2 O(@ecti)e
1.4 =efinitions
1./ He+uirements
1./.1 0recon'itions for an u'it
1./.2 greement on u'it >ngagement Terms
1./.3 Hecurring u'its
1./.# cceptance of a Change in the Terms of the u'it >ngagement
1./.2 ''itional Consi'erations in >ngagement cceptance
UNIT '8 DOCUMENTATION AND OBTAININ! CONSIDERATION O1 LA/S
AND RE!ULATIONS IN AN AUDIT (ISA '$( > '#(
A0 A+-.t Doc+mentat.on
2.1 %ntro'uction
2.1.1 Ccope of this %C
2.1.2 !ature an' 0urposes of u'it =ocumentation
2.1.3 O(@ecti)e
2.2 =efinitions
2.3 He+uirements
2.3.1 Timel& 0reparation of u'it =ocumentation
2.3.2 =ocumentation of the u'it 0roce'ures 0erforme' an' u'it
>)i'ence
B0 O@ta.ne- Con7.-erat.on of LaB7 an- Re:+;at.on7 .n an A+-.t of
1.nanc.a; Statement7
2.# %ntro'uction
2.#.1 Ccope of this %C
2.#.2 >ffect of Jaws an' Hegulations
2.#.3 Hesponsi(ilit& for Compliance with Jaws an' Hegulations
(Hef: 0ara. 1E5)
2.#.# O(@ecti)es
2.2 =efinition
2.5 He+uirements
2.5.1 The u'itor:s Consi'eration of Compliance with Jaws an'
Hegulations
2.5.2 u'it 0roce'ures 8hen !on.Compliance %s %'entifie' or
Cuspecte'
2.5.3 Heporting of %'entifie' or Cuspecte' !on.Compliance
2.4 =ocumentation
UNIT $8 T%E AUDITOR3S RESPONSIBILITIES RELATIN! TO 1RAUD IN
AN AUDIT O1 1INANCIAL STATEMENTS (ISA '*(
A0 T,e A+-.tor37 Re7pon7.@.;.t.e7 Re;at.n: to 1ra+- .n an A+-.t of 1.nanc.a;
Statement7
3.1 %ntro'uction
6
3.1.1 Ccope of this %C
3.1.2 Characteristics of $rau'
3.1.3 Hesponsi(ilit& for the 0re)ention an' =etection of $rau'
3.1.# O(@ecti)es
3.2 =efinitions
3.3 He+uirements
3.3.1 0rofessional Ckepticism
3.3.2 =iscussion among the >ngagement Team
3.3.3 Hisk ssessment 0roce'ures an' Helate' cti)ities
3.3.# %'entification an' ssessment of the Hisks of *aterial
*isstatement =ue to $rau'
3.3.2 Hesponses to the ssesse' Hisks of *aterial *isstatement =ue
to $rau'
3.3.5 >)aluation of u'it >)i'ence
3.3.4 u'itor ,na(le to Continue the >ngagement
3.3./ 8ritten Hepresentations
3.3.3 Communications to *anagement an' with Those Charge' with
Fo)ernance
3.3.11 Communications to Hegulator& an' >nforcement uthorities
3.# =ocumentation
UNIT *8 AUDIT PLANNIN! AND ASSESSIN! T%E RIS&S O1 MATERIAL
MISSTATEMENT (ISA $(( > $)#
A0 P;ann.n: an A+-.t of 1.nanc.a; Statement7
#.1 %ntro'uction
#.1.1 Ccope of this %C
#.1.2 The Hole an' Timing of 0lanning
#.1.3 O(@ecti)e
#.2 He+uirements
#.2.1 %n)ol)ement of Ie& >ngagement Team *em(ers
#.2.2 0reliminar& >ngagement cti)ities
#.2.3 0lanning cti)ities
#.2 =ocumentation
B. I-ent.f?.n: an- A77e77.n: t,e R.7<7 of Mater.a; M.77tatement t,ro+:,
Un-er7tan-.n: t,e Ent.t? an- .t7 En9.ronment
#.5 %ntro'uction
#.5.1 Ccope of this %C
#.5.2 O(@ecti)e
#.4 =efinitions
#./ He+uirements
#./.1 Hisk ssessment 0roce'ures an' Helate' cti)ities
#./.2 The He+uire' ,n'erstan'ing of the >ntit& an' %ts >n)ironment"
%nclu'ing the >ntit&:s %nternal Control
#./.3 %'entif&ing an' ssessing the Hisks of *aterial *isstatement
#.3 =ocumentation
7
UNIT #8 AUDIT MATERIALITY AND T%E AUDITOR3S RESPONSES TO
ASSESSED RIS&S (ISA $'( > $$(
A. Mater.a;.t? .n P;ann.n: an- Perform.n: an A+-.t
2.1 %ntro'uction
2.1.1 Ccope of this %C
2.1.2 *aterialit& in the Context of an u'it
2.2 =efinition
2.3 He+uirements
2.3.1 =etermining *aterialit& an' 0erformance *aterialit& 8hen
0lanning the u'it
2.3.2 He)ision as the u'it 0rogresses
2.# =ocumentation
B0 T,e A+-.tor37 Re7pon7e7 to A77e77e- R.7<7
2.2 %ntro'uction
2.2.1 Ccope of this %C
2.5 =efinitions
2.4 He+uirements
2.4.1 O)erall Hesponses
2.4.2 u'it 0roce'ures Hesponsi)e to the ssesse' Hisks of *aterial
2.4.3 *isstatement at the ssertion Je)el
2.4.# 'e+uac& of 0resentation an' =isclosure
2.4.2 >)aluating the Cufficienc& an' ppropriateness of u'it
>)i'ence
2./ =ocumentation
UNIT C8 EVALUATION O1 MISSTATEMENTS AND AUDIT EVIDENCE (ISA
*#( > #((
A0 E9a;+at.on of M.77tatement7 I-ent.f.e- -+r.n: t,e A+-.t
5.1 %ntro'uction
5.1.1 Ccope of this %C
5.2 =efinitions
5.3 He+uirements
5.3.1 ccumulation of %'entifie' *isstatements
5.3.2 Consi'eration of %'entifie' *isstatements as the u'it 0rogresses
5.3.3 Communication an' Correction of *isstatements
5.3.# >)aluating the >ffect of ,ncorrecte' *isstatements
5.3.2 8ritten Hepresentations
5.# =ocumentation
B0 A+-.t E9.-ence
5.2 %ntro'uction
5.2.1 Ccope of this %C
5.5 =efinitions
5.4 He+uirements
5.4.1 Cufficient ppropriate u'it >)i'ence
5.4.2 %nformation to Be ,se' as u'it >)i'ence
5.4.3 Celecting %tems for Testing to O(tain u'it >)i'ence
5.4.# %nconsistenc& in" or =ou(ts o)er Helia(ilit& of" u'it >)i'ence
8
UNIT D8 EETERNAL CON1IRMATIONS AND ANALYTICAL PROCEDURES
(ISA #(# > #'(
A0 EFterna; Conf.rmat.on7
4.1 %ntro'uction
4.1.1 Ccope of this %C
4.1.2 >xternal Confirmation 0roce'ures to O(tain u'it >)i'ence
4.2 =efinitions
4.3 He+uirements
4.3.1 >xternal Confirmation 0roce'ures
4.3.2 *anagement:s Hefusal to llow the u'itor to Cen' a
Confirmation He+uest
4.3.3 Hesults of the >xternal Confirmation 0roce'ures
4.3.# !egati)e Confirmations
4.3.2 >)aluating the >)i'ence O(taine'
B0 Ana;?t.ca; Proce-+re7
4.# %ntro'uction
4.#.1 Ccope of this %C
4.#.2 O(@ecti)es
4.2 =efinition
4.5 He+uirements
4.5.1 Cu(stanti)e nal&tical 0roce'ures
4.5.2 nal&tical 0roce'ures that ssist 8hen $orming an O)erall
Conclusion
4.5.3 %n)estigating Hesults of nal&tical 0roce'ures
UNIT "8 AUDIT SAMPLIN! AND RELATED PARTIES (ISA #$( > ##(
A0 A+-.t Samp;.n:
/.1 %ntro'uction
/.1.1 Ccope of this %C
/.2 =efinitions
/.3 He+uirements
/.3.1 Cample =esign" Ci<e" an' Celection of %tems for Testing
/.3.2 0erforming u'it 0roce'ures
/.3.3 !ature an' Cause of =e)iations an' *isstatements
/.3.# 0ro@ecting *isstatements
/.3.2 >)aluating Hesults of u'it Campling
B0 Re;ate- Part.e7
/.# %ntro'uction
/.#.1 Ccope of this %C
/.#.2 !ature of Helate' 0art& Helationships an' Transactions
/.#.3 Hesponsi(ilities of the u'itor
/.#.# O(@ecti)es
/.2 =efinitions
/.5 He+uirements
/.5.1 Hisk ssessment 0roce'ures an' Helate' cti)ities
/.5.2 %'entification an' ssessment of the Hisks of *aterial
*isstatement ssociate' with Helate' 0art&
/.5.3 Helationships an' Transactions
9
/.5.# Hesponses to the Hisks of *aterial *isstatement ssociate'
with Helate' 0art&
/.5.2 Helationships an' Transactions
/.5.5 >)aluation of the ccounting for an' =isclosure of %'entifie'
Helate' 0art&
/.5.4 Helationships an' Transactions
/.5./ 8ritten Hepresentations
/.5.3 Communication with Those Charge' with Fo)ernance
/.4 =ocumentation
UNIT G8 /RITTEN REPRESENTATIONS AND 1ORMIN! AN OPINION AND
REPORTIN! ON 1INANCIAL STATEMENTS (ISA #"( >D((
A0 /r.tten Repre7entat.on7
3.1 %ntro'uction
3.1.1 Ccope of this %C
3.1.2 8ritten Hepresentations as u'it >)i'ence
3.1.3 O(@ecti)es
3.2 =efinitions
3.3 He+uirements
3.3.1 *anagement from whom 8ritten Hepresentations He+ueste'
3.3.2 8ritten Hepresentations a(out *anagement:s Hesponsi(ilities
3.3.3 Other 8ritten Hepresentations
3.3.# =ate of an' 0erio'(s) Co)ere' (& 8ritten Hepresentations
3.3.2 $orm of 8ritten Hepresentations
3.3.5 =ou(t as to the Helia(ilit& of 8ritten Hepresentations an'
He+ueste' 8ritten
3.3.4 Hepresentations !ot 0ro)i'e'
B0 1orm.n: an Op.n.on an- Report.n: on 1.nanc.a; Statement7
3.# %ntro'uction
3.#.1 Ccope of this %C
3.2 =efinitions
3.5 He+uirements
3.5.1 $orming an Opinion on the $inancial Ctatements
3.5.2 $orm of Opinion
3.5.3 u'itor:s Heport
3.5.# Cupplementar& %nformation 0resente' with the $inancial
Ctatements
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10