ALLAMA IQBAL OPEN UNIVERSITY ISLAMABAD (Department of Business Administration)

AUDITING (MBA-5545) CHECKLIST SEMESTER: AUTUMN 2011

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, Admission & Mailing, 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 Total Marks: 100

Semester: Autumn 2011 Pass Marks: 40

ASSIGNMENT No. 1
Note: Attempt all the questions. All questions carry equal marks. Study the detail guidelines before attempting the questions. Q. 1 Explain the concept of audit and its different types. Discuss the role of ethics in the audit process of business organization. Q. 2 Discuss internal control system and its different types. How the internal control system of banking organization is evaluated? Q. 3 Explain the practical implications of internal control system over the overall financial control, cheque payments, balances held, remuneration of employees and fixed assets. Q. 4 Discuss the nature and reasons of selecting samples. Discuss the different types of sampling and its roll in audit of non-business organization. Q. 5 Explain the differences between vouching and routine checking. Discuss the vouching process of receipt and payment side of cash book in detail.

GUIDELINES FOR ASSIGNMENT # 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 & 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. Prepare your assignment as per the guidelines and it may be re-evaluated by the Quality Assurance Cell, Department of Business Administration at any time.

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. Internal control system in one of the compulsory activities of audit. Students are advised to study the internal control system over receipts and payments of banking organization. 1. 2. Audit program is an important activity in audit process. Students are required to visit a services organization and evaluate their audit program. Vouching is one of the most important activities in the audit process. Students are advised to visit a manufacturing organization, study and analyze the techniques used by that organization for cash book. Verification is an essential part of audit. Students are advised to visit a business organization and evaluate the verification process used for fixed assets and various problems faced to the organization in this regard. Share capital is the back bone of the organization. Students are required to visit and analyze the audit process share capital of a commercial organization. Management audit the important concepts used in auditing. Students are required to study a business organization and collect information regarding the management audit and evaluate them. Internal check is an important activity in audit of every organization. You are required to visit a commercial bank to observe the process of internal check and evaluate it.

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Profit forecasts are one of the important concepts used in audit. Students are required to visit a business organization to study and evaluate the investigation process regarding profit forecasts. Special audit is one of the most important concepts used in audit. Students are advised to visit a non-business organization to study and evaluate the special audit. Company auditor has a great importance in company audit. You are advised to collect information from a commercial organization regarding the appointment, qualifications, powers and duties of a company auditor and evaluate them.

8. 9.

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 # 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 you an opportunity to express their communication skills, knowledge & understanding of concepts learned during practical study assigned in assignment # 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) 5) 6) 7) 8)

Practical study of the organization (with respect to the issue) Data collection methods SWOT analysis (strengths, weaknesses, opportunities & threats) relevant to the issue assigned Conclusion (one page brief covering important aspects of your report) 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 # 2 & WORKSHOP PRESENTATIONS: Assignment # 2 & workshop presentations are evaluated on the basis of theory & its applicability. The weightage of each aspect would be: Theory: 60% Applicability (practical study of the organization): 40% Prepare your assignment as per the guidelines and it may be re-evaluated by the Quality Assurance Cell, Department of Business Administration at any time.

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 2.6.5 2.6.6 2.6.7 2.6.8 2.6.9 2.6.10

Balances held Cheque payments Remuneration of employees Trading transactions Stock control Fixed assets 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 Fixed assets 5.4 Floating assets and mode of their valuation 5.5 Wasting assets 5.6 Intangible assets and their valuation 5.7 Auditors position as regards the valuation of assets 5.8 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 7.4 7.5 7.6 7.7 7.8 7.9 7.10

Objective of management audit Criticism on management audit Distinction between statutory audit and management audit Who should conduct the management audit Preliminary to the conduct of management audit Management audit program Work and duties of the management auditor 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. Books Recommended: Saeed Amjad Khawaja (Revised edition 2007), Auditing Principles and Procedures Lahore. Institute of Business Management. Additional Reading: (1) Auditing Principles and Practice by DN Tripatty.

(2) Auditing and Assurance Services by Jack C. Robertson and Timothy

Sturt Manson. Auditing Concepts and methods; A Guide to Current Theory and practice by Douglas R. Carmichael, John J. Willingham and Caral A. Schaller. =======

(3) The Audit Process, principles, Practice and Cases by Iain Gray and

J. Louwers.

(4)