ACC 383.2

TOPICS IN AUDITING

MANAGEMENT AUDITING AND CONTROL

Fall 2007

 

Instructor Urton Anderson                                                                                                                        Office: CBA 4M.222

Department of Accounting                                                                                                                     Office Phone: 471-5339

The University of Texas at Austin                                                                                                        e-mail: urton@mail.utexas.edu

WEB: http://www.mccombs.utexas.edu/Faculty/Urton.Anderson/

                                                                                                                                                                       Hours: T 12:30-1:30, Th 10-11 and by appointment

 

Course TA: Margaret Christ                                                                                                                     Office: CBA 5.334Z

                                                                                                                                                                       Phone: 471-1671

                                                                                                                                                                       e-mail: Margaret.Christ@phd.mccombs.utexas.edu

`                                                                                                                                                                      Hours: Friday 9:30-11:30 and by appointment

 

REQUIRED TEXTS

(1)   K. Reding, P. Sobel, U. Anderson, M. Head, S. Ramamoorti, , M. Salamasick, and C. Shreve, Internal Auditing: Assurance and Consulting Services, The Institute of Internal Auditors, 2007.

(2)   ACC 383.2, Topics in Auditing - Management Auditing and Control: Readings, Fall 2007. Available at Speedway Copy, first floor - Dobie Mall.

(3)   KnowledgeLeader provided by Protiviti, http://www.knowledgeleader.com/. Subscription will be set-up for each student in the class for the semester by the 3rd class period.  The subscription is for the full semester and part of the KnowledgeLeader University program which provides the service to university internal audit courses at no cost to the students.

COURSE OBJECTIVES

            This course is designed for students who plan careers in the accounting and finance functions of corporations or government entities or in the consulting/risk management/internal audit services side of public accounting and internal audit outsourcing firms.  The purpose of the course is to introduce the student to scope of auditing in today's organizations, a scope that extends beyond far the traditional attestation of the financial statements.  Its objectives are to provide the student with:

 

·        A basic understanding of the use of internal auditing by top management and governing boards for controlling organizations.

·        An understanding of techniques for risk assessment and management.

·        Knowledge of the standards for conducting management audits.

·        An understanding of the audit function's organization and administration.

·        An understanding of the management audit process.

·        Ability to scope and to establish criteria for an effective management audit.

·        The knowledge and ability to apply the basic tools used in evidence collection including the generalized audit software package - IDEA.

·        The ability to report effectively the results of the audit.

Among the topics to be covered are:

·        Organizational governance and the role of internal audit

·        Providing value-added internal audit services

·        Types of internal audit services: (attestation, performance, quick response, assessment, facilitation, remediation)

·        Risk assessment and allocation of audit resources

·        The management audit process

·        Use of CAATS

·        Management control procedures and control system design

·        Evaluating the effectiveness of compliance systems

·        Management and control of contracts, outsourcing and offshoring relationships

·        Auditor/auditee relations

·        Effective engagement reporting

·        Quality assurance of the audit function

·        Investigative auditing

            These and other topics will be cover through lectures and readings, analysis of case studies by students, presentation of by practitioners from industry and government, and a team project.  At the completion of the course students should be ready to assume positions in internal audit functions.

 

EXAMINATIONS AND GRADING

            Grades will be based on the total points obtained in the course (as shown below).  I will assign specific numbers of A's, B's, etc. to result in an average GPA for the course of approximately 3.3 to 3.6. However, I will use my own judgment as to how this objective shall be obtained.

 

                                                                                                POINTS

                        Exam                                                                   125

                        Team Project                                                      225

                        Class Participation,

                          Quizzes and Attendance                                 100

                        Short Assignments                                               60

                               total points                                         510

 

Beginning in Fall 2005 semester the University of Texas at Austin instituted plus/minus grading for graduate students. Department of Accounting policy requires that a grading scale including pluses and minuses be used for all graduate accounting classes. University policy continues to prohibit use of plus/minus grading for undergraduate students. Department of Accounting policy requires that grades for undergraduate students enrolled in graduate accounting classes will be determined by dropping the plus or minus (if any) from their letter grade.

 

            Exams. The exam will consist of three parts: 1) multiple-choice problems, 2) short answer problems, 3) essay and extended calculation problems.

 

            Team project. During the semester you will complete a major field project.  You will work in groups of three to four depending on the scope of the project.  The projects this term will involve actual audit work in a government agency, company or non-profit organization.  The projects will be evaluated as follows:

                                                                                                POINTS

            Deliverables and work papers                                   100

            Written Description                                                       15

            Class presentations                                                      30

            Final written report                                                         35

            Team evaluation                                                            25

            Individual evaluations (client and/or audit

            supervisor) and completion of audit final checklist    20

                                                                                                  225

 

     short assignments.  There will be four short assignments (i.e., homework assignments) during the semester.  These will consist of three cases and an interview (part of the project).  The third case will be an exercise using the IDEA software which will be provided.

 

     class participation, quizzes and attendance.  There will be 22 quizzes worth 3 points each (four lowest will be dropped) for a total of 54 points.  The three dropped quizzes include all excused and unexcused absences (i.e., no make-up for missed quizzes).  Additional points will be given for questions for guest speakers (2 points each), and project presentation evaluations (2 points each).  The remainder of the 100 points will be awarded for general attendance and participation in class (approximately 10 to 15 points out of the 100).

 

ACADEMIC HONESTY

Accounting Department Policy:

The Department of Accounting has no tolerance for acts of scholastic dishonesty.  The responsibility of both students and faculty with respect to scholastic dishonesty are described in detail in the department’s Policy Statement on Scholastic Dishonesty in the MPA Program and the Professional Program in Accounting.  By teaching this course, I have agreed to observe all of the faculty responsibilities described in that document.  By enrolling in this class, you have agreed to observe all of the student responsibilities described in that document.  If the application of that Policy Statement to this class and its assignments is unclear in any way, it is your responsibility to ask me for clarification.

 

The student responsibilities embodied in the department’s Policy Statement on Scholastic Dishonesty are consistent with the GSB Honor Code and the University’s General Information catalog.  However, you should obtain and read the department’s Policy Statement to ensure that you understand my responsibilities.  Copies are available in CBA 2.302.

Students with Disabilities

The University of Texas at Austin provides upon request appropriate academic accommodations for qualified students with disabilities. For more information, contact the Office of the Dean of Students at 471-6259, 471-4641 TTY.

Class Web Sites and Student Privacy

In Spring 2001, web-based, password-protected class sites became available for all accredited courses taught at The University. Syllabi, handouts, assignments and other resources are types of information that may be available within these sites.  Site activities could include exchanging e-mail, engaging in class discussions and chats, and exchanging files.  In addition, class e-mail rosters will be a component of the sites.  Students who do not want their names included in these electronic class rosters must restrict their directory information in the Office of the Registrar, Main Building, Room 1.  For information on restricting directory information see: http://www.utexas.edu/student/registrar/catalogs/gi05-06/app/appc09.html

 

ACC 383

assignments for classes1

TH        August 30         CLASS 1

TOPIC: What is Management Auditing?

READINGS:      None

T          September 4    CLASS 2

TOPIC: The Internal Auditing Profession,the Professional Practices Framework

READINGS

1.       Text, Chapter 1,pages 1-1 to 1-19

2.       Text, Chapter 2, pages 2-1 to 2-9

3.       Text, Appendix A (end of book, no page numbers)

4.       Pulliam, S. and D. Solomon, “Uncooking the Books: How Three Unlikely Sleuths Discovered Fraud at WorldCom,” WSJ, October 30, 2002, P A1

5.       Pulliam, S., “Over the Line: A Staffer Ordered To Commit Fraud Balked, Then Caved…” WSJ, June 23, 2003, P A1

TH        September 6    CLASS 3

TOPIC: The Professional Practices Framework

READINGS

  1. Text – Chapter 2, pages 2-9 to 2-29
  2. Text – Appendix B (end of book, no page numbers)

T          September 11  CLASS 4

TOPIC: Adding Value: Governance, Risk Management and Control

READINGS

1.       Text, Chapters 3, pages 3-`1 to 3-35, 3-44 to 3-47

2.       The IIA, Organizational Governance: Guidance for Internal Auditors, July 2006, Found at:

http://www.theiia.org/download.cfm?file=76050

 

TH        September 13  CLASS 5

TOPIC: Risk Assessment - Basil Woller – Protiviti

READINGS

1.       Text, Chapters  4, pages 4-1 to 4-8

2.        Committee of Sponsoring Organizations of the Treadway Commission, COSO Enterprise Risk Management — Integrated Framework, (COSO, 2004), executive summary. Found at:

http://www.coso.org/Publications/ERM/COSO_ERM_ExecutiveSummary.pdf

3.        Practice Advisory 2100-3: Internal Audit's Role in the Risk Management Process (PAs found at end of readings packet)

4.       Practice Advisory 2110-1: Assessing the Adequacy of Risk Management Processes

5.       Practice Advisory 2100-4: Internal Audit's Role in Organizations Without a Risk Management Process

T          September 18  CLASS 6

TOPIC: Business Process and Business Risks

READINGS

  1. Text – Chapter 4, pages 4-8 to 4-31
  2. Kaplan, J. AuditNet Auditors Guide to Flowcharting. Found at: http://www.auditnet.org/Guides/flowcharting%20guide.pdf
  3. Case 1 (read), Text pages 4-34 to 4-36.

 

TH        September 20  CLASS 7 Colleen Charles and Angelina Chin - GM

TOPIC: Managing the Internal Audit Function – the Auditor and the Auditee

READINGS

  1. Rowe, K. and Johnson, E. “The Other Side of the Fence,” The Internal Auditor, December 2006, pp. 27-28.
  2. Glascock, K., “Reaching a Higher Level, The Internal Auditor, February 2007, pp. 20-25
  3. Applegate, D., “The U. S. Corporate Audit Function,” The Internal Auditor, October 2004, pp. 23-27
  4. Committee of Sponsoring Organizations of the Treadway Commission, Internal Control - Integrated Framework, (COSO, 1992), executive summary, pp. 1-7. Found at: http://www.coso.org/publications/executive_summary_integrated_framework.htm

T          September 25  CLASS 8 -

TOPIC: Internal Control

READINGS

  1. Text - Chapter 5, pages 5-1 to 5-30

ASSIGNMENT

Case 1 (Text, pages 4-34 to 4-36) due

TH        September 27  CLASS 9

TOPIC: Performing the Assurance Engagement: An Overview of the Audit Process

READINGS

  1. Text, Chapters 9, pages 9-1 to 9-27
  2. Lange, J. “Curse of the Prior Workpapers,” The Internal Auditor, August 2005, pp. 26-27
  3. Practice Advisory 2100-14 Audit Evidence Requirements
  4. Practice Advisory 2330-1: Recording Information

T          October 2         CLASS 10

TOPIC: Performing the Assurance Engagement

READINGS

  1. Text, Chapters 10, pages 10-1 to 10-50

TH        October 4         CLASS11

TOPIC: Performing the Assurance Engagement: Inquiry and Other Procedures

READINGS

  1. Nich, D. "Inquiry and Observation - Effective internal Auditing Techniques," Internal Auditing, Fall 1987, pp. 11 -17.
  2. Brune, C. “The Artful Interviewer,” The Internal Auditor, April 2003, pp. 25-27.
  3. Koop, D. “The Art and Science of Inquiry,” The Internal Auditor, August 2007, pp. 25-29.
  4. Turpen, R. “A Fresh Look at Walkthroughs,” The Internal Auditor, December 2004, pp. 25-29.
  5. Practice Advisory 2300-1: The Internal Auditor's Use of Personal Information in Conducting Audits

T          October 9         Class 12 - Steve Goepfert – CAE – Continental Airlines, Inc. – 2006-2007 Chairman,  The Institute of Internal Auditors

TOPIC: Governance and the Relationship between IA and the Board

READINGS

  1. Bromilow, C.; Berlin, B.; and Anderson, R. “Stepping Up,’ The Internal Auditor, December 2005, pp. 52-57.
  2. Ridley, A. “An Audit Committee Event Matrix, The Internal Auditor, April 2000, pp. 53-56
  3. Moody’s Investor Services, Best Practices in Audit Committee Oversight of Internal Audit, October 2006. (Available at document section of course Blackboard web site)
  4. Practice Advisory 1110-2: Chief Audit Executive Reporting Lines
  5. Practice Advisory 2060-2: Relationship with the Audit Committee

 

TH        October 11       CLASS 13

TOPIC: Performing the Assurance Engagement: Testing and Sampling

READINGS

  1. Text, Text, Chapters 9, pages 9-27 to 9-39
  2. Martin, J. “Sampling made Simple”, The Internal Auditor, August 2004, pp. 21-24.
  3. Practice Advisory 2100-10: Audit Sampling

T          October 16       CLASS 14

TOPIC: Performing the Assurance Engagement: Testing and Sampling

READINGS

  1. Text, Text, Chapters 9, pages 9-21-9-24, 9-40 to 9-45
  2. UK National Audit Office, A Practical Guide to Sampling, Found at: http://www.nao.org.uk/publications/Samplingguide.pdf
  3. Practice Advisory 1220-2:Computer Assisted Audit Techniques (CAATS)
  4. GAO, Data Mining: Results and Challenges for Government Program Audits and Investigations, GAO-03-591T, March 2003.  Found at: http://www.gao.gov/new.items/d03591t.pdf

ASSIGNMENT

            Case 2 due

TH        October 18       CLASS15         

TOPIC: Managing the Internal Audit Function

READINGS

  1. Text, Chapter8, pages 8-1 to 8-35.
  2. Practice Advisory 1300-1: Quality Assurance and Improvement Programs
  3. Practice Advisory 1310-1: Quality Program Assessments
  4. Practice Advisory 1312-1: External Assessments
  5. Practice Advisory 1312-2: External Assessments – Self-assessment with Independent Validation
  6. Practice Advisory 1311-2: Establishing Measures (Quantitative Metrics and Qualitative Assessments) to Support Reviews of Internal Audit Activity Performance

T          October 23       CLASS16         

TOPIC: No Class – Project work day

READINGS: None

TH        October 25       CLASS 17

TOPIC: Information Technology Risks and Controls

READINGS

  1. Text, Chapter 6, pages 6-1 to 6-21
  2. Global Technology Audit Guide, Guide 1: Information Technology Controls
  3. http://www.theiia.org/guidance/technology/gtag/gtag1/
  4. Martin, A. “Get Spreadsheets Under Control,” The Internal Auditor, December 2005, pp. 31-35.

T          October 30       CLASS 18        

TOPIC: Reporting and Follow-up

READINGS                                                    

  1. Text, Chapter 11, pages 11-1 to 11-28
  2. Feierman, J. "Write it Right the First Time," The Internal Auditor, February 2006, pp. 27-32.
  3. Practice Advisory 2410-1: Communication Criteria
  4. Practice Advisory 2440-3: Communicating Sensitive Information Within and Outside of the Chain of Command

ASSIGNMENT

            Case 3 due

 

TH        November 1     CLASS 19        

TOPIC: Investigative Auditing and Whistleblowing

READINGS

  1. Text - Chapter 7, pages 7-1 to 7-26
  2. Thompson, C. “Don’t Shoot the Messenger,” The Internal Auditor, December 2004, pp. 83-87.
  3. Practice Advisory 1210.A2-1: Identification of Fraud
  4. Practice Advisory 1210.A2-2: Responsibility for Fraud Detection
  5. Anderson, U. "Assessing the Merits of Alleged Wrongdoing," Internal Auditing, Spring 1995, pp. 48-54.
  6. Ferenczy, J. “The Privilege of Internal Auditing,” The Internal Auditor, April 2004, pp. 75-81.
  7. Glascock, K. “That’s Privileged Information,” The Internal Auditor, August 2005, pp. 46-51.

T          November 6     CLASS 20

TOPIC: Compliance

READINGS:

  1. Anderson, U. "The New Federal Sentencing Guidelines: Implications for the Internal Audit Function," Internal Auditing, Fall 1992, pp. 71-77.
  2. Anderson, U. "Effective Compliance Programs," Internal Auditing, Spring 1994, pp. 46-50.
  3. Waring, C. “Measuring Ethical Climate Risk,” The Internal Auditor, December 2004, pp. 71-85
  4. Practice Advisory 2100-5: Legal Considerations in Evaluating Regulatory Compliance Programs
  5. Practice Advisory 2130-1: Role of the Internal Audit Activity and Internal Auditor in the Ethical Culture of an Organization

TH        November 8     CLASS 21 - Dennis Beran – JC Penney

TOPIC: JC Penney Overview and Compliance and Contracts

READINGS

  1. JC Penney Audit Committee Charter

 http://media.corporate-ir.net/media_files/irol/70/70528/corpgov/auditcharter031307.pdf

  1. JC Penney, Statement of Business Ethics

 http://media.corporate-ir.net/media_files/irol/70/70528/corpgov/StatementofBusinessEthics.pdf

  1. Case (to be distributed)

T          November 13   CLASS 22 –

TOPIC: Performing the Consulting Engagement

READINGS                                                    

  1. Text, Chapter 12, pages 12-1 to 12-19
  2. White, S., “The Auditor as Internal Consultant, The Internal Auditor, February 2007, pp. 60-64.
  3. Practice Advisory 1000.C1-1: Principles Guiding the Performance of Consulting Activities of Internal Auditors
  4. Practice Advisory 1000.C1-2: Additional Considerations for Formal Consulting Engagements
  5. Practice Advisory 1000.C1-3 Additional Considerations for Consulting Engagements in Government Organizational Settings
  6. Practice Advisory 2120.A1-2: Using Control Self-assessment for Assessing the Adequacy of Control Processes

ASSIGNMENT

Practice Exam (not to be handed in)

 

TH        November 15   CLASS 23

TOPIC: Exam

 

T          November 20   Class 24 - - Jerry Courtney – PGS (Petroleum Geo-Services)

TOPIC: Internal/External Audit Coordination and Auditing in a Global Environment

READINGS:

  1. Text – Chapter 8, Managing the Internal Audit Function (pages 8-10 to 8-11)
  2. Chambers, R., and Jacobs, R., “Assessing Political Risk,” The Internal Auditor, August 2007, pp. 58-64.
  3. Practice Advisory 2050-2: Acquisition of External Audit Services
  4. Stephenson, M. SAS 70 reports continue to grow in demand and utility for Sarbanes-Oxley compliance, Protiviti, 2006. (Available at document section of course Blackboard web site)

 

T          November 27   Class 25 - – Robert Pink – Principal – IA and Regulatory Compliance Services - KPMG

TOPIC: Compliance, Contracts and Alliances

READINGS

  1. Daugherty, T. The Self-Reporting Economy: A Matter of Transparency and Trust, KPMG 2004. (Available at document section of course Blackboard web site).
  2. Anderson, S, Christ, M., and Sedatole, K. “Risky Business,” The Internal Auditor, December 2006, pp. 47-52.

TH        November 29   CLASS 26

TOPIC: No Class – Project work day

READINGS: None

T          December 4     CLASS 27

TOPIC: Project Presentations

READINGS: None

TH        December 6     Class 28

TOPIC: Project Presentations

READINGS: None

Final Exam Period

Monday            December 17                           8-12

Project Presentations (All students are expected to attend)

 


1 The following abbreviations are used:

R&A --ACC 383.2, Topics in Auditing - Management Auditing and Control: Readings and Assignments, Fall 2007.

Text -- K. Reding, P. Sobel, U. Anderson, M. Head, S. Ramamoorti, , M. Salamasick, and C. Shreve, Internal Auditing: Assurance and Consulting Services, The Institute of Internal Auditors, 2007