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Introduction to External Auditing

Course description and purpose
External Auditing [AU1] is the first of three courses in the auditing stream in the CGA program of professional
studies and is compulsory for all students at the fourth level of the program. The course introduces the concepts and procedures of external auditing. Although many of the concepts apply to the other types of audits, such as management or internal audits, the focus of AU1 is on the external or attest audit. In Advanced External Auditing [AU2], these concepts and procedures are explored in more depth, and in Internal Auditing & Controls [MU1], the concepts and procedures specific to performing management or internal audits become the focus of study.

AU1 is designed to assist you in developing the following professional competence and skills:
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Understand the framework in which audits are conducted, including the concepts of evidence, materiality, risk, and audit planning. Understand and work within the ethical and legal environment of the independent professional accountant conducting an audit. Perform an external audit of financial statements by using the risk-based audit approach to determine the extent, nature, and timing of audit evidence collected in an audit of financial statements. Use statistical and nonstatistical sampling to determine what evidence to gather. Communicate the results of the audit and determine the appropriate opinion to issue.

The CGA Program of Professional Studies is designed to help you develop the competencies that are essential to a professional accountant. To learn more about the programs competency-based approach and to view the complete CGA competency list, see How to use the course features under the Resources tab. For information on the competencies developed and strengthened specifically in AU1 and how they relate to the course topics, see the AU1 examination blueprint, under the Exam Preparation tab.

Canadian Auditing Standards

The Auditing and Assurance Standards Board (AASB) in Canada develops and issues the Canadian Generally Accepted Auditing Standards (GAAS), which are the standards currently used in performing external audits in Canada. However, the AASB is in the process of adopting International Standards on Auditing (ISA) issued by the International Auditing and Assurance Standards Board (IAASB). After the adoption of the ISA, the auditing standards used in Canada will be called the Canadian Auditing Standards (CAS) (and constitute what we now know as GAAS). The anticipated effective date for implementation of the CAS is for audits of financial statements for periods ending on or after December 14, 2010. As the AASB is committed to adopting the ISA as written, the only expected changes are those that may be necessary to comply with Canadian law. Before the AASB adopts a particular standard of the ISA, a rigorous process (including public consultation) is conducted before the corresponding standard is issued in final form. At the time of writing of this course, all CAS relating to the audit of financial statements have been issued in final form and are included in the CICA Handbook Assurance, Part I. Existing standards which did not relate specifically to the audit of financial statements have also been included in Part I of the CICA Assurance Handbook.

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Throughout the module notes, where specific sections of the auditing standards are discussed, you will find the relevant section of the CAS accompanied by reference to the former CICA Handbook Assurance sections.

Course prerequisites
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Foundation courses: As a Level 4 course, AU1 draws on the knowledge you have acquired from other subjects. It assumes that you have a foundation in intermediate financial accounting and are familiar with quantitative methods and management information systems. A description of these prerequisite courses is available in the CGA-Canada Syllabus on the CGA-Canada website. Mathematics: You are expected to have a sound understanding of basic mathematics and its application in the business context; the expected level of knowledge can be gained from any standard business mathematics text. Ethics: An understanding of ethical principles and how the accounting profession addresses ethical issues is an essential part of the CGA program of professional studies. The Ethics Readings Handbook [ERH] has been developed as a study resource in this area and is provided electronically through a link in the Reference library (under the Resources tab). In AU1 it is assumed that you have become familiar with Section A of the ERH. Section A clarifies important concepts and terms used throughout the ERH and is necessary background knowledge for ERH readings referred to in this and other courses.

Software skills: When working with AU1, you are expected to have acquired basic competence with the Microsoft Windows and Microsoft Excel. (If you need to build your Windows or Excel skills, refer to the CGA computer tutorials, CT1 and CT2.) For information on how to work with software in this course, see How to use software under the Resources tab.

Structure and delivery

AU1 comprises 10 modules that can be studied over a 12-week period, one module per week followed by
preparation for the final examination. Each module should take between 15 and 20 hours to complete. The modules are delivered online and can be saved to your hard drive and/or printed.

Textbook and reference materials

The textbook and reference materials for AU1 are
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W.J. Smieliauskas and Kathryn Bewley, Auditing: An International Approach, Fifth Canadian Edition (Whitby, Ontario: McGraw-Hill Ryerson Ltd., 2010)

CICA Handbook Assurance, Part I, January 2010 release Ethics Readings Handbook [ERH], Third Edition (Vancouver, B.C.: CGA-Canada, 2010) (electronic version under the Resources tab)

For a list of the required software for all CGA courses, go to the Support Centre tab.

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CICA Handbook knowledge is an important part of professional preparation. You will be directed at appropriate
points to refer to specific sections of the Handbook. A licence is needed to use the Handbook and can be purchased online. Complete instructions are provided on a separate course supplement CD obtainable from your regional CGA office. As part of its program of providing professional support to its members, CGA-Canada has published the CGACanada Public Practice Manual [PPM]. The PPM is an integral part of the practice of public accounting by CGAs, so it is appropriate that you be familiar with it. Excerpts from the PPM are provided in AU1. Note: For purposes of this course, CICA Assurance Handbook Part I is examinable. The Handbook incorporates all CAS which have been adopted and are effective for all financial statement audits for periods ending on or after December 14, 2010. In many sections of the new auditing standards, there are no material differences from the previous standards. All material differences are highlighted in the module notes.

Modules
The course modules serve several purposes:
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to provide guidance on and supplement the text readings to provide guidance with online work to provide practice and assessment tools to measure learning and achievement

These purposes are achieved through some standard features that are common to all CGA courses, such as learning objectives and levels of competence. For a description of these features under the Resources tab.

Practice tools
In AU1, you are encouraged to make use of the Test your knowledge questions, accessible through a link on each module overview page. These multiple-choice questions give you instant feedback to help you gauge the depth of study required for the module. You will also find a set of self-test questions following the module topics to help you prepare for the assignment.

Course assessments
The assessments in this course consist of the following:
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Five quizzes, one each in Modules 2, 4, 6, 8, and 10: These are in the form of multiple-choice questions that you complete online. For instructions on accessing and completing quizzes, see Submit assignments and quizzes. A short assignment in Module 5, a longer, integrated assignment in Module 7, and a final short assignment in Module 9. You prepare your assignment response in Word and submit it to your marker via your AU1 Assignment Submission/Group Work area. Course examination: As with other foundation level CGA courses, the final examination is three hours long and is a comprehensive exam.

Your final course mark will be the combined quiz/assignment mark and examination mark (30 for the quiz/assignment mark and 70 for the examination). The five quizzes will be worth a combined maximum score

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of 10 (each quiz has a maximum score of 2). Assignment 1 and Assignment 3 will be worth a maximum score of 5 each. Assignment 2 will be worth a maximum score of 10. Your final examination will be graded out of 100, and your raw examination mark will be scaled into a mark out of 70. Your quiz/assignment mark (with a maximum score of 30) will then be added to the scaled examination mark. Several resources are available to help you prepare for the final examination:
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two practice examinations, which show you the general form of the final examination, including the types of questions you can expect examination reviews, in the form of recorded lectures, available approximately two weeks before the course examination an examination blueprint, which outlines the primary content areas covered on the examination, the related learning objectives, the proportion of marks assigned, and the weighting for different types of questions

To access these resources, click the Exam Preparation tab. Important reminder: For CGA-Canada's policy regarding original work on assignments, check out the Academic integrity policy in your AU1 Assignment/Quiz submission section.

Course roadmap
In the course schedule you will find a link to the course roadmap. This document will allow you to trace the topics you have studied across the various modules to the assignments and to trace each assignment question to the modules and topics it draws on. Use this document as a helpful guide to working through the course material.

Working with hyperlinks and icons

AU1 uses some special icons and links to organize the course material. The most common icons are the
learning objectives (target) icon and the required reading (book) icon, shown below. They are found at the beginning of most topics.

Here are a few more icons and links you should know about. Web links Links to other study material on the World Wide Web may be indicated by a hyperlink like the word online in the instruction: take the self-assessment exercise online and have your computer total the scores for you. Sooner or later, you may encounter a broken link, as many websites go through frequent structural changes. Also, websites may be temporarily down for maintenance, and the link may not actually be broken; if time allows, try revisiting it the next day. If you are sure a link is broken, you can report it on the Course websites page. Meanwhile for your study purposes, if a site is inaccessible, you may have to use your own initiative and

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developing skills with the search engines on the web to locate similar online sources of learning and adapt the online activity or study material accordingly. Extend your knowledge At various places in the module notes, you may encounter the Extend your knowledge icon. Click this icon to read about international facts, background, exceptions, and emerging issues. Extend-your-knowledge material is provided for your enrichment and is not examinable. It is identified by the following icon.

Activities In some modules, you will link from the topic commentary to Activities. There is a range of activities in the course, which you complete individually. They are directly related to particular topics. Activities that contain audio, video, or website components have a Multimedia icon next to the activity title.

Recommended study approach

Here is a recommended study approach for each module. You can develop variations on it to suit your own learning style. 1. Check the course schedule for an overview of your required reading and assignment responsibilities. 2. Try the test your knowledge questions and use the instant feedback to gauge the depth of study required for this module. 3. Read the assigned pages from the text and make your own notes. 4. Read the online module material and online lectures and preview the activities. 5. Do each of the activities and make notes. 6. Do the self-test questions and check your responses against the solutions. 7. Complete the assignment.

Data files
Note: The following instructions require you to have a compression utility such as WinZip on your computer for unzipping files. Before you begin working on the data files in this course, you must first download them from a zipped file and save them to your hard drive. Follow these steps: 1. Click the "Download data files" link at the end of these instructions and select "Save Target As" and save to your desktop. When the download is complete, click Close.

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2. Double-click the zipped file on your desktop to open it. Click Extract from the menu bar and choose a location on your hard drive for the data files using the New Folder button. Then click Extract once again to save the files to that location. Click Close. You are now ready to open and work with the data files on your hard drive. Download data files

Copyright
External Auditing
12th Edition Wally J. Smieliauskas, University of Toronto Current edition revised by Sandra Iacobelli, York University Curriculum Developer: John Kurian Curriculum Editor: Wendy Plain Project Coordinator: Joanna Steel

This course is produced in Canada by:

Certified General Accountants Association of Canada 100 4200 North Fraser Way Burnaby, British Columbia Canada V5J 5K7 CGA-Canada, 2010 All rights reserved. These materials or parts thereof may not be reproduced or used in any manner without the prior written permission of the Certified General Accountants Association of Canada. Both the curriculum and the content of this course have been reviewed by the School of Commerce of the Laurentian University and have been found to meet acceptable standards. Every reasonable effort has been made to obtain permissions for all articles and data used in this edition. If errors or omissions have occurred, they will be corrected in future editions, provided written notification has been received by the publisher.

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