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ACC 747 – Advanced Auditing Essay

1.Course Objectives

This course is an advance course in auditing. The course materials consist primarily of empirical research and case studies on the subject of auditing designed to provide a deeper understanding of topics covered in the first auditing course. Subject matters include the demand for auditing, the nature of the audit market, differences in audit approaches, auditor decision-making, audit sampling, and audit risk. In addition, selected topics are covered that do not receive coverage in the first auditing course, especially information systems auditing. Students are expected to gain the following:

a.An understanding of the economic nature of auditing and the demand for audit and assurance services.
b.Knowledge of diversity in audit practice, and the various tools available to assist auditors in the performance of the audit.
c.Factors that affect audit performance and audit risk.
d.The ability to communicate concepts orally and in writing.

2.Required Texts and Materials

Coursepack of selected readings and course notes – Distributed by professor.
Contemporary Auditing: Issues and Cases, Knapp, ITP/South-Western College Publishing Co., 4th Ed., 2001.
Information Systems Auditing and Assurance, Hall, ITP/South-Western College Publishing Co., 1st Ed., 2000.

Both texts are available at the Orange Bookstore only. Research readings and course notes will be distributed at least one class in advance.

Optional Materials

Auditing and Assurance Services: An Integrated Approach, Arens, Elder and Beasley, Prentice-Hall Inc. (or other auditing text).
Codification of Statements on Auditing Standards, AICPA.

3.Course Routine

Because this course is a seminar, attendance and participation by all members in class is expected and required. The course has been divided into several topics and segments. Although the format will vary by the topic covered, a typical class format is as follows:

Introduction to topic by professor
Presentation and discussion of research paper
Discussion of class discussion question found in course notes
Discussion of case
Topic wrap-up by professor

The professor will provide an introduction into each segment. Representative research studies and cases for each topic will then be discussed in class. For most research papers and discussion cases, one member of the class will be designated as the discussion leader. In addition to leading the discussion, the discussion leader will submit a written summary of the paper or case in a format prescribed by the instructor. The discussion leader will receive written feedback on his or her written evaluation and oral presentation the following class.

Each topic will have one or two major discussion issues. Each member of the class should prepare a written response to each question, which will be submitted at the end of class. In a seminar environment, the approach and conclusions of the authors of a research study should be critically examined. The comments of fellow class members and the professor are also subject to challenge for purposes of discussion. Students are expected to offer at least one comment every class.

4.Grade Determination

Total points in the class are tentatively planned as follows:

1st mid-term 75
2nd mid-term 75

Paper 100

3 ACL assignments 30

Discussion leader presentations
3 research papers and cases @ 30 points each 90

Participation 60

Total points 430

The grading cutoff is expected to be approximately as follows: 390 points

I will provide you with a summary of your class standing before the second mid-term exam. Course grading elements are discussed further below.


The first midterm will be held on Monday, March 3rd. The exam will be primarily essay questions on material covered to that date. The second mid-term is scheduled for Wednesday, April 23rd. The format of the second exam will be similar to the first exam, and will cover the material from the second half of the course (non-cumulative). Copies of a previous exam will be distributed in class to indicate the nature and type of questions.

The essay exams will take longer than the normal class period. The exams will be scheduled at a mutually agreeable time for all the class members. Two class sessions will not be held during the semester to compensate for the additional time allocated to the exams.


One typewritten paper is required during the term on a topic agreed to by the student and professor. Generally, this will be an expansion of one of the topics covered in the course. The paper will consist of a literature review of the topic, followed by the development of a brief research proposal for an issue that you believe merits further research. The form and content of the papers will be discussed in greater detail before they are due. Each paper should be at least 10 pages in length, and are expected to be between 12-20 pages in length.

The due date for the paper is Friday, May 2nd. If you wish feedback on your paper prior to final submission, I am willing to review one draft of the paper any time before Monday, April 28th.
I will generally try to give you my comments within two days. In addition, you should provide me with your topic and a tentative reading list by Monday, April 7th.

Further instructions on the form and content of the paper will be distributed later in the term. Papers will be graded based on presentation and content. Presentation includes correct spelling and grammar, as well as organization, including use of headings and subheadings.

7.ACL Assignments

The middle section of this course includes an emphasis on information systems auditing. Three assignments using ACL generalized audit software and data on the CD-Rom included with Information Systems Auditing and Assurance will be collected and graded. The instructor will provide detailed requirements for completion of the ACL assignments.

8.Discussion Presentations and Assignment

Discussion leader responsibilities will be evenly divided among the class. Each class member will be assigned as the discussion leader three times (usually two research papers and one case). Evaluation will be based on both the written evaluation and oral presentation.

Separate instructions are included in the course notes on the format and content of paper and case evaluations. Written evaluations should be approximately 4-6 double-spaced pages, and will be evaluated on both content and presentation, including organization. Oral presentations should be organized, with appropriate use of overheads. Because this is a seminar, presentations should not be presented using Powerpoint.


A total of 60 points are allocated for participation (note that attendance is expected). Each member of the class is expected to actively participate in discussion. The professor will maintain records of participation during each class, including extent and quality of participation. Each topic has a major discussion question. Class members should be prepared with a response to the discussion question, along with supporting reasoning or justification. These written responses will be collected by the professor. They do not have to be typed, and one or two paragraphs should suffice. Feedback on your written questions and participation will be given using a +, , - system.

10.Academic Integrity

Consistent with the Academic Integrity Policy adopted by the faculty of the School of Management, honesty, integrity and respect for others are expected from students at all times. All students should have completed a certification statement available in the Office of Graduate Programs (Suite 222). All assignments are expected to be original work, and any act of academic dishonesty will result in a zero grade for that assignment.

11.Compliance with Rehabilitation Act Section 504 and Americans with Disabilities Act

Any student requiring special consideration because of any type of disability should make an appointment to meet with the course instructor.

12.Course Schedule

A detailed, tentative schedule for the course follows. A schedule with assignment of discussants for cases and research papers will be distributed by the second or third week of class. The instructor will also indicate specific page and concept requirements for the material in Information Systems Auditing and Assurance.

Advanced Auditing
Tentative Class Schedule – Spring, 2003



Reading Assignment
Introduction to Audit Research
The Demand for Auditing

The Demand for Auditing

Audit Quality
Chow, C., “The Demand for External Auditing: Size, Debt and Ownership Influences”, The Accounting Review (AR) (April 1982) 272-290. Case 1.2, ESM Securities, Contemporary Auditing Issues and Cases. Mon

No Class – Martin Luther King Day

Audit Quality

Carcello, J., R. Hermanson and N. McGrath, “Audit Quality Attributes: The Perceptions of Audit Partners, Preparers, and Financial Statement Users”, Auditing: A Journal of Practice and Theory (AJPT) (Spring 1992): 1-15.

8.4, Yale Express System, Inc., Contemporary Auditing Issues and Cases. Mon
Audit Quality

Zhou, J., and R. Elder – “Auditor Size, Industry Specialization, and
Discretionary Accruals for IPO firms.” Enron Case
No Class


Audit Pricing
Ch. 1-2, Information Systems Auditing and Assurance
Case 1.6, Crazy Eddie, Contemporary Auditing Issues and Cases.

Advanced Auditing
Tentative Class Schedule – Spring, 2003

Reading Assignment
Auditor Changes

Audit Opinions
Chow, C. and S. Rice, “Qualified Audit Opinions and Auditor Switching”, The Accounting Review (1982): 326-335. Bamber, E. and R. Stratton, “The Information Content of the Uncertainty-Modified Audit Report: Evidence from Bank Loan Officers”, Accounting Horizons (June 1997): 1-11. Mon

Audit Opinions – Going Concern
Geiger, M., and K. Raghunandan, “Going-Concern Opinions in the “New” Legal Environment”, Accounting Horizons (March 2002): 17-26. Case 1.7, Penn Square Bank, Contemporary Auditing Issues and Cases. Wed

Auditor Liability
Ch. 4, Information Systems Auditing and Assurance
Sullivan, J., “Litigation Risk Broadly Considered”, University of Kansas Auditing Symposium XI (1992): 49-59. Mon
Auditor Liability
Anderson, J., M. Jennings, D. Lowe, and P. Reckers, “The Mitigation of Hindsight Bias in Judges’ Evaluation of Auditor Decisions”, Auditing: AJPT (Fall 1997): 1-19. Case 8.5, First Securities (Ernst & Ernst v. Hochfelder) in Contemporary Auditing. Wed

Auditor Liability
Ch. 5, Information Systems Auditing and Assurance (p. 189 – 210) Case 8.6, Equity Funding in Contemporary Auditing.
Risk Assessment

Elder, R. and R. Allen, “A Longitudinal Field Investigation of the Relation Between Risk Assessments and Sample Size Decisions (2002 Syracuse University working paper). Case 3.3, E. F. Hutton & Company, Inc. in Contemporary Auditing. Wed

Risk Assessment
Houghton, C. and J. Fogarty, “Inherent Risk”, Auditing: AJPT (Spring 1991):1-21. Case 1.1, Mattel, Inc. in Contemporary Auditing.
First Mid-term exam

Accounts Receivable
Ch. 6, Information Systems Auditing and Assurance
Case 1.4, ZZZZ Best in Contemporary Auditing.
Advanced Auditing
Tentative Class Schedule – Spring, 2003

Reading Assignment
No Class – Spring Break

No Class – Spring Break

Accounts Receivable
Caster, P., “An Empirical Study of Accounts Receivable Confirmations as Audit Evidence”, Auditing: AJPT (Fall 1990) 75-91. Case 2.3, J.B. Hanauer & Co. in Contemporary Auditing.
Accounts Receivable – Revenue Recognition
Ch.7, Information Systems Auditing and Assurance
Case 8.7, National Student Marketing in Contemporary Auditing. Mon
Audit Sampling
Complete ACL Assignment 1
Waggoner, J., “Auditor Detection Rates in an Internal Control Test”, Auditing: AJPT (Spring 1990): 77-89. * Case 6.4, Tommy O’Connell, Audit Senior in Contemporary Auditing. Wed
Audit Sampling
Ch. 8, Information Systems Auditing and Assurance
Elder, R. and R. Allen, “An Empirical Investigation of the Auditor’s Decision to Project Errors”, Auditing: AJPT (Fall 1998): 71-87. Mon
No Class
Complete ACL Assignment 2

Audit Sampling
Burgstahler, Glover, S. and J. Jiambalvo, “Auditor Sensitivity to Error Projection and Uncertainty in the Evaluation of Error”, Auditing: AJPT (Spring 2000): 79-99. Case 2.6, Giant Stores Corporation in Contemporary Auditing. Mon

Auditor Judgment
Paper Topic Due
Ch. 9, Information Systems Auditing and Assurance
Houston, R., “The Effect of Fee Pressure and Client Risk on Audit Seniors’ Time Budget Decisions”, Auditing: AJPT (Fall 1999): 70-86.

Advanced Auditing
Tentative Class Schedule – Spring, 2003

Reading Assignment
Auditor Judgment

Complete ACL Assignment 3
Cushing, B. and S. Ahlawat, “Mitigation of Recency Bias in Audit Judgment: The Effect of Documentation”, Auditing: AJPT (Fall 1996): 110-122. Case
1.8, Star Technologies, Inc. in Contemporary Auditing.

Auditor Judgment – Analytical Procedures
Anderson, U. and L. Koonce, “Evaluating the Sufficiency of Causes in Analytical Procedures” Auditing: AJPT (Spring 1998): 1-12. Case 1.3, U.S. Surgical Corporation in Contemporary Auditing. Wed
Governmental Auditing
Brown, C. and K. Raghunandan, “Audit Quality in Audits of Federal Programs by Non-Federal Auditors”, Accounting Horizons (September 1995):1-10. * Elder, R., “A Comment on ‘Audit Quality in Audits of Federal Programs by Non-Federal Auditors’,” Accounting Horizons (December 1996). Copley, P., and M. Doucet, “The Impact of Competition on the Quality of Governmental Audits”, Auditing: AJPT (Spring 1993): 88-98. Mon

Assurance Services and New Professional Services

Hermanson, H., “An Analysis of the Demand for Reporting on Internal Control”, Accounting Horizons, (September 2000): 325-342. Alles, M., A. Kogan, and M. Vasarhelyi, “Feasibility and Economics of Continuous Assurance”, Auditing: AJPT (March 2002): 125-138. Wed

Second Mid-term exam

Course wrap-up

Final paper due

Essay Topics:

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