Chapter 1 Instructor's Guide

Chapter 1 Instructor's Guide - Chapter 1 The Demand for...

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Chapter 1 The Demand for Audit and Other Assurance Services Usually students will not have read Chapter 1 before the material is covered. As a policy, we always give students the entire scheduled time on the first day of class. In addition to getting a seating chart set up (which we always use), and handling the course procedures, we attempt to cover the following major topics in the chapter: Chapter Opening Vignette — “Auditors Have a Great Responsibility” We use this vignette about Cynthia Cooper and WorldCom to highlight the important role that internal and external auditors play in preventing fraud. We describe how WorldCom followed immediately after the Enron fraud, and resulted in the passage of the Sarbanes–Oxley Act and new regulation of public companies and their auditors. Many students will be aware that WorldCom was audited by Andersen. However, we do not spend significant time discussing the demise of Andersen and issues related to the firm’s audit practice. We prefer to emphasize the responsibility of auditors, and the positive role that auditors play in providing assurance on financial statements. Nature of Auditing (page 4) Start by asking students to tell you what auditing is. A student's own definition is written on the overhead. Other students are asked to discuss it until there is a reasonably usable definition. The three things that should be stressed are: a. Evidence (define the term) b. Information c. Determining degree of correspondence Students tend to think of auditing as auditing financial statements by CPA firms in accordance with GAAS. We therefore use Figure 1-1 (page 5) to discuss the definition. (See Figure 1-1) We also like to set up the matrix on T-1-1 on the overhead and go through it with the students. As a part of this, students are briefly introduced to IRS auditors, CPAs, and internal auditors. None of this is usually lecture. (See T-1-1)
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Chapter 1 Instructor's Guide - Chapter 1 The Demand for...

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