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AUDITING Program Instructor Bachelor in Management Associate Professor William H. Coyle Ph.D. C.P.A.

Course status Elective Concentra International Management, Marketing, Financial Management, Public tion Administration Year Term Workload 4th year Fall – 2011 3 ECTS, 45 hours of classes

Prerequisites Financial accounting, Managerial accounting, Financial analysis, Business Law General Information: This will be the second year where Babson and GSOM (the Graduate School of Management of St. Petersburg State University, Russia) will simultaneously have Auditing taught to their respective students. We will be accomplishing this through the help of our respective technology professionals and the video-conferencing technologies present at both universities. This cooperation between educational institutions is illustrative of how both universities are doing all they can to enhance the educational experience of their students. This will be the first year that all Babson Auditing students will be part of this unique course format. Last year, we tested this format on a handful of Babson students and it worked well and was assessed well by both the Babson students who participated and the GSOM students. The class will work in the following way. Professor Coyle will be in St. Petersburg for the first seven classes of the course. Undergraduate Dean Hanno of Babson will teach the eighth class and then Prof. Coyle will teach the remaining classes of the semester from Babson. The technology allows the Babson and GSOM students to see each other and speak to each other so even though the students are located 8/9 time zones away, they will be together in class. Professor’s Background Information: Professor Bill Coyle will be the primary professor for the class. Professor Coyle graduated from the University of Notre Dame and majored in accounting. He took a job with the Boston office of what was then known as Price Waterhouse and worked there for four years, including a six month engagement in Saudi Arabia where he was part of the Price Waterhouse launch team to establish a firm presence in Saudi Arabia. While at Price Waterhouse he attained his Certified Public Accountant (CPA) credentials from the Commonwealth of Massachusetts which he still maintains. He attained his Ph.D. from Texas A&M University and took a position of Assistant Professor at Babson in the fall 1992 semester. Soon thereafter he travelled to Russia in January 1993 as part of Babson’s first MBA off-shore elective to St. Petersburg and Moscow, Russia. Since 1995 Prof. Coyle has been the Director of Russian Programs at Babson, has led or co-led 24 undergraduate or graduate off-shore electives in Russia and has been a Visiting Professor

at GSOM. Classroom: At Babson. Then office hours will be established. I have an iphone and I receive emails on it wherever I am so I should always be in contact with you if you need me. Eighth Edition. by Alvin A. For all classes starting on Tuesday November 8. this is still the best way for the GSOM students to communicate with me. Fourteenth Edition. This course is first an auditing course but it is also an opportunity to have a rich international experience without leaving home. There is much students can learn from each other and that knowledge goes well beyond auditing. Prentice Hall. they have to adjust as needed. to be determined but likely in the Dekabristov Building on the fifth floor Class Days: Every Tuesday and Thursday starting on September 1 until December 8 except for Tuesday October 11 (Columbus Day holiday in the USA and November 22 and 24 (Thanksgiving Day holiday in the USA). Elder and Mark S. Petersburg will then be 9 hours ahead of Babson. 9:45 to 11:20 Tuesdays and Thursday. Supplemental Text: . Required Texts: 1. Just be aware of time zone differences. class will be held from 18:45 to 20:20 as St. St. For GSOM students. Course Logistics: Both Babson and GSOM are innovative institutions. This course is just another way that both institutions cooperate with each other and provide a unique educational experience for its students. Coyle has taught a course at GSOM. Michael C. Arens. So class will be held from 17:45 to 19:20 for all classes through Thursday November 3. the best thing to do is email me Email: coyle@babson. This course represents an excellent opportunity for Babson and GSOM students to learn about each other’s countries and learn about each other.edu While in Russia for everyone. Olin 220. 2012 2. email is the best way to communicate with me. No class will be held on October 11. For GSOM it gets complicated because Russia no longer changes its clocks in the fall and spring. at GSOM. With this course this marks the fourth consecutive year that Prof. but the hope is that the individuals in each group will interact with each other without the direction of the course or the professor. Beasley. Upon returning to the USA. Contemporary Auditing: Real Issues and Cases. Petersburg is 8 hours ahead of the Babson (eastern time zone in the USA). From the beginning of class until November 6. Knapp. Auditing and Assurance Services: An Integrated Approach. 2011. It is up to the students to take advantage of this opportunity. The course will force interactions between the Babson and GSOM students. South-western Cengage Learning. The class days and times are driven by the Babson schedule so unfortunately for our GSOM colleagues. Office Location at Babson: Luksic 306 Office Phone Number at Babson: extension 4366 or +1-781-239-4366 for GSOM students Office Hours: For Babson students there will be no office hours until I return from Russia. Randal J. November 22 and November 24 Class Time: For Babson.

and procedures needed to audit all of the major financial statement areas within a typical audit. KPMG. how an auditor plans and executes an audit engagement. By the end of the course. You will see the effects that the Sarbanes-Oxley Act has had on the auditing profession. Gleim Publications Inc. So if you buy the books. 2011 Edition. There are differences between the two editions and I will try to keep you informed of where those differences are. However. Ernst & Young and Deloitte and Touche) all conduct their audits worldwide based on the principles and procedures you will learn in this course. CPA Review: Auditing and Attestation. This is especially true for the Arens book. • Not everyone needs one but you must have access to it for the exams. you will have learned the fundamental concepts. you are not at a disadvantage learning Auditing in this way because good auditing is done the way you will learn it in this course. For the GSOM students: • On reserve in the library there are copies of the 14th edition of the Arens book and the 13th edition of the Arens book. This course will teach the responsibilities associated with being in the auditing profession. a secondary objective is that this course will prepare you to successfully complete the Auditing and Attestation section of the CPA exam. I will try to reconcile the sections for both editions so you will know which questions you need to familiarize yourself with for the midterm and final exam. you can get it at a discounted price + shipping. If you call Gleim at 800-874-5346. You will become familiar with generally accepted auditing standards (GAAS). Course Objective: This is a very focused senior-level or fourth-year level course. which are the guidelines by which an auditor professionally conducts a financial audit. The Big 4 international accounting firms (PricewaterhouseCoopers. including the assessment of a client’s internal control structure and the evidence gathered to support the assertions of management with respect to the account balances within the financial statements. • Also on reserve in the library are copies of the eighth edition of the Knapp book and earlier editions as well. For the Babson students: • We will go through most of the chapters in the Arens book and read most of the cases in the Knapp book. what an audit opinion is. this course is focused on conducting an audit in the USA. There were cases added and deleted between the 6th. Financial auditing is the process of rendering an opinion on a client’s financial statements. Nature of the Course: . risks. For the GSOM students. • There are copies of the 2011 and 2010 editions of the Gleim book on reserve in the library. I found last year there were enough copies to go around. you will get your money’s worth. the risks associated with rendering that opinion. The Knapp book has international cases which makes it less US-focused. Gleim and Hillison. 7th and 8th edition of the Knapp book. tell them you want to buy this book and that you are a Babson student. For the Babson students. You need to be aware of these case additions and deletions.1.

The Babson students are seniors and the GSOM students are likely to be fourth year students or graduate students and therefore you deserve to be treated as professionals. Then in 2008 the financial markets. leases. to name a few companies with fraudulent financial statements. The Bbason students . At that time no one. I will expect that you would have fully read and thought about the chapters and cases assigned and that you are prepared to fully participate in class. auditing is one-fourth of the CPA exam. since auditing is what many of you will do. Therefore. In part this was due to opaque and sometimes deceptive financial statements that did not adequately disclose the risks being undertaken by especially the companies in the financial sector of the economy. and Global Crossing. Enron was just breaking heavily into the US news. I understand you may have job interviews and stuff happens. The role of the auditor is never more crucial than it is in today’s environment. In the past. my expectation level of your performance is very high. The auditor must know the nuances in determining an account balance so that the appropriate and sufficient amount of evidence supporting the client’s balance is obtained. I feel I owe it to you to conduct the class in such a way that is consistent with the business environment that you will soon be dealing with every day. • Class Attendance: I expect you to attend class. Also. However auditors do not prepare the financial statements. It is the auditor’s responsibility to gather enough evidence in order to conclude that the account balances as presented by management are fairly stated in all material respects. inform me in advance by email (coyle@babson. Many of the GSOM may follow the same career path in public accounting. including me. and execution which requires analytical skills but of a more subjective type. would have expected the magnitude and effect of Enron. To audit accounts such as inventory. Nature of the Auditing Profession: By the end of 2001. If anything. but are not limited to the following: • Preparation: I am assuming all of the Babson students intend to work for a public accounting firm as an auditor or tax accountant and that you will take the CPA exam.This course is the least quantitative accounting course offered in the accounting curriculum.edu) in the event you will not be attending class. This class should be of the very highest priority. Perhaps that is not the case anymore. Madoff had financial reports that were supposedly examined by an auditor. planning. Therefore. so when possible. No one would have thought about the establishment of a Public Company Accounting Oversight Board in the US through an act of Congress named Sarbanes-Oxley. Expectations include. at the time one of the Big Five international accounting firms. The profession is going through a turbulent time right now. the banking sector and the housing market simultaneously collapsed. students would not quite believe me. and in the US. I always said that auditing was an exciting and crucial profession. Worldcom. but that also means you have the responsibility to act like professionals. it reinforces the importance for honesty and transparency in the financial markets and the significant role an auditor needs to play in order to promote an efficient capital market. No one would have expected the complete collapse of Arthur Andersen. and pensions. Course Conduct: I expect you to be highly motivated. That does not mean that you will not need the knowledge learned in other accounting courses. that is management’s task. an auditor must know how they are constructed. Auditing is more risk assessment.

I do and so I may be more lenient with the GSOM students because they do not control the environment around them as much as the Babson students do. The questions on the quizzes will be on major issues raised in that day’s readings. cultural differences and certainly time differences. you will not have such an opportunity. In the event of an excused absence. Grading: Grading Components are as follows: Quizzes Group Projects Audit Case Write-ups Midterm Exam Final Exam Total 250 points 150 points 150 points 200 points 250 points 1. It is culturally OK in the US for students to bring food and drink into the classroom. This is more of a cultural issue for Babson students than St. most classes will start with a quiz so you really need to be in class on time. So perhaps more for the Babson students. Quizzes will be worth a total of 250 points. Still. Coyle will determine who will be in what group. leave the seating area neat and dispose of any trash. your average grade on the quizzes you took during the semester will be assumed to be your score for any missed quizzes. but that does not mean there will be 25 quizzes. But everyone will face these issues when they are working. if 17 quizzes are taken and a student scores 136 out of 170 (or 80%). . Material on the quizzes will be from the Arens book chapters and Knapp cases assigned for that day. • Arriving Late: Class will begin promptly as scheduled. In fact.may not appreciate the difficulty. All quizzes count. in the event a university-excused absence is needed. such that a reasonably careful reading of that day’s material should allow for excellent results on the quizzes. therefore. GSOM students may think Babson students live in a desert. The groups will consist of a mixture of Babson and GSOM students. for the benefit of students that will follow you into the classroom. During the semester there will be two group projects that need to be completed. • Another cultural difference that will become apparent. you do not get to drop any. For example. Point totals will be based on the overall percentage attained on those quizzes given in class during the course of the semester. then they will receive 200 points (80% of 250) for grading purposes. Given what Babson students will do. it is the sole responsibility of the student to secure such an excuse. time and distance some GSOM students have to travel in order to get to class. Prof. You live in a very small world. • Leaving Class: Only in rare circumstances should it be necessary to leave class. Quizzes will be graded on a 10 point scale. Petersburg State students. • For the Babson students. GSOM students and Russian students in general do not bring food and liquids into class. I guarantee you will be working with people from other countries so these assignments will help you prepare for that.000 points Expect that there will be a quiz given every day. In a business meeting setting. You may need to work through language problems. every effort should be made to get to class and get to class on time. The group exercises will allow an opportunity for the Babson and GSOM students to work together and learn from each other.

To be more specific regarding what I expect of the write-ups. although not all class days have an opportunity to hand in a case write-up. Case write-ups are due by the beginning of the class in which they will be discussed. you are highly encouraged to cite relevant material from the book. and the final will cover Chapters 14-24. including Statements of Auditing Standards (SAS). The midterm exam is worth 200 points and the final is worth 250 points. Everyone is expected to be prepared to discuss those questions in class. For the GSOM students. The midterm exam will cover Chapters 1-13. also based on how well written it is. That means no discussion or consultation with anyone in the class other than the professor is allowed. I am trying to make your life a little easier. For all students the midterm exam will be held in class. For the Babson students. The final exam will be given based on what Babson and the GSOM registrar/administration tell me. The final section for all case write-ups should be a one paragraph Case Conclusion section where you should state whether you agree or disagree with how the case was actually resolved. Because some cases are very short. I will inform you as soon as I learn what Babson and GSOM decide regarding the timing of the final exam. The key here is that if a question asks for an opinion or a conclusion on your part. but for the Babson students. the case write-ups should be written with clearly distinguishable sections. The length of the write-up will depend on the nature and number of the questions asked. you should be able to cite relevant support for your position. and most importantly. I will leave it to you to decide which cases you wish to write-up. although it is likely you will not be taking the CPA exam. you will do a formal write-up and analysis of a case. In this way. the final is cumulative in the sense that an understanding of the first 13 chapters is essential in order to do well in the last 11 chapters. . all cases noted with a (*) at the end of the case could be used for write-up purposes. In the Course Outline section of the syllabus. should state the company involved. but two times during the semester. In answering these questions. what it does. All of the cases have questions at the end of the case. There are many cases with a (*) next to it.Throughout the semester. Each write-up will be worth 75 points but will be graded on a 100 point scale. I leave it to you to manage your time appropriately. as you can look at your calendar and determine when you will have more time to do these write-ups. Both the midterm and the final will include multiple choice questions taken word for word from the Gleim and Hillison CPA Review book. in the sense that it will not contain a question specifically concerning the first 13 chapters. who the major players are in the case. However. not all cases are eligible for write-ups. so there are plenty of choices available and note that most. there will be case readings from the Knapp casebook. The write-ups are to be done on an individual basis. and why. Allowances will be given to the GSOM students as English is their second language. Please email me the case writeups using Microsoft Word. Grading will be based not only on the content of the answers. Each question should be answered separately. what the issues are in the case. Following the Case Summary section should be a separate section addressing each individual question at the end of the case. I believe that you should get used to the type and style of questions you will see on the CPA exam. Every case write-up should start with a Case Summary section that within a paragraph or two. The final is not explicitly cumulative. the CPA multiple choice questions do a very good job of testing your auditing knowledge.

• Leadership and Teamwork: the teamwork aspect in this course will be your crosscountry. I will also rely on my travels and experiences. Undergraduate Learning Goals: This section is specifically addressed to the Babson students but the GSOM students may find it interesting. creditors. Ethics and Social Responsibility is extremely important to the profession. operations and organizational behaviour all are reflected on the financial statements. such as marketing. how do you intend to meet those educational requirements? I am here to help you answer those questions. customers. finance. based on material discussed in class. and along with the MSA Director. As auditors you work in a team. Based on the nature of the client and the environment in which it operates. the way an auditor decides what evidence and how much evidence needs to be gathered to support a management assertion or account balance. an auditor must critically evaluate how they will obtain enough assurance so as to render an opinion on the financial statements. Furthermore. Babson has undergraduate learning goals. . More and more. • Critical and Integrative Thinking: You will have to use your knowledge from all your accounting classes and from most of your business classes as decisions made in other functional areas. suppliers. auditors have a high social responsibility as the independent monitor on behalf of shareholders. Professor Joanne Williams early on in the semester so I or Prof. I am one of the faculty teaching in the MSA program. accounts. exams will contain problems and essays written by me. etc. and your ability to work with others is crucial to your success in the profession. This then affects the risks associated with an audit. • Entrepreneurship and Creativity: particularly in creativity. • Global and Multicultural Perspectives: this one should be obvious given the nature of the course. still in auditing you need to be able to work with amounts. Therefore you need to consider in which state do you intend to work. as we will discuss differences in the auditing environments in different countries. This course will promote your development in all seven Babson undergraduate learning goals: • Rhetoric: through class participation and written assignments • Quantitative Analysis: although less so than in intermediate or advanced accounting classes. which are areas/concepts/skills that we at Babson believe should be an important component to a Babson student’s education. It is probably a good idea for the Babson students to meet me fairly soon after I return from Russia or if you prefer. and finally. For those interested in the Babson’s MSA Program. and the relationships between and among them. what the educational requirements are in that state to make you eligible to sit for the CPA exam. auditors are involved with multi-national clients. financial statements. Certainly the past few years have taught us that. cross-cultural group assignments.In addition to CPA questions. CPA Eligible: I am assuming that all of the Babson students intend to take the CPA exam. so understanding those different business and social environments is important. • Ethics and Social Responsibility: chapter four in the text is all about professional ethics and there is an ethical code within the AICPA (American Institute of Certified Public Accountants). Williams can discuss how you can get CPA exam eligible. or at least the last two parts of that question.

especially if you do not intend to practice in a 150 hour state.Professor Joanne Williams. . Accommodations: Any Babson student who feels he or she may need an accommodation based on the impact of a disability should contact me privately by email and in a timely fashion to discuss your specific needs. I will give you advice on non-MSA ways to make you CPA exam eligible as well. However. Students must also contact the Manager of Disability Services at 781-239-4508 or in Hollister Hall to coordinate reasonable academic accommodations. we are a good resource to use in that regard. please do not feel that you have to get an MSA. I believe my role is to give you all the alternatives I can think of and then leave it to you to decide what path to take.

8 OAO Gazprom (*) ???? Final Exam .8 Crazy Eddie. Note that only those cases which are followed by a (*) are eligible for a case write-up.5 The Leslie Fay Companies (*) Oct 4 Chapter 9 Case 8.7 Fred Stern & Company (*) Sept 22Chapter 6 Case 7. Inc. (#) cases do not appear in the 6th Edition of the casebook. Case numbers refer to the 8th edition. Chicago (*) Case 6.6 CBI Holding Company.2 Just for FEET. Ltd. (*) Case 7.7 Australian Wheat Board (*) (#) Dec 6 Chapter 23 Case 2. In-Charge Acct.3 Jamaica Water Properties (*) Nov 1 Chapter 15 Case 2. Inc.3 David Myers.1 Livent.1 The Trolley Dodgers Case 3. (*) Dec 1 Chapter 22 Case 6. (*) Oct 18 Chapter 12 Case 1.4 Tommy O’Connell Case 6.2 Howard Street Jewelers. (*) Nov 3 Chapter 16 Case 7. (*) (#) Nov 15 Chapter 19 Case 8. Inc.Course Outline: Take the following outline as my vision of what we will be doing this semester. Inc Case 8.3 United Way of America (#) Case 8.4 Triton Energy.6 American Fuel and Supply (*) Sept 15Chapter 4 Case 4.7 Hamilton Wong.9 Tata Finance Limited (#) Dec 8 Chapter 24 Case 8.12 Madoff Securities (*) (#) Oct 25 Midterm Exam on Chapters 1-13 Oct 27 Chapter 14 Case 1.2 Bill DeBurger.3 Suzette Washington Case 6.15 Tae Kwang Vina (#) Nov 18-27 Thanksgiving Break (no class) Nov 29 Chapter 21 Case 1. Inc.6 NextCard.3 Happiness Express. Inc (*) Oct 20 Chapter 13 Case 1.9 ZZZZ Best Company. Sept 20Chapter 5 Case 3.8 First Securities Co. (*) Case 1. Sept 29Chapter 8 Case 1. Controller Case 8.4 CapitalBanc Corporation Case 3.11 New Century Fin’l Corp (*) (#) Oct 13 Chapter 11 Case 1. (*) Case 5. In-Charge Acct Sept 27Chapter 7 Case 1. Inc.7 Lincoln S&L Association (*) Case 6.1 Leigh Ann Walker Sept 13 Chapter 3 Case 5. (*) (#) Oct 6 Chapter 10 Case 1.1 Ligand Pharmaceuticals (*) (#) Nov 8 Chapter 17 Case 2.1 Enron Corporation (*) Sept 8 Chapter 2 Case 4. Inc.2 F&C International.5 Koger Properties. CLASS TEXTBOOK CHAPTER AUDIT CASE ASSIGNMENT Sept 1Introduction Sept 6 Chapter 1 Case 1. Inc.5 Zuan Yan (*) (#) Nov 17 Chapter 20 Case 3. (*) Nov 10 Chapter 18 Case 2.2 Golden Bear Golf. Inc. Inc.