Untitled Document

HONG KONG INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS

Syllabus for the Paper PC-Auditing
(For Reference Only)

1.	The theory, nature, purpose and scope of an audit

	a.	Introduction and development of auditing theory.
	b.	The ethical base of auditing.
	c.	Notion of accountability, stewardship and agency.
	d.	The social concept of an audit and its changing role.

2.	The regulatory framework of auditing and assurance

	a.	Auditing and Assurance Standards, their nature, purpose, scope and development.
	b.	Legislation and the auditor; the development and impact of statute law, case law.
	c.	The role and responsibilities of bodies which set Auditing and Assurance Standards.
	d.	The roles of parties in relation to auditing including the Practice Review Committee, Directors' Responsibilities and Audit Committees (with reference to their contribution to corporate governance).

3.	Fundamental principles and concepts

	a.	Independence, objectivity and integrity.
	b.	Confidentiality.
	c.	Audit evidence and documentation.
	d.	Due care, skill and competence.
	e.	Audit risk.
	f.	Materiality and judgement.
	g.	True and fair view.
	h.	Audit reporting as a communication medium.
	i.	Audit planning and supervision.

4.	The framework of auditing

	a.	The application of fundamental auditing principles and concepts.
	b.	The application of Auditing and Assurance Standards.
	c.	The requirements of the Companies Ordinance.
	d.	The legal liability of auditors and their professional obligations.
	e.	The auditors' responsibility for the detection and reporting of fraud.
	f.	The statutory and ethical considerations relating to the acceptance and continuance of audit clients.
	g.	Terminating professional engagements and factors affecting such decisions.
	h.	Preparing, issuing and revising engagement letters.

5.	Audit evaluation and planning

	a.	Establishing the objectives, scope and critical aspects of an audit.
	b.	Developing the audit plan to meet those objectives.
	c.	The identification of sources of audit evidence and its relationship to critical audit objectives.
	d.	Establishing materiality levels, statistical sampling and sampling size.
	e.	Determining the areas of audit risk and the consideration of inherent risk, control risk and detection risk.
	f.	Analysing the consistency of financial and related information by substantive analysis (including analytical review).
	g.	Designing, documenting and re-evaluation of the audit plan.
	h.	Evaluating the management information systems.
	i.	Organising and planning complex audit situations, including group audits, joint auditor working with specialists, utilisation of Computer-assisted audit techniques (CAATs).

6.	Evidence collection and analysis

	a.	Collecting evidence using a variety of sources and methods.
	b.	Selecting audit procedures appropriate to the business.
	c.	Identifying and applying sampling techniques.
	d.	Evaluating the evidence collected.
	e.	Recognising mutual co-operations, similarities and differences in the work of the internal, external and other auditors.
	f.	Recognising the needs and limitations of the use of specialists.

7.	Performing of an audit

	a.	Determining the internal control systems and documenting the system.
	b.	Designing the audit programme.
	c.	Evaluating internal controls.
	d.	Performing compliance tests on the system.
	e.	Evaluating the results of tests and the re-evaluation of inherent and control risk.
	f.	Applying substantive analysis, substantive sampling and the evaluation of test results.
	g.	Determining and analysis the inter relationship of tests.
	h.	Altering/modifying tests in the light of test results.
	i.	Comparing test results with evidence from other tests, critical audit objectives, risk evaluation and materiality levels.
	j.	Responding to potential weaknesses in the system and areas of concern evidenced by substantive tests.
	k.	Utilising CAATs and testing Management Information System controls.
	l.	Impact of relevant legislation on the performance of an audit.
	m.	Performing substantive procedures in relation to balance sheet items and evaluating the sufficiency, relevance and reliability of evidence, and the amendment of audit plan.
	n.	Monitoring the impact of information systems development on the audit process, including the impact of computers on the auditing process, monitoring best practice in systems design, operation and the management of information systems development, and the resource implications of Information Technology systems.

8.	Reporting framework

	a.	Evaluating the sufficiency, relevance and reliability of audit evidence.
	b.	Reviewing financial statements for their compliance with Hong Kong Financial Reporting Standards.
	c.	Evaluating other critical areas - going concern status, related party transactions, pending legal action, illegal acts by clients, management representation and truth and fairness of financial statements.
	d.	Reviewing the auditors' work with respect of the preceding year amounts.
	e.	Reviewing unaudited information included with audited financial statements.
	f.	Identifying and recommending appropriate action on weaknesses found during the audit.
	g.	Formulating an audit opinion.
	h.	Issuing management letters, the principles and practices.
	i.	Advising management of improvements in business systems.
	j.	Preparing a formal audit report, and the form of audit qualifications.
	k.	Determining the potential effects of audit qualifications.
	l.	Evaluating and determining the circumstances in which it is necessary to qualify audit reports.

9.	Current issues and controversies

	a.	The evaluation of current issues and controversies relating to auditing, including audit expectations, the regulation of audits.
	b.	The monitoring and evaluation of international issues affecting auditing.
	c.	Monitoring developments in auditing theories and their implications for the profession.

10.	Management of a Certified Public Accountant (CPA) (Practising) firm

	a.	Establishing quality control procedures with CPA (Practising) firm for better management and control.
	b.	Establishing adequate risk management procedures including client acceptance, ongoing client retention and limitation of liability measures such as professional indemnity insurance.
	c.	Understand the nature of practice review process and responsibilities for providing assistance when selected for such review.
	d.	Managing the audit client, including compiling and reviewing information on clients throughout the year.

Examination Format
-	3-hour open-book format plus 1/2 hour reading time.
-	the examination will comprise 2 sections and the marks allocation are as follows:
	Case Essay/Short Questions	50 50

Note:
1	The syllabus of this paper is based on the auditing components of Module C – Auditing and Information Management of the Institute’s Qualification Programme.
2	Updated version of the Candidate Learning Pack designed for Module C will be available for sales around 4 months prior to the Examinations.

Reference List

Primary Reference

Hong Kong Law Chapter 32 Companies Ordinance.

Hong Kong Institute of Certified Public Accountants Members' handbook.

A Guide to Quality Control, Hong Kong Institute of Certified Public Accountants.

Candidate Learning Pack of Module C (Auditing and Information Management) of the Qualification Programme of the Hong Kong Institute of Certified Public Accountants.

International Standards on Auditing.

Exposure Drafts (Auditing); Hong Kong Institute of Certified Public Accountants.

Relevant articles published by the Institute e.g. articles in A Plus.

Supplementary Reference

A. Arens & J. Loebbecke; Auditing: an Integrated Approach 8th Edition; Prentice Hall.

F.A. Gul; Hong Kong Auditing Economic Theory and Practice 2nd Edition; City University of Hong Kong Press.

P.T.Y. Lau & N.C.Y. Lam; Auditing and Assurance in Hong Kong: Pilot Publishing Company.

Note: The above publications are subject to editorial amendments.