BA 123 Public Accounting Practice COURSE OUTLINE nd 2 Semester, AY 2013-2014

Consultation Hours: Consultation Room

D. C. Salazar M-F 1-4 CBA 201 D / 204

B. Dela Cruz TTh 9 12; W-F 1-5 CBA 201 C

INTRODUCTION Financial statements are the main source of financial information to persons external to the business organization, and also are of great importance to management. Information provided by the financial statements is the basis for many business and economic decisions. Specifically, external users rely on these financial statements as they make a variety of decisions such as whether or not to invest their resources on a certain business organization. Resources that are very much needed as these organizations compete for market share and earnings growth within their domestic as well as in the global market. Thus, the reliability of these financial statements is crucial to its users. These users demand that an unbiased monitor report on whether the assertions embodied within the financial statements are reliable. This creates the need for a financial statement audit. A financial statement audit lends credibility to the financial statements. Without a financial statement audit, companies would be encountering restrictions in obtaining capital through the securities market and from financial institutions. Oftentimes, these restrictions manifest in the form of higher interest rates premiums. Therefore, financial statement audits may reduce the cost of capital. Consequently, the public accountant must be ever responsive to the needs of these users in order to provide the economic benefits society demands from the profession. As the rapidly changing world creates more complex and challenging business situations, the profession must keep abreast and ensure that its attest function continually be more relevant to the users of financial statements. This course prepares future public accountants to meet the challenges of the profession.

COURSE DESCRIPTION The course deals with the practical application of theories and concepts of auditing in public accounting practice. The course will expose the students to contemporary audit methods and techniques involved in the complex decisions and judgment processes inherent in audit practice. Discussions on the application of auditing standards, preparation of working papers and completion of an engagement will prepare the students in the eventual practice of their profession. The students will assume the role of a member of an engagement team during the informative discussions and exercises throughout the conduct of the course. GENERAL OBJECTIVES After taking this course, the students are expected: 1) To be able to conduct a financial statement audit as a member of an audit engagement team. 2) To be familiar with basic audit engagement related issues and conditions 3) To be able to prepare a complete set of financial statements. SPECIFIC OBJECTIVES 1. To integrate the concepts and procedures learned in the basic auditing course by simulating the environment and process of an audit engagement. 2. To integrate the concepts and procedures learned in auditing and accounting courses by simulating the environment and process of an audit engagement. 3. To be able to identify general and specific audit objectives and the related audit procedures. 4. To be able to determine audit procedures addressing possible errors related to financial statement accounts. 5. To enhance the learning process and interpersonal skills of the students by utilizing the cooperative (group) learning method. 6. To sharpen the oral and written communication, including listening skills of the students. 7. To improve the understanding of the audit process from inception to completion. BASIC REFERENCES 1. International Accounting Standards / International Financial Reporting Standards 2. Auditing, Gramling, Rittenberg, and Johnstone 3. Intermediate Accounting, Ronald Kieso

COURSE OUTLINE BA 123 1. Fundamental concepts of error correction. (1.5 sessions) Practical Accounting 1 2.0 Accounting for Income and Expenses 2.1 Net income a. Transaction approach b. Capital maintenance approach 2.2 Accounting changes 2.3 Prior-period errors 2.4 Interim reporting 2.5 Segment reporting 2.6 Development-stage enterprise Module 1: Current assets and current liabilities 3.0 Accounting for Assets 2. Cash and cash 3.1 Cash and cash equivalents equivalents (1.5 sessions) 3.2 Trade and other receivables 3. Receivables (1.5 sessions) Audit Problem Theory of Accounts 10.0 Other Topics 10.1 Accounting changes and prior-period errors a. Change in estimates b. Change in accounting policies c. Prior-period errors Ref

2.1 Audit of the revenue and receipt cycle a. Audit of sales and revenue transactions b. Audit of receivable balances c. Audit of cash receipt 2.2 Audit of expenditure and disbursement cycle transactions / cash balance c. Audit of cash disbursement transactions / cash balance 2.6 Audit of cash balances

6.0 Accounting for Assets (nature, recognition, measurement, valuation, classification, derecognition, and disclosure) 6.1 Concept of financial and non-financial assets 6.2 Current assets a. Cash and cash equivalents c. Trade and non-trade receivables (including receivable financing)

Readings IAS 39

BA 123 4. Inventories (1 session)

Practical Accounting 1 3.3 Inventories

Audit Problem 2.2 Audit of expenditure and disbursement cycle a. Audit of acquisitions and purchases d. Audit of inventory balances 2.3 Audit of production cycle a. Audit of conversion activities b. Audit of inventory balances: work-inprocess and finished goods c. Audit of cost of goods sold balance 2.2 Audit of expenditure and disbursement cycle f. Audit of prepaid expenses and accrued liabilities

Theory of Accounts 6.0 Accounting for Assets (nature, recognition, measurement, valuation, classification, derecognition, and disclosure) 6.2 Current assets d. Inventories (except LIFO, peso value-LIFO, retail LIFO, and conventional retail method) 10. Other Topics 10.8 Cost accumulation for product costing

Ref IAS 2

5. Prepayments (0.5 session)

6.0 Accounting for Assets (nature, recognition, measurement, valuation, classification, derecognition, and disclosure) 6.2 Current assets e. Prepaid expenses 6. Current Liabilities 4.0 Accounting for Liabilities 2.2 Audit of expenditure and 7.0 Accounting for Liabilities (0.5 session) 4.1 Trade and other disbursement cycle (nature, recognition, payables b. Audit of payroll measurement, valuation, 4.2 Provisions; Contingent transactions classification, liabilities e. Audit of trade payable disposition, and disclosure) balances 7.1 Concepts of financial vs. f. Audit of accrued non-financial liabilities liabilities 7.2 Current liabilities (including provisions) Module 1 Audit Exam: December 16, 2013 Module 2: Non-current assets

3.4 Prepaid expenses

BA 123 7. Investments (2 sessions)

Practical Accounting 1 3.5 Investments (excluding investment in subsidiaries and joint ventures)

Audit Problem 2.5 Audit of investing cycle a. Audit of investing transactions b. Audit of investment account balances

Theory of Accounts 6.0 Accounting for Assets (nature, recognition, measurement, valuation, classification, derecognition, and disclosure) 6.2. Current assets b. Short-term investments (including financial assets at fair value through profit or loss, available-for-sale securities, derivatives) f. Other financial assets 6.3 Noncurrent assets a. Noncurrent investments (including held-to-maturity securities, available-for sale securities) 6.0 Accounting for Assets (nature, recognition, measurement, valuation, classification, derecognition, and disclosure) 6.3 Noncurrent assets b. Property, plant, and equipment c. Intangibles and other noncurrent assets (including noncurrent assets held for sale) 6.4 Impairment of assets 10. Other Topics 10.3 Research and development 10.4 Borrowing costs

Ref IAS 39

8. Property, plant and equipment (2.5 sessions) 9. Intangible assets (0.5 session)

3.6 Property, plant and equipment 3.7 Intangibles 3.8 Other assets 3.9 Impairment of assets

c. Audit of property, plant and equipment account balances d. Audit of intangible account balances

IAS 16 IAS 23 IAS 36 IAS 38

BA 123 10. Biological assets (0.5 session)

11. Government Grants (0.5 session)

Practical Accounting 1 6.5 Accounting for biological assets, agricultural produce at the point of harvest and government grants related to agricultural activity 6.6 Accounting for government grants and disclosure of government assistance

Audit Problem

Theory of Accounts 10.0 Other Topics 10.13 Accounting for agricultural activity

Ref IAS 41

10.0 Other Topics 10.11 Accounting for government grants and disclosure of government assistance

IAS 20

6.3 Accounting for noncurrent assets held for sale and discontinued operations

IFRS 5

12. Investment Property (0.5 session) Pre-mockboards 1 (January 31, 2013) / Module 2 Audit Exam (February 3, 2014) Module 3: Long term liabilities and stockholders equity 4.0 Accounting for Liabilities 2.4 Audit of the financing 7.0 Accounting for Liabilities 13. Bonds payable 4.3 Income taxes payable cycle (nature, recognition, (1 session) 4.4 Bonds payable a. Audit of financing measurement, valuation, 4.5 Notes payable cycle transactions classification, 4.6 Debt restructuring b. Audit of non-trade disposition, and disclosure) (except dacion en pago) liability balances 7.3 Noncurrent liabilities c. Audit of interest 7.4 Debt restructuring expense and finance 7.5 Other financial liabilities cost balances

IAS 40

IAS 32 IAS 39 IFRIC 19

BA 123 14. Pension (1 session) 15. Stockholders Equity (2 session) 16. EPS / BVPS (1 session)

Practical Accounting 1 4.7 Employee benefits 4.8 Other liabilities

Audit Problem

17. Income taxes (1 session)

5.0 Accounting for Equity 5.1 Preference shares 5.2 Ordinary shares 5.3 Additional paid-in capital / share premium / other sources 5.4 Reserves (e.g., revaluation surplus, translation adjustments, and unrealized gain or loss on assets available for sale) 5.5 Retained earnings / accumulated profit or loss 5.6 Treasury shares 5.7 Earnings per share 5.8 Book value per share 5.9 Capital restructuring 6.0 Other Topics 6.1 Accounting for deferred taxes 6.2 Accounting for leases

2.4 Audit of the financing cycle d. Audit of equity accounts

Theory of Accounts 10. Other Topics 10.5 Employee benefits, including retirement benefit costs 8.0 Accounting for Equity (nature, recognition, measurement, retirement, and disclosure) 8.1 Preference and ordinary shares 8.2 Additional paid-in capital 8.3 Revaluation surplus 8.4 Retained earnings (including dividends and appropriations/accumulated profit or loss) 8.5 Capital restructuring (quasi-reorganization, recapitalization) 8.6 Treasury stock 8.7 Other reserves 8.8 Book value per share 10.0 Other Topics 10.2 Accounting for income taxes 10.0 Other Topics 10.6 Leases (operating leases, finance leases, sale and leaseback) 10.0 Other Topics 10.10 Accounting for sharebased payments

Ref IAS 19

IAS 32 IAS 33 IFRIC 17

IAS 12

18. Income taxes (1 session)

IAS 17

19. Income taxes (1 session)

6.4 Accounting for sharebased payments Module 3 Audit Exam - March 3, 2014

IFRS 2

BA 123 20. Comprehensive Financial Statements (1 sessions) 21. Statement of Cash Flows (1 sessions) 22. Segment reporting; Interim reporting; Subsequent events; Accounting policies and Accounting estimates (1. sessions)

Practical Accounting 1 1.0 Preparation of Financial Statements 1.1 Accounting process 1.2 Components of financial statements a. Balance sheet b. Income statement c. Statement of changes in equity d. Cash flow statement e. Notes to financial statements 1. Contingencies 2. Events after balance sheet date 3. Accounting policies 4. Related party disclosure 5. Segment reporting 6. Earnings per share 7. Other disclosures 1.3 Cash basis to accrual basis and single entry 1.4 Financial reporting and changing prices (including hyperinflationary economies)

Audit Problem 3.0 Completing the Audit 3.1 Evaluation of related party transactions, going concern, and contingencies 3.2 Evaluation of events after the balance sheet date 3.3 Drafting the audited financial statements 3.4 Application of analytical procedures in the overall review 3.5 Drafting the audit report

Theory of Accounts 9.0 Financial Statements 9.1 Form and content a. Balance sheet b. Income statement c. Statement of changes in equity d. Cash flows statement 9.2 Interim financial statements: Presentation & disclosure requirements 9.3 Segment reporting: Presentation & disclosure requirements 9.4 Accounting for/Disclosure requirements a. Events after the balance sheet date b. Earnings per share c. Contingencies d. Related party e. Accounting policies f. Others 10. Other Topics 10.12 Financial reporting and changing prices (including hyperinflationary economies)

Ref

IAS 1 IAS 7 IAS 10 IAS 34 IAS 29 IFRS 8

23. Small and Medium Enterprises (1 session) Pre-mockboards 2 March 19, 2014 / Module 4 Audit Exam (March 21, 2014) Mockboards (March 28, 29, April 4 and 5, 2014)

GRADING SCHEME: Stress Quizzes Long Quizzes Module Examinations (4) Final Examination 10% 15% 60% 15% 100%

GRADING SCALE: 96.5 100 92.5-96.49 88.5-92.49 84.5-88.49 Reminders

1.00 1.25 1.50 1.75

81.5-84.49 76.5-80.49 72.5-76.49 68.5-72.49

2.00 2.25 2.50 2.75

65-68.49 60 64.99 Below 60

3.00 4.00 .00

1. There will be 2 pre-mockboards examination. Each pre-mockboard will be composed of 3 examinations (Practical Accounting 1, Theory of Accounts and Audit Theory) of 30-50 multiple choice questions. 2. Final Examination will taken from the Mock CPA Board Examination. Grade on the final examination will be composed of Audit Problem (55%), Audit Theory (15%), Practical Accounting 1 (15%) and Theory of Accounts (15%). 3. You will be given a grade of Incomplete if you fail to take the final examination provided your standing is 3.0 or better, otherwise you will be given a grade of 5.00. 4. Take note of the release of grades and the period for objections/corrections. After the lapse of the objections peri od, submitted grades become FINAL and IRREVOCABLE. 5. Important dates: a. December 18, 2013 Last day of class in 2013 b. January 6, 2014 Resumption of classes c. February 20, 2014 Last day for dropping d. March 7, 2014 Deadline for filing LOA e. March 22, 2014 End of classes f. April 8, 2014 Deadline for submission of grades for graduating students;

A student is not officially dropped until the instructor's copy of the dropping form is duly submitted.