1/30/2018

Corporate Governance and Auditing

Module 1
Handout 1.1 - Week 1 Lecture
Introduction, The audit process and how to use
your ISA’s

Introduction to Corporate governance

and auditing
• Lecturer introduction:

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What is a CA(SA)?
• What does a CA(SA) represent to you?
Characteristics?
• Why do you want to become one?
– Discuss with someone next to you
– Article on Skills needed in 21st century

Extract from the “New vision for education – World economic forum”

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Why is CGA subject requirement on your path to

becoming a CA(SA)?

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CGA teaches one to:

– Understand and analyse businesses (opportunity);

– Identify and manage risk (business owner)
– Create efficiencies or improve systems in place (add value)
– Prove and assess value (help decision making)
– Develop ethical framework of thinking (everyone)
– Develop logical/ problem solving thought processes in
context of business environment
– Perseverance, patience and adaptability.
– Articulate thoughts into writing that is easily understood
and concise
All useful stuff!

What do we want to achieve as

lecturers on CGA?
• We want you to view us as a team working towards a common
goal.
• Prepare you for ITC by developing you as a person, challenging
you, changing your way of thinking about the subject.
• Change your misconceptions about the subject.
• Take value from your learning sessions that goes above and
beyond ticking off the SAICA competency framework.
• Help you develop an understanding for the subject thus
enabling you to minimise the amount of time you will need to
spend on it.
• Create learning environments that are engaging and two
directional. Be open to debate and discussion.
• Help in developing you as a person into a CA(SA) that will be a
leader/ role model.

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What is expected of you as students

on the CGA programme?
• Have a plan from day 1, implement and evolve the plan.
– “A bad plan that has been well implemented will always be better
than the perfect plan that is never implemented”.
– Not one size fits all, make use of the flexibility we have tried to
include in the learning process.
• ENGAGE in the learning process, get out of the mindset of
one directional teaching. Teachers are facilitators of a
learning process.
• Don’t be afraid to ask questions.
• Expect to feel lost if you do not do your work, the contact
sessions will be designed in such a way that they assume you
have done the work that has been given.
• To have an ability to reflect on undergraduate knowledge and
engage in topics that have not been covered in details as yet.

Common mistakes we see students

make every year
• Students do not prioritise the subject.
• It is hard to understand because ITC last
couple of years:
Total Marks CGA Marks %

SAICA ITC 2013 January 400 120 30%

June 400 117 29%

SAICA ITC 2014 January 400 111 28%

June 400 110 28% *Including SWOT analysis

SAICA ITC 2015 January 400 90 23%

June 400 129 32%

SAICA ITC 2016 January 400 100 25%

June 400 92 23%

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Common mistakes continued

• Refer to module 0

How do the modules and weekly

handouts work?
• Lets start by saying – it is very NB to read all
the modules, including module 0.
• There are 3 modules for the year, every
module has weekly hand outs that correlate to
the module – for example:
– Module 1 has 8 weekly handouts 1.1-1.8
– Included in these handouts is the suggested work
plan for the topic, together with learning
objectives, seen tutorials and solutions, additional
reading etc.

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It looks something like this…

Attended or
Time allocated Week 1
Completed?
Pre - Week 1 Lecture
None
preparation
Introduction, the audit process
15%-20% Lecture and using your ISA standards –
Lecture slides attached
Read through lecture slides and
5% Post lecture self-reflection
email queries to lecturers

Tutorials to prepare for Week 2

Level 1 None
50%
Level 2 None

Level 3 None

Question reflection documents

Level 1
5%
Level 2 None

Level 3

Pre - Week 2 Lecture

0%-5%
preparation

20% Attend tutorial in Week 2 - Not applicable as no tutorial

Other applicable articles or

recommended watching

Please…
• Collect your weekly handouts every week as
soon as possible.
• Try stick to the plan as best you can or be
strategic in where you spend your time
• File you handouts and modules in order
• Complete allocated tutorials and additional
reading BEFORE requesting more questions.

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Ok lets begin…with some practical

activities on Auditing and what it
•
means
5 minutes brainstorm anything that comes to mind when you think of the
word auditing.
– What does it mean to you? To industry? To businesses?
– Why is it done?
– Who performs it?
– Who uses it?
– Are there different types?
– What legislation controls how it is done?

• The next 5 minutes discuss how an auditor is similar to a and is often

required to also be a:
– Detective
– Accountant
– Cost accountant
– Business owner
– Tax specialist

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What created the need for auditors?

• Lets look at the history behind it (In module
as extra reading):
– Human settlement, cities and need to keep
records
• Agricultural revolution
• Tax…
– Industrial revolution:
• Large corporations/ shareholders vs owner/ managed
companies.
• Creation and use of debt and interest.
– Stock exchange & Financial failures:
• Listed company failures – need for protection;
• Add credibility (increased) vs detection of fraud and
error.

What created the need for auditors?

– Post world war two:
• Rapid growth and development;
• Sampling techniques introduced
– Technological revolution:
• Accounting evolution – accounting for complex financial
instruments
• Increased reliance on computer systems
• Emphasis on independence because of additional non-audit
services (audit failures – Enron)
• Globalisation = increased awareness of business risks
– Future of auditing?
• Use of experts (importance of project management skills)
• Increased reliance on AI and data interrogation;
• Live and relevant?
• Qualitative considerations? How to value and audit?
• Forward looking opinions?
• Increased transparency (audit report)

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Why do we audit i.e. what is the

objective of an audit?
• Thoughts? “An official
inspection of a
• The objective of an audit is to: companies
– Express an opinion; accounts”

– On fair presentation (or lack there of) of

information examined
– Support opinion with evidence (audit evidence)
But How?????

The Audit Process! Wikipedia?

Assurance engagement vary

dependent on number of factors

Index in
ISA

What are
they
interested
in?

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Overall Audit Process Summary

Refer to handout 1.1 for summary of applicable legislation and how relates to the different stages
of the process

Pre Engagement
activities

Planning: Controlled by
applicable laws
- Establish strategy and regulations:
- ISA’s
- Risk assessment - IFRS
Materiality - Code of
professional
conduct
- Auditing
Determine the Audit professions
Plan to respond to act
- Companies act
audit risks - King

And institutions:
Carry out the audit plan - IRBA
by putting plan into
action
Evaluate,
conclude
and report

How to use your ISA standards?

• Lets get an understanding of what is included:
• Activity 1:
– Start by opening the index to the ISA and linking the
various standards back to a stage of the audit
process….
• Activity 2:
– Lets reflect on the ISA standard most relevant from
today? Which one do you think it would be?
– Open to the standard and its index:
• Notice the difference between the REQUIREMENTS and
APPLICATION thereof.

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How to use your ISA continued…

• Activity 3:
– Cross referencing
• To appendix and other applicable ISA standards
– Refer to para 3-9 in ISA200

• Activity 4:
– Understanding how to extract information that would
be most relevant for you in a test or exam
• This is sometimes highlighted by the lecturer
• Or you may come across information during pre-reading that
is relevant
• Whenever you read an ISA, try think of whether the
information could be useful in a test or exam.

How to use your ISA continued…

• Some of the topics where your ISA can be useful in a test or exam:

– ISQC1
– Engagement letters
– Gathering audit evidence – assertions
– Auditing specific balances/ transactions – estimate, opening balances,
related parties etc.
– Concluding and reporting – audit opinions and audit reports
– CPC and APA
– Companies act and King III
• Get a good understanding of where these are and how to find them
quickly.
• All the ISA’s can be helpful to gather a good understanding of the
topic though

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High level – why so many books?!

• Volume 2A – ISA standards (Including new and
revised)
• Volume 2B – Code of professional conduct
• Volume 2A (2) – Standards on engagements
other than audit
• Volume 2 C – Companies act and APA
• Volume 2D – King Code and King report

How to use your ISA continued…

• Bring it to lectures;
• In your post lecture review, if the slides refer
to a specific paragraph then go read that
paragraph and flag the page.
• While doing tutorials (Level 2/3), have your
legislation with you so that you can refer to it
as you would in a test or exam
– Practice like you play!

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Thank you

Questions?

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