CONTENTS
Page
Preface
Topic 1: The business world and corporate governance 9
Topic 2: The internal auditor 33
Topic 3: The external auditor 51
Topic 4: Auditing concepts 71
Topic 5: The audit process 97
Topic 6: System and cycles within a business 115
Topic 7: The revenue and receipts cycle 125
Topic 8: The acquisition and payments cycle 155
Topic 9: The bank reconciliation 177
Topic 10: Payroll 183
AUE1501/1 (III)
, AUE1501
INTRODUCTION TO AUDITING
Topic 1 The business world and corporate governance
1. Various types of business entities
2. Corporate governance
3. Internal control
Topic 2 The internal auditor
4. Introduction to internal auditing
5. The responsibilities of the internal auditor
6. Professional conduct requirements for the internal auditor
7. Internal audit and good corporate governance
Topic 3 The external auditor
8. The development of the external auditing profession
9. Assurance by the external auditor
10. Professional conduct requirements for external auditors
11. The relationship between internal and external auditors
Topic 4 Auditing concepts
12. Assertions
13. Audit evidence
14. Materiality and audit risk
15. Risk assessment and further audit procedures
Topic 5 The audit process
16. The overall audit process
17. Planning and implementing the plan
18. Reaching conclusion and reporting
Topic 6 System and cycles within a business
19. Systems and cycles within a business entity
Topic 7 The revenue and receipts cycle
20. Ordering and warehouse/despatch functions
21. Invoicing and recording of sales functions
22. Recording of receipts and credit management functions
2
, Topic 8 The acquisition and payments cycle
23. The ordering and receiving of goods functions
24. The recording of purchases and payment (preparation and actual payment) functions
Topic 9 The bank reconciliation
25. The steps in performing a bank reconciliation
Topic 10 Payroll and personnel cycle
26. Personnel and payroll preparation
DIAGRAM 1
2 The teaching strategy
4.1 The study package
The study package for mastering this module consists of
• the prescribed textbook that you must purchase (see Tutorial Letter 101 for
the details).
• a printed study guide, the content of which is also on the myUnisa module
site under Study Units. The material in the guide is intended to enhance
your learning experience and is based on the prescribed textbook. Study
units contain learning activities that will enable you to further develop insights
and reveal to you how much you have actually learnt. The material has been
structured in topic and study units.
• all the study material is also made available on the myUnisa webpage for
this module under the Official Study Material tab.
• assignments, which are contained in Tutorial Letter 101.
• announcements on myUnisa which contain information to which we wish to
draw your attention. You will be notified of new announcements.
• discussion forum activities activated by the e-tutor.
2. Have I noted the due dates of the assignments on my
calendar? Yes No
4.2 Importance of study outcomes and self-assessment
Each topic will introduce you to a set of study units that belong to that particular
topic. Each study unit will contain its own study outcomes. At the end of the study
unit you will be reminded of the study outcomes and you will be asked if you are
able to achieve the study outcomes. Do not proceed to the next study unit before
you are able to answer these self-assessment criteria positively. The sequence
of the study units is important.
4.3 Study and study activities
A variety of study activities and study activities (self-assessment) are included in
each study unit. These are a combination of reading, studying, internet research,
AUE1501/1 3
, reflecting and discussion activities that are presented in a flexible manner through-
out the various study units. They have been designed to enable you to absorb the
content of the topic, to practise your understanding and to direct your thoughts.
This is a vital aspect of our learning approach because as you encounter these
study activities and actually do them, you will become directly involved in control-
ling the extent and quality of your learning experience. In short, how much and
how well you learn will depend on the extent of your progress through the study
activities, and the quality of your efforts.
As you page through the study guide you will notice that spaces have been left
open where you can write down your answers to some of the study activities. This
is intended to guide you to complete the answer correctly when referring to the
prescribed textbook. Your study guide thus becomes your workbook. Active
use of your prescribed textbook is essential to achieve success in this module.
I would like you to buy a blank exercise book or exam pad to use with the study
guide. In this exercise book you must respond to the study activities, reflect on
what you have learned, make your own notes or add diagrams to assist you in
the learning experience. The exercise book will become useful when revising
for the examination because all your notes are then kept at one place. There are
numerous activities in the study guide that you must complete. Besides help-
ing you to learn, writing down the answers will also assist you in improving your
writing skills.
3. Do I have a blank exercise book or exam pad to use as
workbook? Yes No
4.4 Meaning of words
Meaning of words is extremely important when attempting the assignments and
the examination. In this module we require you to understand the meaning of
certain words to enable you to interpret assessment criteria, comprehend what
various activities in the study guide require you to do and interpret assignments
and examination questions.
To indicate the length, scope and format of answers to study activities and ques-
tions, we have deliberately built limits or restrictions into the questions by using
action verbs. These action verbs give you an indication of how to tackle the given
problem and what style of writing is called for.
An analysis of the action verbs contained in a question will
• enable you to plan the answer systematically and organise your thoughts
logically
• ensure that you comply with the lecturer’s requirements
You will also save yourself time and trouble by eliminating irrelevant material that
falls outside the scope of the answer.
For the purposes of this module, the following meanings will be attached to the
following action words:
4
Page
Preface
Topic 1: The business world and corporate governance 9
Topic 2: The internal auditor 33
Topic 3: The external auditor 51
Topic 4: Auditing concepts 71
Topic 5: The audit process 97
Topic 6: System and cycles within a business 115
Topic 7: The revenue and receipts cycle 125
Topic 8: The acquisition and payments cycle 155
Topic 9: The bank reconciliation 177
Topic 10: Payroll 183
AUE1501/1 (III)
, AUE1501
INTRODUCTION TO AUDITING
Topic 1 The business world and corporate governance
1. Various types of business entities
2. Corporate governance
3. Internal control
Topic 2 The internal auditor
4. Introduction to internal auditing
5. The responsibilities of the internal auditor
6. Professional conduct requirements for the internal auditor
7. Internal audit and good corporate governance
Topic 3 The external auditor
8. The development of the external auditing profession
9. Assurance by the external auditor
10. Professional conduct requirements for external auditors
11. The relationship between internal and external auditors
Topic 4 Auditing concepts
12. Assertions
13. Audit evidence
14. Materiality and audit risk
15. Risk assessment and further audit procedures
Topic 5 The audit process
16. The overall audit process
17. Planning and implementing the plan
18. Reaching conclusion and reporting
Topic 6 System and cycles within a business
19. Systems and cycles within a business entity
Topic 7 The revenue and receipts cycle
20. Ordering and warehouse/despatch functions
21. Invoicing and recording of sales functions
22. Recording of receipts and credit management functions
2
, Topic 8 The acquisition and payments cycle
23. The ordering and receiving of goods functions
24. The recording of purchases and payment (preparation and actual payment) functions
Topic 9 The bank reconciliation
25. The steps in performing a bank reconciliation
Topic 10 Payroll and personnel cycle
26. Personnel and payroll preparation
DIAGRAM 1
2 The teaching strategy
4.1 The study package
The study package for mastering this module consists of
• the prescribed textbook that you must purchase (see Tutorial Letter 101 for
the details).
• a printed study guide, the content of which is also on the myUnisa module
site under Study Units. The material in the guide is intended to enhance
your learning experience and is based on the prescribed textbook. Study
units contain learning activities that will enable you to further develop insights
and reveal to you how much you have actually learnt. The material has been
structured in topic and study units.
• all the study material is also made available on the myUnisa webpage for
this module under the Official Study Material tab.
• assignments, which are contained in Tutorial Letter 101.
• announcements on myUnisa which contain information to which we wish to
draw your attention. You will be notified of new announcements.
• discussion forum activities activated by the e-tutor.
2. Have I noted the due dates of the assignments on my
calendar? Yes No
4.2 Importance of study outcomes and self-assessment
Each topic will introduce you to a set of study units that belong to that particular
topic. Each study unit will contain its own study outcomes. At the end of the study
unit you will be reminded of the study outcomes and you will be asked if you are
able to achieve the study outcomes. Do not proceed to the next study unit before
you are able to answer these self-assessment criteria positively. The sequence
of the study units is important.
4.3 Study and study activities
A variety of study activities and study activities (self-assessment) are included in
each study unit. These are a combination of reading, studying, internet research,
AUE1501/1 3
, reflecting and discussion activities that are presented in a flexible manner through-
out the various study units. They have been designed to enable you to absorb the
content of the topic, to practise your understanding and to direct your thoughts.
This is a vital aspect of our learning approach because as you encounter these
study activities and actually do them, you will become directly involved in control-
ling the extent and quality of your learning experience. In short, how much and
how well you learn will depend on the extent of your progress through the study
activities, and the quality of your efforts.
As you page through the study guide you will notice that spaces have been left
open where you can write down your answers to some of the study activities. This
is intended to guide you to complete the answer correctly when referring to the
prescribed textbook. Your study guide thus becomes your workbook. Active
use of your prescribed textbook is essential to achieve success in this module.
I would like you to buy a blank exercise book or exam pad to use with the study
guide. In this exercise book you must respond to the study activities, reflect on
what you have learned, make your own notes or add diagrams to assist you in
the learning experience. The exercise book will become useful when revising
for the examination because all your notes are then kept at one place. There are
numerous activities in the study guide that you must complete. Besides help-
ing you to learn, writing down the answers will also assist you in improving your
writing skills.
3. Do I have a blank exercise book or exam pad to use as
workbook? Yes No
4.4 Meaning of words
Meaning of words is extremely important when attempting the assignments and
the examination. In this module we require you to understand the meaning of
certain words to enable you to interpret assessment criteria, comprehend what
various activities in the study guide require you to do and interpret assignments
and examination questions.
To indicate the length, scope and format of answers to study activities and ques-
tions, we have deliberately built limits or restrictions into the questions by using
action verbs. These action verbs give you an indication of how to tackle the given
problem and what style of writing is called for.
An analysis of the action verbs contained in a question will
• enable you to plan the answer systematically and organise your thoughts
logically
• ensure that you comply with the lecturer’s requirements
You will also save yourself time and trouble by eliminating irrelevant material that
falls outside the scope of the answer.
For the purposes of this module, the following meanings will be attached to the
following action words:
4
