Student guide Faculty of Economics A.Y. 2008/09

Internal and External Auditing
Aim of the course
In recent years there has been a resurgence of interest in internal and external control systems, also in the wake of some major business failures in which the absence or malfunction of such review mechanisms played an important role. There is consequently now a widely felt need to study these topics more in depth, on the part of both academics and the professionals working in this sector.
The aim of the "Internal and external auditing" course is therefore to investigate the specific significance and differences which characterise control mechanisms in general, and the internal and external audit functions in particular.
The course is divided into two parts.
In the first, after a brief introduction to corporate governance models and the regulatory and professional framework on matters of internal auditing and control, the Internal Auditing function, is studied from both the theoretical and – most importantly - practical perspective, through a critical analysis of the principal operating cycles of the firm, backed up by real-world examples and case studies of Italian groups which implement the IA function. From an international perspective, the final aim of the course is to make a comparative analysis of the state of the art and future prospects in Italy, the United Kingdom and the USA, these last two being countries where the internal auditing function originated and has traditionally developed.
The second part of the course is devoted to the External Auditing function, and aims to equip students with the tools for understanding the context in which responsibility for control is entrusted to an independent external body, and the principles and procedures which guide the conduct of the audit.
The audit procedures are analysed with reference to the main operating cycles of the company, examining for each one the links between the operating cycle and the administrative process, in order to provide a better understanding of the dynamics within the firm.
The teaching method combines academic rigour with an incremental learning approach, and the illustration of real-world case studies and examples.
Part one
1. Corporate governance and systems of internal control.
1.1 Definition of corporate governance and its significance.
1.2 Systems of internal control: definition, objectives and content.
1.3 Regulatory framework and analysis of Italian and Anglo-Saxon professional practice.
2.   Internal Auditing (IA): structural and process aspects.
2.1   Definition, objectives, standards and content of IA activities.
2.2  Evolution of the content of IA activities: from financial to operational and management auditing.
3.   Implementation and organisation of the Internal Auditing function in some Italian groups.
Part two
1.  The External Audit:
1.1. Definition, objectives, standards and content of the external audit.
1.2. Types of audits (operational audit, financial audit, environmental audit, quality audit, IT system audit).
1.3. The reference regulatory framework.
1.4. Accounting principles.
1.5. Auditing principles.
2. Steps of a financial audit.
2.1. Planning the audit.
2.2. Relations between surveillance bodies.
2.3. The internal control system and its evaluation.
2.4. Operational tools used in audit activities
2.5. Documenting the audit.
3. Audit procedures applied to the cycles of the firm.
3.1. Procurement cycle and sales cycle.
3.2  The capital investment cycle.
3.3. Other operating cycles of the firm.
4. The final step of the audit.
4.1. Audit differences.
4.2Types of judgements.
4.3 Management letter.
There will be a written examination at the end of the course.
Students who attend class will have the option of sitting intermediate written tests.
Reading list
M. Livatino, N. Pecchiari, G. Pogliani, “Auditing”, Egea, Milano, 2005.
Study materials provided by the lecturers.