1 / 21

9.401 Auditing

9.401 Auditing. Chapter 21 Completing the Audit. Audit Completion Activities. Reviewing for contingent liabilities Reviewing for subsequent events Accumulating final evidence Evaluating results Working Paper Review Writing the audit Report (see chapt 2) Read annual report

afia
Download Presentation

9.401 Auditing

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. 9.401 Auditing Chapter 21 Completing the Audit

  2. Audit Completion Activities • Reviewing for contingent liabilities • Reviewing for subsequent events • Accumulating final evidence • Evaluating results • Working Paper Review • Writing the audit Report (see chapt 2) • Read annual report • Audit Correspondence

  3. Review for contingent liabilities • Goal: • Identify all contingent liabilities • Determine likelihoods and amts involved • Ensure treatment & disclosure is appropriate

  4. Techniques for contingent liabilities and commitments • Consider evidence already gathered • Confirmations, warranties etc. • Enquiry of management • Review income tax assessments • Review minutes of meetings • Analyze legal expenses-review invoices • Confirm client lawyers (next slide) • Read contracts etc.

  5. Lawyer’s letters • Sent to all lawyers used by client • Sent on client letterhead, signed by client, with instructions to return confirmation to auditor • Contains: • List, description & evaluation of all known claims • Request to advise if info is reasonable • Request to advise if list is incomplete • Lawyers are encouraged to respond but may not or may use slightly different terminology

  6. Review for subsequent Events • Auditors are responsible for reviewing events up to date of audit report (=“substantial completion of fieldwork” • Goals: • Identify information having direct effect on f/s and requiring adjustment (=indicates condition existing at year end) • Identify important events requiring disclosure

  7. Techniques for subsequent events • Subsequent receipts • Subsequent payments • Settlement prices of subsequent transactions • Enquiry of management • Review minutes of meetings • Confirm client lawyers • Review internal statements for subsequent pd. • Review books of account for significant or unusual transactions • Letter of representation

  8. Date of audit report • Date = substantial completion of fieldwork, including subsequent event review • If a subsequent event arises after that date and before issue of report, auditor can: • Extend fieldwork (subsequent event review for all events) to new date or • Limit review to new event only and double-date report

  9. Subsequent discovery of facts • Auditor not actively engaged to look for info after release of audit report, but some may come to their attention. • If relates to condition that existed before audit report issue and material: • Auditor must audit subsequent event • Request client re-issue and auditor re-issues report • If client refuses, consult legal advice

  10. Accumulating Final Evidence • Final Analytical Procedures • Evaluate Going Concern Assumption

  11. Client Representation Letter • Goal: • Impress upon mgmt that f/s are their reponsibility • Document responses of mgmt

  12. Client Representations • On the client’s letterhead, addressed to the auditor, signed by responsible officers and dated as of the auditor’s reports. Contains, among other things: • Acknowledgement of primary responsibility for fair presentation of financial statements in conformity with GAAP • Availability of all financial records and related data • Completeness of the minutes of meeting of stockholders, directors, and important committees • Info about related parties • Irregularities involving management or employees • Plans or intentions affecting b/s items • see HB 7100 These representations are not substitutes for corroborating evidence obtainable by the auditor.

  13. Evaluating Results • Cumulative known errors, most likely and possible errors, including those on opening balances on: • Total assets • Total liabilities • Current assets/liabilities • Net income • Qualitative aspects • Overall fair presentation of f/s, including disclosure

  14. Working Paper Review • Goals: • Evaluate staff • Ensure audit meets firm standards and GAAS • Counteract biases • Primacy, recency • Internal control descriptions prepared by client (L. Kopp)

  15. Working Paper Review: to consider • Planning decisions were adequate • All work complete and properly documented • Conclusions appropriate • Analytical review results

  16. Other Information and Supplementary Information • Other Information Section 7500.13 - • Auditor’s have and obligation to read (study) the information and determine whether it is inconsistent with the audited financial statements. • However the auditor is not required to review press releases, analyst’s interviews or other forms of irregular financial new releases specifically engaged by the client to do so. • 13 The auditor should read the other information in the annual report and consider whether any of this information is inconsistent with the financial statements on which he has reported. [JAN. 1986]

  17. Other Information and Supplementary Information • Other Information Section 7500.13 - • Auditor’s have and obligation to read (study) the information and determine whether it is inconsistent with the audited financial statements. • However the auditor is not required to review press releases, analyst’s interviews or other forms of irregular financial new releases specifically engaged by the client to do so. • 13 The auditor should read the other information in the annual report and consider whether any of this information is inconsistent with the financial statements on which he has reported. [JAN. 1986]

  18. Read annual report • Auditors have and obligation to read (study) the information and determine whether it is inconsistent with the audited financial statements. Any inconsistencies must be corrected. • NOT required to review press releases, analyst’s interviews or other forms of irregular financial new releases specifically engaged by the client to do so.

  19. Audit Communications • Necessary communication with mgmt (and audit committee): • Misstatements (other than trivial ones) • Illegal or possibly illegal acts • Internal control “reportable conditions” (=significant deficiencies in design or operation)

  20. Communications with audit committee • Auditor vs mgmt responsibility • Significant planning decisions • Significant acctg policies • Areas of audit sensitivity, mgmt estimates • Disagreements with mgmt, major issues discussed • Difficulties encountered

  21. Management letters • Optional • Areas of improvement in internal control, efficiency and effectiveness in operations

More Related