Completing The Audit. Good Review Requires More Than Looking At Working Papers. CONTINGENCIES SUBSEQUENT EVENTS FINAL ANALYTICAL REVIEW EVALUATE GOING CONCERN CLIENT REP. LETTER EVALUATE RESULTS OTHER INFORMATION IN ANNUAL REPORTS COMMUNICATION WITH AUDIT COMMITTEE MANAGEMENT LETTER.
Good Review Requires
More Than Looking
At Working Papers
FINAL ANALYTICAL REVIEW
EVALUATE GOING CONCERN
CLIENT REP. LETTER
OTHER INFORMATION IN ANNUAL REPORTS
COMMUNICATION WITH AUDIT COMMITTEE
MANAGEMENT LETTERPHASE IV : WRAP-UP ACTIVITIES
Significant control weaknesses
Financial statement adjustments
Disagreements with management
Difficulties encountered in the auditREQUIRED COMMUNICATION WITH AUDIT COMMITTEE
Types of Who When
Review Does Done Purpose
Perform Final Analytical Procedures
Evaluate Going Concern Assumption
Obtain Management Representation Letter
Read Other Information in the Annual Report
1.Examination of prior year’s working papers
a. Were last year’s working paper and review notes examined for areas
of emphasis in the current-year audit?
b. Was the permanent file reviewed for items that affect the current year?
2. Internal control
a. Has internal control been adequately understood?
b. Is the scope of the audit adequate in light of the assessed control risk?
c. Have all major weaknesses been included as reportable conditions in
a letter to the audit committee or to senior management?
3. General documents
a. Were all current-year minutes and resolutions reviewed, abstracted,
and followed up?
b. Has the permanent file been updated?
c. Have all major contracts and agreements been reviewed and abstracted
and copied with all existing legal requirements?
on the Basis of Evidence in the CYCLE, ACCOUNT,
AND THE OVERALL FS PRESENTATION
A contingent liability is potential future
obligation to an outside party for an unknown
amount resulting from activities that have
already taken place.
What if it’s probable & reasonably est?
considerable concern to the auditor:
for Finding Contingencies
about the possibility of unrecorded contingencies.
revenue agent reports for income tax settlements.
meetings for indications of lawsuits or other contingencies.
for Finding Contingencies
review invoices and statements from legal counsel.
indicate a potential contingency.
date and obtain a confirmation of the used and unused balance.
Those that have a Direct Effect on the Financial statements and Require Adjustment
W/draw from Engagement
(EWW!)Type I Subsequent Events
Those that have NO Direct Effect on the Financial Statements but Which Disclosure is Advisable
(Interpretation/usefulness of FS’s affected)
Dual-dated audit report means
that the audit report includes two dates.
1. The first date is the date for the completion
of field work except for a specific exception.
2. The second date, which is always later,
deals with the exception.
Once the report is issued, the auditor has no further obligation to perform additional procedures
UNLESS…new material information comes to our attention (don’t have to go looking)
Are people attaching importance to the info, likely to rely on the info?Subsequent Discovery of Facts
If it is a material issue, then the auditor must PREVENT further reliance in the report
3 D’s: The auditor can advise the client to disclose the new info: 1. Draft new FS’s/revoke old, 2. Disclose in imminent report (e.g., Qrtly), OR 3. Press Release “DON’T RELY!)Subsequent Discovery of Facts
If the client won’t disclose the new info, then further reliance in the report
Notify the CLIENT and BOD’s – report can no longer be associated w/ the FS’s
Notify REGULATORY AGENCIES – “audit report unreliable!”
Notify each PERSON known to be relying - “audit report unreliable!”Subsequent Discovery of Facts
A necessary audit procedure wasn’t performed (perhaps discovered in internal or external peer review)
Ask the Q: is the report still reliable?
IF NO, or uncertain, DO the procedure
Ask again: is the report still reliable?
If NO, do the 3 “D’s”Omitted Procedures detected after report date