Completing the Audit. Items to consider. Contingent liabilities Commitments Legal confirmation Subsequent events Final evidence accumulation Analytical procedures Going concern assumption Client representation letter CAS 720 – The annual report Management discussion and analysis (MD&A)
Completing the Audit
(Name of entity, name of other party, nature, amount claimed and current status)
(Indicate likelihood of loss (or gain) and estimated amount of ultimate loss (or gain), if any; or indicate that likelihood is not determinable or the amount is not reasonably estimable.)
ABC Company Ltd.
123 Main Street
31 January, 201Y
Such & Such
Barristers and Solicitors
765 John Street
To Whom It May Concern:
In connection with the preparation and audit of our financial statements for the fiscal period ended 31 December 201X we have made the following evaluations of claims and possible claims with respect to which your firm's advice or representation has been sought:
Would you please advise us, as of (effective date of response), on the following points:
This enquiry is made in accordance with the Joint Policy Statement of January 1978 approved by The Canadian Bar Association and the Auditing Standards Committee of the Canadian Institute of Chartered Accountants.
Please address your reply, marked "Privileged and Confidential", to this company and send a signed copy of the reply directly to our auditor, GHW & Co. Llp, 321 Yonge Street, Toronto, Ontario
John James, President
c.c. GHW & Co
Why analyze legal expenses?
Required to obtain evidence for subsequent events
Not required to obtain evidence *
Balance sheet date
Field work completed
Directors approve and sign financial statements
Audit report signed
Audited financial statements released to the public
The auditor has to gather some final evidence besides the examination of
In an examination of Marco Corporation as of December 31, 2009, the following situations exist. No related entries have been made in the accounting records.
(Adapted from AICPA)
Melanie Adams is a public accountant in a medium sized public accounting firm and takes an active part in the conduct of every audit she supervises. She follows the practice of reviewing all working papers of subordinates as soon as it is convenient, rather than waiting until the end of the audit.
When the audit is nearly finished, Melanie reviews the working papers again to make sure that she has not missed anything significant. Since she makes most of the major decisions on the audit, there is rarely anything that requires further investigation. When she completes the review, she prepares a draft of the financial statements, gets them approved by management, and has them assembled in her firm’s office. No other public accountant reviews the working papers because Melanie is responsible for signing the auditor’s report.
Ruben Chavez, a public accountant, has prepared a management representation letter for the president and controller to sign. It contains references to the following items:
In analyzing legal expense for Boastman Bottle Company, Bart Little, a public accountant, observes that the company has paid legal fees to three different law firms during the current year. In accordance with his accounting firm’s normal operating practice, Bart requires standard confirmation letters as od the balance sheet date from each of the three law firms.
On the last day of fieldwork, Bart notes that one of the confirmations has not yet been received. The confirmation from the second law firm contains a statement to the effect that the law firm deals exclusively in registering patents and refuses to comment on any lawsuits or other legal affairs of the client. The confirmation letter from the third law firm states that there is an outstanding bill due from the client and recognizes the existence of a potentially material lawsuit against the client but refuses to comment further to protect the legal rights of the client