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Modern Auditing: Assurance Services and the Integrity of Financial Reporting, 8 th Edition. William C. Boynton California Polytechnic State University at San Luis Obispo Raymond N. Johnson Portland State University. Chapter 19 – Completing the Audit and Postaudit Responsibilities.
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Modern Auditing: Assurance Services and the Integrity of Financial Reporting, 8th Edition William C. Boynton California Polytechnic State University at San Luis Obispo Raymond N. Johnson Portland State University Chapter 19 – Completing the Audit and Postaudit Responsibilities
Completing the Audit • Do not pertain to specific transaction cycles or accounts • Performed after the balance sheet date • Involve many subjective judgments • Usually performed by audit managers or other senior members of the audit team
Completing the Fieldwork • Making Subsequent Events Review • Types of Events • Type 1 subsequent events • Type 2 subsequent events • Auditing Procedures in the Subsequent Period • Effects on Auditor’s Report
Completing the Fieldwork • Reading Minutes of Meetings • Obtaining Evidence Concerning Litigation, Claims, and Assessments • Audit Considerations • Letter of Audit Inquiry • Effects of Responses on Auditor’s Report
Completing the Fieldwork • Obtaining Client Representation Letter • Content of Representation Letter • Effects on the Auditor’s Report • Performing Analytical Procedures • Overall Review
Evaluating the Findings • Making Final Assessment of Materiality and Audit Risk • Known Misstatements • Projected Uncorrected Misstatements (Sampling Techniques) • Estimated Uncorrected Misstatements (Analytical Procedures) • Likely Misstatement • Aggregate Likely Misstatement
Evaluating the Findings • Evaluating Going Concern • Substantial Doubt Exists • Obtain information of management’s plans • Assess likelihood of effective implementation • Substantial Doubts Persists • Consider adequacy of disclosure • Include explanatory paragraph
Evaluating the Findings • Making Technical Review of Financial Statements • Financial Statement Checklist • Formulating Opinion and Drafting Audit Report on Financial Statements
Evaluating the Findings • Formulating Opinion and Drafting Audit Report on Internal Controls Over Financial Reporting • Opinion about fairness of management’s assertion on internal controls • Opinion about adequacy of internal controls • Making Final Reviews of Working Papers • First-level • Manager • Partner • Cold Review
Study Break • These types of events provide evidence with respect to conditions that did not exist at the date of the balance sheet but arose subsequent to that date. • Type 1 subsequent events • Type 2 subsequent events • Overall review • Balance sheet date B. Type 2 subsequent events
Study Break • This item is obtained to complement other audit procedures, including confirmation of oral representations given to the auditor by management. • Client representation letter • Letter of audit inquiry • Final review • Auditor’s report A. Client representation letter
Study Break • The total of uncorrected misstatements, projected uncorrected misstatements, and estimated misstatements for an account is called ______. • Known misstatement • Likely misstatement • Aggregate likely misstatement • Tolerable misstatement B. Likely misstatement
Communicating with the Client • Communicating Internal Control Matters • Significant Deficiency • Material Weakness
Communicating with the Client • Communicating Matters Pertaining to Conduct of Audit • Auditor’s responsibility under GAAS • Significant accounting policies • Auditor’s judgment about the quality of the entity’s accounting principles • Management judgments and accounting estimates
Communicating with the Client • Communicating Matters Pertaining to Conduct of Audit • Significant audit adjustments • Disagreements with management • Consultation with other accountants • Major issues discusses with management prior to retention • Difficulties encountered in performing the audit
Communicating with the Client • Preparing Management Letter • Internal Control Matters • Recommendations regarding the management of resources • Tax-related Matters
Postaudit Responsibilities • Subsequent Events Between Report Date and Issuance of Report • Discovery of Facts Existing at Report Date • Discovery of Omitted Procedures
Study Break • This is an internal control deficiency that adversely affects the company’s ability to initiate, record, process or report external financial data reliably in accordance with GAAP. • Material weakness • Corroboration • Misappropriation • Significant deficiency D. Significant deficiency
Study Break • The management letter may include all of the following items, except: • Internal control matters • Management recommendations • Tax-related matters • All of the above D. All of the above