TOPIC 5

1. TOPIC 5 • COMPLETING THE AUDIT • Suhaimi Ismail • Faculty of Business Management • Telephone no: 03-83178333 ext 8408 • E-mail: suhaimi@leadership.edu.my

2. Learning Objectives • With respect to events occurring after the end of the financial year: • Describe the auditor’s responsibilities • Explain the different types of accounting treatment • Explain the procedures in ensuring that the going-concern basis is appropriate

3. Learning Objectives • Explain the procedures in ensuring that all contingent liabilities have been properly identified and disclosed • Describe and state the purpose of a management representation letter

4. Learning Objectives • Indicate why analytical procedures are important in undertaking the overall review of the financial report • Identify the steps in evaluating audit findings • Indicate the appropriate communication with the entity at the conclusion of the audit

5. References • Text - Chapter 14 • AUS 508 - Inquiry Regarding Litigation • AUS 706 - Events Occurring After Balance Date • AUS 520 - Mgmt. Representations • AUS 708 - Going Concern • AUS 710 - Communication withManagement

6. Key Terms & Concepts • Aggregate likely misstatement • Cold (or second) review • Contingent liability • Going-concern basis • Management letter • Management representation letter

7. Key Terms & Concepts • Overall review • Post-audit responsibilities • Solicitor’s representation letter • Subsequent events

8. Completing the Fieldwork • Procedures do not pertain to specific items • Performed after balance date • Involve subjective judgements • Performed by senior audit staff

9. Completing the Fieldwork • Undertaking a subsequent events review • Auditing considerations • Up to the date of auditor’s report • Between signing of auditor’s report and issue of financial report • After issue of financial report

10. Completing the Fieldwork • Undertaking a subsequent events review • Post-audit responsibilities • Before/after the financial report is issued

12. Completing the Fieldwork • Undertaking a subsequent events review • Accounting considerations • Conditions existing at the reporting date • Conditions arising after the reporting date

13. Completing the Fieldwork • Considering the appropriateness of the going concern assumption • Consider possibility of failure prior to issue of next audit report

14. Completing the Fieldwork • Going concern assumption • Does audit evidence suggest problems? • If so, evaluate entity’s financial position more closely, such as continued access to finance • Discuss problems with management and evaluate its plans for mitigation

15. Completing the Fieldwork • Reviewing for contingent liabilities • Solicitor’s representation letter • Sent by management, at auditor’s request, with reply to be directed to auditor • Corroborates management’s assertions as to litigation and outstanding claims and contingencies

16. Completing the Fieldwork • Management Representation Letter • Confirms oral representations • Documents continuing appropriateness of representations • Minimises misunderstandings • Impresses on management its responsibilities

17. Completing the Fieldwork • Management Representation Letter • Primarily corroborating, rather than a substitute for auditor-acquired evidence • Content negotiated with management and signed by appropriate officers

18. Completing the Fieldwork • Management Representation Letter • Contents of a management representation letter • Effects on auditor’s report

19. Completing the Fieldwork • Performing analytical procedures • Overall review • Corroborates conclusions formed • Procedures should be: • Applied to critical areas • Based on adjusted data

20. Evaluating the Findings • Objectives • Determine opinion as to fairness • Determine accordance with applicable accounting standards

21. Evaluate Findings • Make final assessment of materiality and risk • Carry out technical review • Conduct final review of working papers • Formulate opinion & draft audit report

22. Communicating With the Entity • Communicating matters with management • Internal control weaknesses • Irregularities • Other matters

23. Communicating With the Entity • Matters for communication should be noted during fieldwork • Consider timeliness, method and level of management to which report is initially made • Consider need to communicate directly with audit committee

24. Communicating With the Entity • Preparing the management letter • Matters for communication should be noted during fieldwork • Consider timeliness, method and level of management to which report is initially made • Communicating matters with the audit committee

25. Summary • The auditor has several key responsibilities at the conclusion of the audit • Must consider the impact of subsequent events • Must communicate with the entity regarding internal control weaknesses noted

26. Further Information? • Insert details of additional resources here