Modern Auditing Assurance Services and the Integrity of

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

Chapter Overview

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

Subsequent Events

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 1. 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. A. B. C. D. Type 1 subsequent events Type 2 subsequent events Overall review Balance sheet date B. Type 2 subsequent events

Study Break 2. This item is obtained to complement other audit procedures, including confirmation of oral representations given to the auditor by management. A. B. C. D. Client representation letter Letter of audit inquiry Final review Auditor’s report A. Client representation letter

Study Break 3. The total of uncorrected misstatements, projected uncorrected misstatements, and estimated misstatements for an account is called ______. A. B. C. D. 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

Summary of Completing the Audit

Postaudit Responsibilities • Subsequent Events Between Report Date and Issuance of Report • Discovery of Facts Existing at Report Date • Discovery of Omitted Procedures

Study Break 4. 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. A. B. C. D. Material weakness Corroboration Misappropriation Significant deficiency D. Significant deficiency

Study Break 5. The management letter may include all of the following items, except: A. B. C. D. Internal control matters Management recommendations Tax-related matters All of the above D. All of the above