WRAPUP PHASE l Search for unrecorded liabilities significant

WRAP-UP PHASE l. Search for unrecorded liabilities & significant subsequent events l. Summarize & conclude l. Partner, manager & senior review

SEARCH FOR UNRECORDED LIABILITIES & SIGNIFICANT SUBSEQUENT EVENTS l. What period are we talking about. . . ? -- From year-end / December 31 -- To last day of field work

SEARCH FOR UNRECORDED LIABILITIES & SIGNIFICANT SUBSEQUENT EVENTS l. What are we looking for. . . ? -- Two kinds of unrecorded liabilities -- Two kinds of significant subsequent events

TWO KINDS OF UNRECORDED LIABILITIES l. Known liabilities l. Contingent liabilities -- Remote -- Reasonably possible -- Probable

CONTINGENT LIABILITY Record, disclose &/or ignore depending upon probability

FASB 5 LEVELS OF PROBABILITY l REMOTE - Don’t disclose or record l REASONABLY POSSIBLE - Disclose l PROBABLE & MEASURABLE - Record and disclose - If range of loss possible, record lower end of range and disclose possible additional loss

TWO KINDS OF SIGNIFICANT SUBSEQUENT EVENTS l. Events confirming a condition existing at year-end l. Events discretely related to subsequent period

FIRST KIND OF SIGNIFICANT SUBSEQUENT EVENT Event that confirms an already existing situation at year-end

CONFIRMS AN EXISTING SITUATION l. Lawsuit settled after year-end l. Customer files for bankruptcy after year-end l. Record adjustment on y/e financial statements

SECOND KIND OF SIGNIFICANT SUBSEQUENT EVENT Event that relates discretely to the following year

RELATES DISCRETELY TO FOLLOWING YEAR l. Factory burns down on Jan 18 l. Airliner crashes at O’Hare on Feb 20 killing 328 people l. Failure to disclose in notes to F/Ss makes F/Ss misleading

SEARCH FOR UNRECORDED LIABILITIES & SIGNIFICANT SUBSEQUENT EVENTS l. Search for unrecorded payables l. Review interim financial statements l. Review significant books of account l. Obtain legal letters

SEARCH FOR UNRECORDED LIABILITIES & SIGNIFICANT SUBSEQUENT EVENTS l. Review minutes & obtain minute representation letter l. Make inquiries of management l. Obtain management representation letter

SEARCH FOR UNRECORDED PAYABLES l. Relates to audit of A/P l. Search through end of audit l. Examine subsequent C/Ds l. Propose PJE for unrecorded

REVIEW LATEST INTERIM FINANCIAL STATEMENTS l Internal monthly F/Ss prepared for January or February l. Look for large, unusual variations from audited F/Ss l. Investigate until explanation found

REVIEW SIGNIFICANT BOOKS OF ACCOUNT l. General ledger l. General journal l. Cash receipts journal l. Sales journal l. Purchases journal

REVIEW SIGNIFICANT BOOKS OF ACCOUNT l. Review through end of audit l. Review for large, unusual activity l. Investigate unusual items to resolution

OBTAIN LEGAL LETTERS l. Standard request on page 715 l. Addresses asserted & unasserted claims l. FASB 5 standards l. Confirm understanding l. Dated close to last day l. Difficulties with attorneys

REVIEW MINUTES l. Obtain minutes thru last day l. Agenda & resolutions for recent meetings l. Obtaim minute representation letter from Corporate Secretary

MAKE INQUIRIES OF MANAGEMENT l. On last day of fieldwork l. Use checklist l. Discuss with CEO & CFO

OBTAIN MANAGEMENT REPRESENTATION LETTER l. Prepare draft for management l. Dated last day of fieldwork l. Signed by CEO & CFO l. Formalize oral & implied reps(720) l. Qualified opinion if management won’t sign

MANAGEMENT REP LETTER l Management primarily responsible l Financial statements present fairly l Specific financial statement matters l Issues addressed during audit l Opinions of management l Plans/intentions of management l All records available/none withheld

SUMMARIZE & CONCLUDE l. Proposed journal entry schedule l. Final engagement memo

REVIEW PROCESS l. Senior review l. Manager review l. Partner review

REVIEW PROCESS - All procedures complete - Sufficient evidence - GAAP & GAAS correct

ISSUE REPORT PHASE The Sixth Phase of the Audit Process

ISSUE REPORT PHASE RIGHT. . . EXACTLY RIGHT. . . ON THE FIRST TRY! ! !

PROCESSING THE REPORT l. Senior drafts report l. Review by client & audit team l. Processing changes l. Comparing (calling) & footing l. Referencing by another senior l. Second partner review l. Signing by partner

ISSUE REPORT l Unqualified report l Qualified report - Scope limitation - GAAP deviation