1. Chapter 21 Completing the Audit
9.401 Auditing
Chapter 21
Completing the Audit

2. Audit Completion Activities
Reviewing for contingent liabilities
Reviewing for subsequent events
Accumulating final evidence
Evaluating results
Working Paper Review
Writing the audit Report (see chapt 2)
Read annual report
Audit Correspondence

3. Review for contingent liabilities
Goal:
Identify all contingent liabilities
Determine likelihoods and amts involved
Ensure treatment & disclosure is appropriate

4. Techniques for contingent liabilities and commitments
Consider evidence already gathered
Confirmations, warranties etc.
Enquiry of management
Review income tax assessments
Review minutes of meetings
Analyze legal expenses-review invoices
Confirm client lawyers (next slide)
Read contracts etc.

5. Lawyer’s letters Sent to all lawyers used by client
Sent on client letterhead, signed by client, with instructions to return confirmation to auditor
Contains:
List, description & evaluation of all known claims
Request to advise if info is reasonable
Request to advise if list is incomplete
Lawyers are encouraged to respond but may not or may use slightly different terminology

6. Review for subsequent Events
Auditors are responsible for reviewing events up to date of audit report (=“substantial completion of fieldwork”
Goals:
Identify information having direct effect on f/s and requiring adjustment (=indicates condition existing at year end)
Identify important events requiring disclosure

7. Techniques for subsequent events
Subsequent receipts
Subsequent payments
Settlement prices of subsequent transactions
Enquiry of management
Review minutes of meetings
Confirm client lawyers
Review internal statements for subsequent pd.
Review books of account for significant or unusual transactions
Letter of representation

8. Date of audit report
Date = substantial completion of fieldwork, including subsequent event review
If a subsequent event arises after that date and before issue of report, auditor can:
Extend fieldwork (subsequent event review for all events) to new date or
Limit review to new event only and double-date report

9. Subsequent discovery of facts
Auditor not actively engaged to look for info after release of audit report, but some may come to their attention.
If relates to condition that existed before audit report issue and material:
Auditor must audit subsequent event
Request client re-issue and auditor re-issues report
If client refuses, consult legal advice

10. Accumulating Final Evidence
Final Analytical Procedures
Evaluate Going Concern Assumption

11. Client Representation Letter
Goal:
Impress upon mgmt that f/s are their reponsibility
Document responses of mgmt

12. Client Representations
On the client’s letterhead, addressed to the auditor, signed by responsible officers and dated as of the auditor’s reports. Contains, among other things:
Acknowledgement of primary responsibility for fair presentation of financial statements in conformity with GAAP
Availability of all financial records and related data
Completeness of the minutes of meeting of stockholders, directors, and important committees
Info about related parties
Irregularities involving management or employees
Plans or intentions affecting b/s items
see HB 7100
These representations are not substitutes for corroborating evidence obtainable by the auditor.

13. Evaluating Results
Cumulative known errors, most likely and possible errors, including those on opening balances on:
Total assets
Total liabilities
Current assets/liabilities
Net income
Qualitative aspects
Overall fair presentation of f/s, including disclosure

14. Working Paper Review Goals: Evaluate staff
Ensure audit meets firm standards and GAAS
Counteract biases
Primacy, recency
Internal control descriptions prepared by client (L. Kopp)

15. Working Paper Review: to consider
Planning decisions were adequate
All work complete and properly documented
Conclusions appropriate
Analytical review results

16. Other Information and Supplementary Information
Other Information Section
Auditor’s have and obligation to read (study) the information and determine whether it is inconsistent with the audited financial statements.
However the auditor is not required to review press releases, analyst’s interviews or other forms of irregular financial new releases specifically engaged by the client to do so.
13 The auditor should read the other information in the annual report and consider whether any of this information is inconsistent with the financial statements on which he has reported. [JAN. 1986]

17. Other Information and Supplementary Information
Other Information Section
Auditor’s have and obligation to read (study) the information and determine whether it is inconsistent with the audited financial statements.
However the auditor is not required to review press releases, analyst’s interviews or other forms of irregular financial new releases specifically engaged by the client to do so.
13 The auditor should read the other information in the annual report and consider whether any of this information is inconsistent with the financial statements on which he has reported. [JAN. 1986]

18. Read annual report
Auditors have and obligation to read (study) the information and determine whether it is inconsistent with the audited financial statements. Any inconsistencies must be corrected.
NOT required to review press releases, analyst’s interviews or other forms of irregular financial new releases specifically engaged by the client to do so.

19. Audit Communications
Necessary communication with mgmt (and audit committee):
Misstatements (other than trivial ones)
Illegal or possibly illegal acts
Internal control “reportable conditions” (=significant deficiencies in design or operation)

20. Communications with audit committee
Auditor vs mgmt responsibility
Significant planning decisions
Significant acctg policies
Areas of audit sensitivity, mgmt estimates
Disagreements with mgmt, major issues discussed
Difficulties encountered

21. Management letters Optional
Areas of improvement in internal control, efficiency and effectiveness in operations