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141 Chapter 10 Completing The Audit (Takeaways)
141 Chapter 10 Completing The Audit (Takeaways)
Audit Responsibilities:
Completing procedures
Identifying subsequent events that may affect the financial statements under audit
Identifying contingencies such as litigation, claims and assessment
Obtaining written management representation
Performing wrap-up procedures
Subsequent events are certain events that occur after the date of the financial statements
that may affect the financial statements and auditor’s report. The types of Subsequent
Events include Requiring adjustments and Requiring disclosures.
Procedures to identify Subsequent Events are:
- Obtaining an understanding of any procedures management has established
- Inquiring of management
- Reading the minutes of the meeting and other relevant data
- Inquiring of the entity’s lawyer
The effect of subsequent events on the date of the report are the date of the completion of
audit procedures on the new subsequent event and the dual date.
Contingencies represents future cash flow requirements. The types of Contingencies are:
- to be recorded provisions
- to be disclosed contingent liability and contingent asset
The procedures to identify Contingencies are:
- Inquire of management and others within the entity including in-house legal counsel
- Reviewing minutes of meeting and correspondence with external legal counsel
- Reviewing legal expense accounts
A Written representation is a written statement by the management provided to the
auditor to confirm certain matters or to support another audit evidence
The auditor shall disclaim an opinion on the financial statements if there is sufficient
doubt about the integrity of management and when the Management does not provide the
required written representations.
Wrap-up procedures are those procedures done at the end of the audit to eliminate loose
ends and to ensure that all available information has been appropriately considered.
The Final analytical procedures include identifying unusual fluctuations that were not
previously identified and assessing the validity of the conclusions reached and evaluating
the overall financial statement presentation
The evaluation of the entity’s ability to continue as a going concern includes the:
- Management’s Responsibility
- Auditor’s Responsibility
- Effect on the Auditor’s Report
In evaluating audit findings and preparing a list of potential adjusting entries, if
management accepts all the adjusting entries proposed by the auditor, an unmodified
report is issued on the financial statements
In Subsequent discovery of facts, if an auditor becomes aware of a material fact which
existed at the date of the auditor’s report; and which, if known at that date, may have
caused the auditor to modify the report he should:
- Discuss the matter with the appropriate level of management and consider
whether the financial statements need revision.
- Advice the management to take the necessary steps to ensure that the users of the
previously issued financial statements are informed of the situation.
In Subsequent discovery of omitted procedures, if after applying the omitted procedures,
the auditor determines that the FS are materially misstated and that the auditor’s report is
inappropriate, the auditor should:
- Discuss the matter with the management
- Take steps to prevent future reliance of report.