Completing The audit

Completing the audit

• The auditor’s responsibilities in completing
the audit involve completing the fieldwork,
evaluating the findings, and communicating
with the client.
3 steps of audit completion are;
A. Completing the Audit Field Work
B. Evaluating the Findings
C. Communicating with the Client
 A. Completing The Audit Field Work
In particular, completing the fieldwork involves
performing the following procedures to obtain
additional audit evidence:
1. Making a Subsequent Events Review
2. Reading Minutes of Meetings
3. Obtaining Evidence Concerning Litigation, Cla
ims, and Assessments
4. Obtaining a Management Representation Lett
er
5. Performing Analytical Procedures
 1. Making a Subsequent Events Review

• Subsequent events are events and transactions that

occur after the balance sheet date but before the
issuance of the financial statements and the
auditor’s report.

• In effect, the subsequent events period extends from

the balance sheet date to the end of the fieldwork.

• During this period, the

auditor is required by GAAS to discover the occurren
ce of any subsequent event that has a material effect
on the financial statements
.
Cont…
2. Reading Minutes of Meetings
The reading of minutes of meetings of stockholders, the
board of directors, and its subcommittees may reveal
information about matters that have audit significance.
These should be read as soon as they become available.
3. Obtaining Evidence Concerning Litigation, Claims,
and Assessments
• In completing an audit following GAAS, the auditor
must determine whether litigation, claims, and
assessments are reported in conformity with
accounting standards.
Cont…

• Management represents the primary source of such information,

whereas a letter of audit inquiry to the client’s outside legal counsel is
the auditor’s primary means of corroborating this information.

4. Obtaining a Management Representation Letter

• The auditor must also obtain written representations from management

regarding the matters that are either individually or collectively
material to the financial statements.

• Such a letter complements other auditing procedures and may reveal

matters not otherwise discovered by the auditor.

• It should be noted that the refusal by management to provide such a

letter in effect limits the scope of the audit and could result in the
auditor not issuing a standard audit report.
Cont…
5. Performing Analytical Procedures

Performing analytical procedures at the end of the fieldwork is

a required part of an overall review.

• It assesses the conclusions reached during the audit and

evaluates the overall Financial statement preparation .

• The procedures are applied to critical audit areas identified

during the audit and are based on financial statement data
after all adjustments and reclassifications have been
recognized.
 B. Evaluating The Findings

• The objective of the auditor is to evaluate the results

of the audit to determine whether the audit evidence
obtained is sufficient and appropriate to support the
opinion to be expressed in the auditor's report.

• After an audit team collects the facts and completes

its investigation, it is time to determine its results.

• For audits, the results are called reported audit

findings.
Cont…
In the audit of financial statements, the auditor’s evaluation of audit results
should include evaluation of the following:

a. The results of analytical procedures performed in the overall review of the

financial statements (“overall review”);

b. Misstatements accumulated during the audit, including, in particular,

uncorrected misstatements;

c. The qualitative aspects of the company’s accounting practices;

d. Conditions identified during the audit that relate to the assessment of the
risk of material misstatement due to fraud (“fraud risk”);
e. The presentation of the financial statements, including the disclosures; and

f. The sufficiency and appropriateness of the audit evidence obtained.

Cont…

• When evaluating whether the financial

statements are free of material misstatement,
the auditor should evaluate the qualitative
aspects of the company’s accounting
practices, including potential bias in
management’s judgments about the amounts
and disclosures in the financial statements.
Cont…

If the auditor identifies bias in management's judgments

about the amounts and disclosures in the financial
statements, the auditor should evaluate whether the effect
of that bias, together with the effect of uncorrected
misstatements, results in material misstatement of the
financial statements.
According to AS 3105, if the financial statements, including
the accompanying notes, fail to disclose information that is
required by the applicable financial reporting framework,
the auditor should express a qualified or adverse opinion
and should provide the information in the report, if
practicable, unless its omission from the report is
recognized as appropriate by a specific auditing standard.
 C. Communicating With the Client

• The auditor’s communicating with the client

after the audit involves the following aspects:
• Communication of Internal Control Structure
Matters
• Communicating Matters About Conduct of Au
dit
• Preparing Management Letter
 C.
1. Communication of Internal Control Structure Matters

Communication of internal control structure

represents;
significant deficiencies in the design or operation of
the internal control structure, which could adversely
affect the organization’s ability to record, process,
summarize, and report financial data consistent with
the assertions of management in the financial
‘statements.

The communication should be made promptly,

either during the audit or after its conclusion
 2. Communicating Matters About Conduct of Audit

• Communication with the audit committee requires the auditor to

communicate certain matters about the conduct of the audit to
those responsible for overseeing the financial reporting process.

• Companies may choose to appoint an audit committee as part of a

good corporate governance strategy, or they may be required to do
so in terms of legislation or other requirements.
• In short, an audit committee is a subcommittee of the board of
directors that is established to deal with financial reporting and
related matters on behalf of the board of directors. The Act states
that, where the appointment of an audit committee is required, the
audit committee must be appointed by the shareholders at every
annual general meeting
Cont…
• Normally this responsibility is assigned to an audit
committee of the board of directors or a group with
equivalent authority, such as a financial committee.

• The communication may be oral or written and may

occur during or shortly after the audit.

• When the communication is in writing, the report

should indicate that it is intended for the audit
committee, the board of directors, and, if
appropriate, management.
 3. Preparing Management Letter
• An auditors observe many facets of the client’s business
organization and operations during an audit
engagement.

• After an audit, many auditors believe it is desirable to

write a letter to management, known as a management
letter, that contains recommendations not included in the
required communication with the audit committee.

• These recommendations usually relate to improving the

efficiency and effectiveness of the company’s operations.
Management letters may include comments on:
Cont…
• Internal control structure matters that are not
considered to be reportable conditions.
• Management of resources such as each
inventory and investment.
• Tax-related matters.
 Audit Report
There are four different types of audit report
opinions that can be issued by the company's
auditor based on the analysis of the company's
financial statements.
It includes
Unqualified Audit Report,
Qualified Audit Report
Adverse Audit Report
 Disclaimer Audit Report.
Cont…
• Unqualified Opinion – Clean Report An unqualified
opinion is considered a clean report. This is the type of
report that auditors give most often. This is also the
type of report that most companies expect to receive.

• Qualified Opinion-Qualified Report When an auditor

isn’t confident about any specific process or transaction
that prevents them from issuing an unqualified, or
clean, report, the auditor may choose to issue
a qualified opinion. Investors don’t find qualified
opinions acceptable, as they project a negative opinion
about a company’s financial status.
Cont…
• Disclaimer of Opinion-Disclaimer Report When an
auditor issues a disclaimer of opinion report, it means
that they are distancing themselves from providing any
opinion at all related to the financial statements.

• Adverse Opinion-Adverse Audit Report The final type

of audit opinion is an adverse opinion. Auditors who
aren’t at all satisfied with the financial statements or
who discover a high level of material misstatements or
irregularities know that this creates a situation in which
investors and the government will mistrust the
company’s financial reports.