Completing the Audit

Part # 1

©2020 FAKULTAS EKONOMI DAN BISNIS UNIVERSITAS PADJADJARAN 24 - 1

Departemen Akuntansi Fakultas Ekonomi dan Bisnis Unpad ©2020 24 - 2
 Summary of the Audit Process

Phase
PhaseIIIIII
Phase
PhaseI I Perform
Performanalytical
analytical
Plan
Planand
anddesign
designan
anaudit
audit procedures
proceduresand andtests
tests
approach.
approach. of
ofdetails
detailsof ofbalances.
balances.

Phase
PhaseIIII Phase
PhaseIVIV
Perform
Performtests
testsof
ofcontrols
controls Complete
Completethetheaudit
auditand
and
and
andsubstantive
substantivetests
tests issue
issuean
anaudit
auditreport.
report.
of
oftransactions.
transactions.

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 Karakteristik Prosedur Audit

••Tidak
Tidakberhubungan
berhubungandengan
dengansiklus
siklustransaksi
transaksi
••Dilakukan
Dilakukansetelah
setelahtanggal
tanggalneraca
neraca
••Banyak
Banyakmenggunakan
menggunakanjudgment
judgmentauditor
auditor
••Dilakukan
Dilakukanoleh
olehauditor
auditorpengalaman
pengalaman
••Waktu
Waktukerja
kerjasangat
sangatketat-mendekati
ketat-mendekatideadline
deadline

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 Perform Additional Test for Presentation
and Disclosures

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 Activities

Review
Reviewfor forcontingent
contingent Evaluate
Evaluateresults.
results.
liabilities.
liabilities.

Review
Reviewfor
for Issue
Issueaudit
auditreport.
report.
subsequent
subsequentevents.
events.

Communicate
Communicatewith
with
Accumulate
Accumulatefinal
final audit
auditcommittee
committee
evidence.
evidence. and
andmanagement.
management.

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 Learning Objective 1

Conduct a review for

Contingent liabilities and
Commitments

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 Contingent Liability

AAcontingent
contingentliability
liabilityisisaapotential
potentialfuture
future
obligation
obligationto
toan
anoutside
outsidepartypartyfor
foran
an
unknown
unknownamount
amountresulting
resultingfrom
fromactivities
activities
that
thathave
havealready
alreadytaken
takenplace.
place.

Material
Materialcontigent
contigentliabilities
liabilitiesmust
mustbe
bedisclosed
disclosedinin
footnotes
footnotes

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 Three Conditions of Contigent
Liability Exist
1. There is potential future payment to an
outside party or the impairment of an
asset that resulted from an existing
condition
2. There is uncertainty of the amount of the
future payment or impairment
3. The outcome wil be resolved by some
future event or events

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Departemen Akuntansi Fakultas Ekonomi dan Bisnis Unpad ©2020 24 - 10
 Auditor’s Concerns
Pending
Pendinglitigation
litigationfor
forpatent
patentinfringement,
infringement,
product
productliability,
liability,or
orother
otheractions
actions
Income
Incometax
taxdisputes
disputes
Product
Productwarranties
warranties
Notes
Notesreceivable
receivablediscounted
discounted
Guarantees
Guaranteesof ofobligations
obligationsofofothers
others
Unused
Unusedbalances
balancesof ofoutstanding
outstandingletters
lettersof
ofcredit
credit

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 Auditor’s Objectives

The auditor’s primary objectives in verifying

contingent liabilities are:
•Evaluate the accounting treatment of known
contingent liabilities to determine whether management
has properly classified the contingency (classification
presentation and disclosure objective).
•Identify to the extent practical any contingencies not
already identified by management (completeness
presentation and disclosure objective).

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 example

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 Audit Procedures for Finding Contingencies

Inquire
Inquireofofmanagement
management(orally
(orallyand
andininwriting)
writing)about
about
the
thepossibility
possibilityofofunrecorded
unrecordedcontingencies.
contingencies.

Review
Reviewcurrent
currentand
andprevious
previousyears’
years’internal
internal
revenue
revenuereports
reportsfor
forincome
incometax
taxsettlements.
settlements.

Review
Reviewthe
theminutes
minutesofofdirectors’
directors’and
andstockholders’
stockholders’
meetings
meetingsfor
forindications
indicationsofoflawsuits
lawsuitsor
or
other
othercontingencies.
contingencies.

Analyze
Analyzelegal
legalexpenses
expensesand
andreview
reviewinvoices
invoices
and
andstatements
statementsfrom
fromlegal
legalcounsel.
counsel.
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 Audit Procedures for
Finding Contingencies

Obtain
Obtainaaletter
letterfrom
fromeach
eachmajor
majorattorney
attorneyofofthe
the
client
clientas
astotothe
thestatus
statusofofpending
pendinglitigation.
litigation.

Review
Reviewaudit
auditdocumentation
documentationforforany
anyinformation
information
that
thatmay
mayindicate
indicateaapotential
potentialcontingency.
contingency.

Examine
Examineletters
lettersofofcredit
creditininforce.
force.

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 Learning Objective 2

Obtain and evaluate letters from

the client’s attorneys.

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 Inquiry of Client’s Attorneys
AAlist
listincluding
including(1)
(1)pending
pendingthreatened
threatenedlitigation
litigationand
and
(2)
(2)asserted
assertedororunasserted
unassertedclaims
claimsororassessments
assessments
with
withwhich
whichthe
theattorney
attorneyhas
hashad
hadinvolvement.
involvement.

AArequest
requestthat
thatthe
theattorney
attorneyfurnish
furnishinformation
informationororcomment
comment
about the progress of each item listed.
about the progress of each item listed.

AArequest
requestofofaalaw
lawfirm
firmto
toidentify
identifyany
anyunlisted
unlistedpending
pendingoror
threatened
threatenedlegal
legalaction
actionororaastatement
statementthat
thatthe
theclient’s
client’s
list
listisiscomplete.
complete.
AAstatement
statementinforming
informingthetheattorney
attorneyof
ofthe
theattorney’s
attorney’s
responsibility
responsibilityto
toinform
informmanagement
managementof oflegal
legalmatters
matters
requiring
requiringdisclosure
disclosureininthe
thefinancial
financialstatements
statementsand
and
to
torespond
responddirectly
directlyto
tothe
theauditor.
auditor.
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 Sarbanes-Oxley Act

Congress
Congressincluded
includedprovisions
provisionsininthis
thisact
actdirecting
directing
the
theSEC
SECtotoissue
issuerules
rulesrequiring
requiringattorneys
attorneysserving
serving
public
publiccompanies
companiestotoreport
reportmaterial
materialviolations
violations
by
bythe
thecompany
companyofoffederal
federalsecurities
securitieslaws.
laws.

The
TheAmerican
AmericanBarBarAssociation
Associationamended
amendedits itsattorney-
attorney-
client
clientconfidentiality
confidentialityrules
rulestotopermit
permitattorneys
attorneys
totobreach
breachconfidentiality
confidentialityififaaclient
clientisis
committing
committingaacrime
crimeor orfraud.
fraud.

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 Learning Objective 3

Conduct a post-balance-sheet
review for subsequent events.

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 Subsequent events

Peristiwa/transaksi,
Peristiwa/transaksi,yang
yangterjadi
terjadisetelah
setelahtanggal
tanggalneraca
neraca
tetapi
tetapisebelum
sebelumditerbitkannya
diterbitkannyalaporan
laporankeuangan
keuangandan
dan
laporan
laporanauditor,
auditor,yang
yangmempunyai
mempunyaipengaruh
pengaruhmaterial
material
terhadap
terhadaplaporan
laporankeuangan.
keuangan.

PSA
PSA4646: :
Auditor
Auditorbertanggung
bertanggungjawab
jawabatas
atastransaksi
transaksidan
danperistiwa
peristiwa
yang
yangmempunyai
mempunyaipengaruh
pengaruhmaterial
materialterhadap
terhadap
laporan
laporankeuangan,
keuangan,dan
danterjadi
terjadisetelah
setelahtanggal
tanggal
neraca
neracatetapi
tetapisebelum
sebelumditerbitkannya
diterbitkannya
laporan
laporankeuangan
keuangandan
danlaporan
laporanauditor.
auditor.

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 Period Covered by Subsequent Events
Review

Client’s ending Audit Date client

balance sheet report issues financial
date date statements

12-31-05 3-11-06 3-26-06

Period to which review for Period for

subsequent events applies processing
the financial
statements
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 Types of Subsequent Events

Those
Thosethat
thathave
haveaadirect
directeffect
effecton
onthe
the
11 financial
financialstatements
statementsand
andrequire
require
adjustment
adjustment

Memberikan
Memberikantambahan
tambahanbukti
buktiyang
yangberhubungan
berhubungan
dengan
dengankondisi
kondisiyang
yangtelah
telahada
adapada
padatanggal
tanggal
neraca
neraca&&berdampak
berdampakterhadap
terhadappenaksiran
penaksiran
dalam
dalampenyusunan
penyusunanlaporan
laporankeuangan
keuangan

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 Examples - Type 1 – needs adjustment

Declaration of bankruptcy by a customer with

Declaration of bankruptcy by a customer with
an
anaccounts
accountsreceivable
receivablebalance
balance
Settlement of a litigation at an amount different
Settlement of a litigation at an amount different
from
fromthe
theamount
amountrecorded
recordedon onthe
thebooks
books
Disposal of equipment not being used in
Disposal of equipment not being used in
operations
operationsatataaprice
pricebelow
belowthe
thecurrent
current
book
bookvalue
value
 Sale of investments at a price below recorded
Sale of investments at a price below recorded
cost
cost

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 Types of Subsequent Events

Those
Thosethat
thathave
haveno
nodirect
directeffect
effecton
on
22 the
thefinancial
financialstatements
statementsbutbutfor
for
which
whichdisclosure
disclosureisisadvisable
advisable

Memberikan
Memberikanbukti
buktimengenai
mengenaikondisi
kondisiyang
yang
tidak
tidakada
adapada
padatanggal
tanggalneraca
neraca
(baru
(baruada
adasetelah
setelahtanggal
tanggalneraca)
neraca)

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 Examples - Type 2 – need disclosures

 Decline in the market value of securities held

Decline in the market value of securities held
for
fortemporary
temporaryinvestment
investmentor
orresale
resale
 Issuance of bonds or equity securities
Issuance of bonds or equity securities
 Decline in the market value of inventory as a
Decline in the market value of inventory as a
consequence
consequenceof ofgovernment
governmentaction
actionbarring
barring
further
furthersale
saleof
ofaaproduct
product
 Uninsured loss of inventories as a result of fire
Uninsured loss of inventories as a result of fire
 A merger or an acquisition
A merger or an acquisition

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 Audit Tests – 2 categories

Procedures
Proceduresnormally
normallyintegrated
integratedas
asaapart
partofofthe
the
verification
verificationofofyear-end
year-endaccount
accountbalances
balances

cut-off tests
cut-off tests
memeriksa penerimaan
memeriksa penerimaankas
kassetelah
setelahtanggal
tanggal
neraca
neraca
membandingkan harga perolehan persediaan
membandingkan harga perolehan persediaan
dengan
denganharga
hargapasar
pasarsetelah
setelahtanggal
tanggalneraca.
neraca.

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 Audit Tests – 2 categories

Procedures
Proceduresperformed
performedspecifically
specificallyfor
forthe
thepurpose
purpose
ofofdiscovering
discoveringevents
eventsor
ortransactions
transactionsthat
thatmust
mustbe
be
recognized
recognizedas assubsequent
subsequentevents
events

Inquire of management.
Inquire of management.
Correspond with attorneys.
Correspond with attorneys.
Review records and statements prepared
Review records and statements prepared
subsequent
subsequenttotothe
thebalance
balancesheet
sheetdate.
date.
Examine minutes issued subsequent to the
Examine minutes issued subsequent to the
balance
balancesheet
sheetdate.
date.
Obtain a letter of representation,
Obtain a letter of representation,

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Dual Date Audit Report

The
Thefirst
firstdate
dateisisthe
thedate
datefor
forthe
the
completion
completionof offield
fieldwork
workexcept
except
for
foraaspecific
specificexception.
exception.

The
Thesecond
seconddate,
date,which
whichisis
always
alwayslater,
later,deals
dealswith
with
the
theexception.
exception.

21
21Maret
Maret2019,
2019,kecuali
kecualiuntuk
untuk
catatan
catatanXXtanggal
tanggal30
30Maret
Maret2019
2019

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 The Impact on Auditor’s Report

Kelalaian
Kelalaianmencatat
mencatatatau
ataumengungkapkan
mengungkapkansubsequent
subsequent
events
eventsyang
yangmaterial
materialdalam
dalamlaporan
laporankeuangan
keuangandapat
dapat
mengakibatkan
mengakibatkanlaporan
laporankeuangan
keuanganmenyimpang
menyimpangdari
dari
prinsip
prinsipakuntansi
akuntansiyang
yangberlaku
berlakuumum
umum

Qualified
QualifiedofofAdverse
AdverseOpinion
Opinion

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 Completing the Audit

Part # 2

©2020 FAKULTAS EKONOMI DAN BISNIS UNIVERSITAS PADJADJARAN 24 - 30

 Learning Objective 4

Design and perform the final steps

in the evidence-accumulation
segment of the audit.

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 Final Evidence Accumulation

1.
1.Perform
Performfinal
finalanalytical
analyticalprocedures.
procedures.
2.
2.Evaluate
Evaluatethe
thegoing-concern
going-concernassumption.
assumption.
3.
3.Obtain
Obtainaamanagement
managementrepresentation
representationletter.
letter.
4.
4.Consider
Considerinformation
informationaccompanying
accompanyingthe the
basic
basicfinancial
financialstatements.
statements.
5.
5.Read
Readother
otherinformation
informationininthe
theannual
annualreport.
report.

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 Final Analytical Procedures

•• Sebagai
Sebagaioverall
overallreview
reviewterhadap
terhadaplaporan
laporankeuangan
keuangan
audited
audited
•• Tujuan
Tujuan: :
--Apakah
Apakahlaporan
laporankeuangan
keuanganmasih
masihmengindikasikan
mengindikasikan
salah
salahsaji
sajimaterial
material
--Menilai
Menilaigoing
goingconcern
concernperusahaan
perusahaan
--Apakah
Apakahlaporan
laporankeuangan
keuangantelah
telahmake
makesense
sense
dari
darisudut
sudutpandang
pandangusers
users
•• Dilakukan
Dilakukanoleholehauditor
auditoryang
yangberpengalaman
berpengalamandan dan
memiliki
memilikipemahaman
pemahamanyang yangbaik
baiktentang
tentangbisnis
bisnisdan
dan
industri
industriklien
klien(partner/
(partner/audit
auditmanager).
manager).

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 Management Representation Letter

Auditor
Auditorharus
harusmemperoleh
memperolehrepresentasi
representasitertulis
tertulisdari
dari
manajemen
manajemensebagai
sebagaibagian
bagiandari
dariaudit
audityang
yang
dilaksanakan
dilaksanakansesuai
sesuaistandar
standarauditing
auditing(PSA
(PSA17).
17).

To
Toimpress
impressupon
uponmanagement
managementits itsresponsibility
responsibility
for
forthe
theassertions
assertionsininthe
thefinancial
financialstatements
statements
To
Todocument
documentthetheresponses
responsesfrom
frommanagement
management
to
toinquiries
inquiriesabout
aboutvarious
variousaspects
aspectsof
ofthe
theaudit
audit

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 Management Representation Letter

1.
1.Financial
Financialstatements
statements
2.
2.Completeness
Completenessof ofinformation
information
3.
3.Recognition,
Recognition,measurement,
measurement,and anddisclosure
disclosure
4.
4.Subsequent
Subsequentevents
events
5.
5.Internal
Internalcontrol
control

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 Management Representation Letter:
Internal Control

1.1.Management’s
Management’sacknowledgment
acknowledgmentofofits itsresponsibility
responsibility
for
forestablishing
establishingand andmaintaining
maintainingeffective
effectiveinternal
internal
control
controlover
overfinancial
financialreporting
reporting
2.2.Management’s
Management’sconclusion
conclusionabout
aboutthe
theeffectiveness
effectiveness
ofofinternal
internalcontrol
controlover
overfinancial
financialreporting
reportingasasofof
the
theendendofofthe
thefiscal
fiscalperiod
period
3.3.Disclosure
Disclosureofofall alldeficiencies
deficiencies
4.4.Management’s
Management’sknowledgeknowledgeofofany
anyfraud
fraud

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 Information Accompanying Basic
Financial Statements
Balance sheet
Income statement Basic Standard
financial auditor’s
Statement of statements report
cash flows
Footnotes
Detailed comparative Information
statements accompanying
basic financial
Statistical data statements
Schedule of
insurance coverage Separate paragraph –
unqualified, qualified,
or disclaimer

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 Learning Objective 5

Integrate the audit evidence

gathered, and evaluate the
overall audit results.

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 Evaluate Results

Sufficiency
Sufficiencyofofevidence
evidence

Evidence
Evidencesupports
supportsauditor’s
auditor’sopinion
opinion

Financial
Financialstatement
statementdisclosures
disclosures

Audit
Auditdocumentation
documentationreview
review

Independent
Independentreview
review

Summary
Summaryofofevidence
evidenceevaluation
evaluation
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Departemen Akuntansi Fakultas Ekonomi dan Bisnis Unpad ©2020 24 - 40
Departemen Akuntansi Fakultas Ekonomi dan Bisnis Unpad ©2020 24 - 41
 Issue the Audit Report

The
Theaudit
auditreport
reportisisthe
theonly
onlything
thingthat
thatmost
most
users
userssee
seeininthe
theaudit
auditprocess,
process,and
andthe
the
consequences
consequencesof ofissuing
issuingananinappropriate
inappropriate
report
reportcan
canbebesevere.
severe.

The auditor should wait to decide the appropriate audit report

to issue until all evidence has been accumulated and evaluated,
including all steps of completing the audit

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 Learning Objective 6

Communicate effectively with the

audit committee and management.

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 Communicate with the Audit
Committee and Management

Communicate
Communicatefraud
fraudand
andillegal
illegalacts
acts
Communicate
Communicateinternal
internalcontrol
controldeficiencies
deficiencies
Other
Othercommunication
communicationwith
withaudit
auditcommittee
committee
Management
Managementletters
letters

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Other Communication with Audit Committee

The auditing standard requirements are designed

to encourage two-way communications between
the auditor and those charged with governance.
1.To communicate auditor responsibilities in the audit of
financial statements
2.To provide an overview of the scope and timing of the
audit.
3.To provide those charged with governance with significant
findings arising during the audit.
4.To obtain from those charged with governance
information relevant to the audit.

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 Learning Objective 7

Identify the auditor’s

responsibilities when facts
affecting the audit report are
discovered after its issuance.

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 Period Covered by Subsequent Events
Review
Client’s ending Audit Date client
balance sheet report issues financial
date date statements

12-31-05 3-11-06 3-26-06

Period to which Period for Period in which

review for processing subsequent
subsequent the financial discovery of
events applies statements facts is made

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 Subsequent Discovery of Fact
• When this subsequent discovery of facts occurs, the auditor has
an obligation to make certain that users who are relying on the
financial statements are informed about the misstatements or
change in the conclusion on the effectiveness of internal
controls.

• If the auditor discovers that the statements are misleading

after they have been issued, the most desirable action is to
request that the client issue an immediate revision of the
financial statements that includes an explanation of the
reasons for the revision

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• If the client refuses to disclose the misstated statements, the
auditor must inform the board of directors. The auditor must
also notify regulatory agencies having jurisdiction over the
client that the statements are no longer fairly stated and also,
when practical, each person who relies on the financial
statements.
• If the stock is publicly held, it is acceptable to request the SEC
and the stock exchange to notify stockholders.
• The subsequent discovery of facts requiring the recall or
reissuance of financial statements arises only from
business events that existed before the date of the
auditor’s report.
• For example, a revision of the financial statements is not required
if an account receivable is believed to be collectible after an
adequate review of the facts at the date of the audit report, but the
customer subsequently files bankruptcy.

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 End

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