Podcast
Questions and Answers
What is the primary purpose of the auditor reviewing the audit documentation?
What is the primary purpose of the auditor reviewing the audit documentation?
Which factor is NOT considered when evaluating the sufficiency of accumulated evidence?
Which factor is NOT considered when evaluating the sufficiency of accumulated evidence?
When should the auditor decide on the appropriate audit report to issue?
When should the auditor decide on the appropriate audit report to issue?
Why is it critical for the auditor's report to be correct?
Why is it critical for the auditor's report to be correct?
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Which type of reports do auditors typically issue in most audits?
Which type of reports do auditors typically issue in most audits?
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What are management letters primarily intended for?
What are management letters primarily intended for?
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What must auditors communicate to the audit committee regardless of materiality?
What must auditors communicate to the audit committee regardless of materiality?
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What is the main objective of communicating audit findings to the audit committee?
What is the main objective of communicating audit findings to the audit committee?
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What is one of the primary auditor concerns regarding presentation and disclosure?
What is one of the primary auditor concerns regarding presentation and disclosure?
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What are auditors required to review for during the audit in relation to contingent liabilities?
What are auditors required to review for during the audit in relation to contingent liabilities?
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Which of the following conditions is NOT required for a contingent liability to exist?
Which of the following conditions is NOT required for a contingent liability to exist?
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Who is primarily responsible for identifying and deciding the appropriate accounting treatment for contingent liabilities?
Who is primarily responsible for identifying and deciding the appropriate accounting treatment for contingent liabilities?
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Which phase of the audit focuses on accumulating evidence to support the audit opinion?
Which phase of the audit focuses on accumulating evidence to support the audit opinion?
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What risk do auditors typically assess as high when it comes to contingent liabilities and subsequent events?
What risk do auditors typically assess as high when it comes to contingent liabilities and subsequent events?
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What is included in the review process during the audit related to subsequent events?
What is included in the review process during the audit related to subsequent events?
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Which of the following best describes the purpose of issuing an audit report?
Which of the following best describes the purpose of issuing an audit report?
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What is the primary purpose of the review for subsequent events by an auditor?
What is the primary purpose of the review for subsequent events by an auditor?
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What is the typical timeline for the auditor's review of subsequent events?
What is the typical timeline for the auditor's review of subsequent events?
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Which of the following is NOT a type of final evidence accumulation responsibility for auditors?
Which of the following is NOT a type of final evidence accumulation responsibility for auditors?
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After completing audit procedures, what must the auditor ultimately determine regarding the financial statements?
After completing audit procedures, what must the auditor ultimately determine regarding the financial statements?
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What is one of the responsibilities of the auditor when issuing a report on internal controls?
What is one of the responsibilities of the auditor when issuing a report on internal controls?
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Which step in final evidence accumulation is focused on evaluating the organization's viability?
Which step in final evidence accumulation is focused on evaluating the organization's viability?
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Which of the following actions takes place near the end of the audit process?
Which of the following actions takes place near the end of the audit process?
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What is a typical element involved in the auditor's integration of results?
What is a typical element involved in the auditor's integration of results?
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Study Notes
Audit Practice and Procedures II
- Completing the audit and offering other service is a key focus
- Auditors' primary concern in presentation and disclosure is whether management has disclosed all required information. This is known as the completeness objective for presentation and disclosure.
- Assessing risks related to completeness of presentation and disclosure involves reviewing information gathered during the first three audit phases to identify any undisclosed facts or circumstances.
- Disclosures related to contingent liabilities and subsequent events often pose high risk that all required information might not be completely disclosed in footnotes.
- Tests in earlier audit phases may not provide sufficient evidence on contingent liabilities and subsequent events, requiring specific procedures in each audit to address these matters.
Contingent Liability
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Contingency liability is a potential future obligation to third parties with an unknown amount arising from completed actions.
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Material contingent liabilities must be disclosed in footnotes.
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Three conditions need to be met for a contingent liability to exist:
- A potential future payment or impairment of an asset arising from an existing condition
- Uncertainty concerning the amount of future payment or impairment
- The outcome will be decided by future events.
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Auditing standards hold management accountable for identifying and accounting for contingent liabilities; auditors' role is impractical without management cooperation.
Review for Subsequent Events
- The review for subsequent events forms part of the audit completion.
- Auditors must review transactions and events after the balance sheet date to determine if they affect current period financial statements fairly.
- Auditing procedures to verify these transactions and events are often called the review for subsequent events or post-balance sheet review.
- Auditor responsibility for reviewing subsequent events is typically limited to the period beginning at the balance sheet date to the auditor's report date.
- This review should be performed closely to completion of the audit.
Final Evidence Accumulation
- Final evidence accumulation involves other tasks besides subsequent events review.
- These include:
- Performing final analytical procedures
- Assessing the going-concern assumption
- Obtaining a management representation letter
- Considering information accompanying financial statements
- Reviewing other information in the annual report
- These tasks are generally done in the later phases of the audit.
Evaluate Results
- After completing audit procedures and gathering final evidence on all areas, auditors must integrate results to form a comprehensive conclusion about the financial statements' validity.
- Auditors must determine if sufficient appropriate audit evidence warrants a conclusion that financial statements are compliant with accounting standards applied consistently with the prior year.
- This involves documenting all audit procedures for review purposes, ensuring every part of the audit program is done accurately and documented, and that all objectives have been met.
Issue the Audit Report
- The auditor must wait until all audit evidence is gathered and properly evaluated to determine the nature of their audit report.
- The audit report, being the primary output of the audit process, must be accurate to avoid negative consequences.
Communicate Effectively with the Audit Committee and Management
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After the audit, the auditor may send various communications including: communication concerning detected fraud or illegal actions; internal control deficiencies; other communications to the audit committee; or management letters.
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The first three communications are required to ensure the audit committee and senior management understand audit findings. The fourth item, management letters, is often communicated to operating management.
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Auditing standards require the communication of fraud or illegal acts, regardless of materiality, to the audit committee or an appropriate body. The goal is aiding the committee's supervisory role to ensure reliable financial statements.
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Phase IV of Completing the Audit includes the subsequent activities of reviewing contingent liabilities, subsequent periods, accumulating evidence, evaluating results, issuing the report, and communication.
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Description
This quiz focuses on the key aspects of completing an audit and the importance of accurate presentation and disclosure. It explores the completeness objective and the risks associated with contingent liabilities and subsequent events. Test your understanding of the procedures necessary to ensure all required information is disclosed.
