Chapter 10:

Completing the Audit

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Procedures to Complete Audit

A. Identifying
B. Identifying
subsequent
contingencies
events that
such as
may affect the
litigation,
financial
claims and
statements
assessments.
under audit.

C. Obtaining
D. Performing
written
wrap-up
management
procedures.
representation.

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 Procedures to Complete Audit
A. Identifying • Subsequent Events
subsequent • are those events or transactions that occur
events that subsequent to the balance sheet date that
may affect the may affect the financial statements and
financial the auditor’s report.
statements • Classified into:
under audit.
 Requiring adjustment
 Requiring disclosure

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 Procedures to Complete Audit
A. Identifying • Subsequent Events
subsequent – Procedures to Identify Subsequent Events:
events that  Inquiring of management about any
may affect the subsequent events.
financial  Reviewing procedures management has
statements established to identify subsequent events.
under audit.  Reviewing the minutes of board of
directors and stockholders’ meetings.
 Reading the latest available interim
financial statements as well as
management reports.
 Inquiring of the entity’s lawyers
concerning litigation, claims, and
assessments.
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 Procedures to Complete Audit
• Subsequent Events
A. Identifying – Subsequent events occurring after the report date but
subsequent before the financial statements are issued:
events that  The auditor does not have any responsibility to
may affect the perform procedures to identify subsequent
financial events occurring after the date of the auditor’s
statements report.
under audit.  Failure on the part of the client to make
appropriate amendments to the financial
statements, where the auditor believes they need
to be amended, will cause the auditor to issue
either qualified or adverse opinion.
 If the auditor’s report has been released to the
entity, the auditor would notify those persons
ultimately responsible for the overall direction
of an entity not to issue the financial statements.
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 Procedures to Complete Audit
• Subsequent Events
A. Identifying – Effect of subsequent events on the date of the audit
subsequent report
events that  If material subsequent event requiring
may affect the adjustment to the financial statements occurs
financial after the date of the auditor’s report but before
statements the issuance of the financial statements, the
under audit. financial statements should be adjusted and the
auditor’s report should bear the original date of
the audit report.
 If a subsequent event requiring disclosures
occurs during this period, the auditor should
consider the adequacy of disclosure and should
date the report either:
– as of the date of the subsequent event; or
– dual date the report. 6
 Procedures to Complete Audit
• Litigation and Claims
B. Identifying  Management is the primary source of information
Litigation and about litigation, claims, and assessment.
Claims  The auditor corroborates the information obtained
from management by asking the client to send letters
of audit inquiry to lawyers with whom the client has
consulted concerning these matters.
 If management refuses, this would be considered a
scope limitation that would require the auditor to
issue either qualified or disclaimer of opinion.
 If the lawyer is unable to estimate the likelihood of
an unfavorable outcome, the auditor should consider
adding an emphasis of a matter paragraph to an
unmodified report.
•
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 Procedures to Complete Audit
• Written Management Representation
C. Obtaining  An important source of audit evidence but does not provide
Written sufficient appropriate audit evidence on their own
Management  Complements the audit evidence the auditor accumulates.
Representation  Do not substitute for the performance of audit procedures
designed to obtain necessary evidence for the expression of
an opinion.
 Shall be in the form of a representation letter from
management.
 Should be addressed to the auditor.
 The date shall be as near as practicable to, but not after, the
date of the auditor’s report.
 Should be signed by the appropriate level of management
who has the primary responsibility for the financial
statements.

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 Procedures to Complete Audit
D. Performing
Wrap-up • Wrap-up Procedures
Procedures – Final Analytical Procedures
– Evaluation of the entity’s ability to continue as a
going concern
– Evaluating audit findings and obtaining client’s
approval for the proposed adjusting entries

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 Post Audit Responsibilities
• Subsequent discovery of facts
– Existed at the date of the auditor’s report
– If known at that date, may have caused the auditor to
modify the report
• Subsequent discovery of omitted procedures
1. Assess the importance of the omitted procedures to the
auditor’s ability to support his/her opinion.
2. Undertake to apply the omitted procedures or the
corresponding alternative procedures.

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Thank you

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