Modern Auditing:
Assurance Services and the Integrity
of Financial Reporting, 8th Edition
William C. Boynton
California Polytechnic State
University at San Luis Obispo
Raymond N. Johnson
Portland State University
Chapter 19 – Completing the Audit and Postaudit
Responsibilities
Chapter Overview
Completing the Audit
• Do not pertain to specific transaction
cycles or accounts
• Performed after the balance sheet date
• Involve many subjective judgments
• Usually performed by audit managers or
other senior members of the audit team
Completing the Fieldwork
• Making Subsequent Events Review
– Types of Events
• Type 1 subsequent events
• Type 2 subsequent events
– Auditing Procedures in the Subsequent
Period
– Effects on Auditor’s Report
Subsequent Events
Completing the Fieldwork
• Reading Minutes of Meetings
• Obtaining Evidence Concerning
Litigation, Claims, and Assessments
– Audit Considerations
– Letter of Audit Inquiry
– Effects of Responses on Auditor’s Report
Completing the Fieldwork
• Obtaining Client Representation
Letter
– Content of Representation Letter
– Effects on the Auditor’s Report
• Performing Analytical Procedures
– Overall Review
Evaluating the Findings
• Making Final Assessment of Materiality
and Audit Risk
– Known Misstatements
– Projected Uncorrected Misstatements
(Sampling Techniques)
– Estimated Uncorrected Misstatements
(Analytical Procedures)
– Likely Misstatement
– Aggregate Likely Misstatement
Evaluating the Findings
• Evaluating Going Concern
– Substantial Doubt Exists
• Obtain information of management’s plans
• Assess likelihood of effective
implementation
– Substantial Doubts Persists
• Consider adequacy of disclosure
• Include explanatory paragraph
Evaluating the Findings
• Making Technical Review of
Financial Statements
– Financial Statement Checklist
• Formulating Opinion and Drafting
Audit Report on Financial
Statements
Evaluating the Findings
• Formulating Opinion and Drafting Audit
Report on Internal Controls Over
Financial Reporting
– Opinion about fairness of management’s
assertion on internal controls
– Opinion about adequacy of internal controls
• Making Final Reviews of Working Papers
–
–
–
–
First-level
Manager
Partner
Cold Review
Study Break
1. These types of events provide evidence
with respect to conditions that did not
exist at the date of the balance sheet
but arose subsequent to that date.
A.
B.
C.
D.
Type 1 subsequent events
Type 2 subsequent events
Overall review
Balance sheet date
B. Type 2 subsequent events
Study Break
2. This item is obtained to complement
other audit procedures, including
confirmation of oral representations
given to the auditor by management.
A.
B.
C.
D.
Client representation letter
Letter of audit inquiry
Final review
Auditor’s report
A. Client representation letter
Study Break
3. The total of uncorrected
misstatements, projected uncorrected
misstatements, and estimated
misstatements for an account is called
______.
A.
B.
C.
D.
Known misstatement
Likely misstatement
Aggregate likely misstatement
Tolerable misstatement
B. Likely misstatement
Communicating with the Client
• Communicating Internal Control
Matters
– Significant Deficiency
– Material Weakness
Communicating with the Client
• Communicating Matters Pertaining to
Conduct of Audit
– Auditor’s responsibility under GAAS
– Significant accounting policies
– Auditor’s judgment about the quality of the
entity’s accounting principles
– Management judgments and accounting
estimates
Communicating with the Client
• Communicating Matters Pertaining to
Conduct of Audit
– Significant audit adjustments
– Disagreements with management
– Consultation with other accountants
– Major issues discusses with management
prior to retention
– Difficulties encountered in performing the
audit
Communicating with the Client
• Preparing Management Letter
– Internal Control Matters
– Recommendations regarding the
management of resources
– Tax-related Matters
Summary of Completing the
Audit
Postaudit Responsibilities
• Subsequent Events Between Report
Date and Issuance of Report
• Discovery of Facts Existing at
Report Date
• Discovery of Omitted Procedures
Study Break
4. This is an internal control deficiency
that adversely affects the company’s
ability to initiate, record, process or
report external financial data reliably in
accordance with GAAP.
A.
B.
C.
D.
Material weakness
Corroboration
Misappropriation
Significant deficiency
D. Significant deficiency
Study Break
5. The management letter may
include all of the following items,
except:
A.
B.
C.
D.
Internal control matters
Management recommendations
Tax-related matters
All of the above
D. All of the above