wrap-up phase

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  • WRAP-UP PHASESearch for unrecorded liabilities & significant subsequent eventsSummarize & concludePartner, manager & senior review

  • SEARCH FOR UNRECORDED LIABILITIES & SIGNIFICANT SUBSEQUENT EVENTSWhat period are we talking about. . . ? -- From year-end / December 31 -- To last day of field work

  • SEARCH FOR UNRECORDED LIABILITIES & SIGNIFICANT SUBSEQUENT EVENTSWhat are we looking for . . . ? -- Two kinds of unrecorded liabilities -- Two kinds of significant subsequent events

  • TWO KINDS OF UNRECORDED LIABILITIESKnown liabilitiesContingent liabilities -- Remote -- Reasonably possible -- Probable

  • CONTINGENT LIABILITYRecord, disclose &/or ignore depending upon probability

  • FASB 5 LEVELS OF PROBABILITYREMOTE - Dont disclose or recordREASONABLY POSSIBLE - DisclosePROBABLE & MEASURABLE - - Record and disclose - If range of loss possible, record lower end of range and disclose possible additional loss

  • TWO KINDS OF SIGNIFICANT SUBSEQUENT EVENTSEvents confirming a condition existing at year-endEvents discretely related to subsequent period

  • FIRST KIND OF SIGNIFICANT SUBSEQUENT EVENTEvent that confirms an already existing situation at year-end

  • CONFIRMS AN EXISTING SITUATIONLawsuit settled after year-endCustomer files for bankruptcy after year-endRecord adjustment on y/e financial statements

  • SECOND KIND OF SIGNIFICANT SUBSEQUENT EVENTEvent that relates discretely to the following year

  • RELATES DISCRETELY TO FOLLOWING YEARFactory burns down on Jan 18Airliner crashes at OHare on Feb 20 killing 328 peopleFailure to disclose in notes to F/Ss makes F/Ss misleading

  • SEARCH FOR UNRECORDED LIABILITIES & SIGNIFICANT SUBSEQUENT EVENTSSearch for unrecorded payablesReview interim financial statementsReview significant books of accountObtain legal letters

  • SEARCH FOR UNRECORDED LIABILITIES & SIGNIFICANT SUBSEQUENT EVENTSReview minutes & obtain minute representation letterMake inquiries of managementObtain management representation letter

  • SEARCH FOR UNRECORDED PAYABLESRelates to audit of A/PSearch through end of auditExamine subsequent C/DsPropose PJE for unrecorded

  • REVIEW LATEST INTERIM FINANCIAL STATEMENTS Internal monthly F/Ss prepared for January or FebruaryLook for large, unusual variations from audited F/SsInvestigate until explanation found

  • REVIEW SIGNIFICANT BOOKS OF ACCOUNTGeneral ledgerGeneral journalCash receipts journalSales journalPurchases journal

  • REVIEW SIGNIFICANT BOOKS OF ACCOUNTReview through end of auditReview for large, unusual activityInvestigate unusual items to resolution

  • OBTAIN LEGAL LETTERSStandard request on page 715Addresses asserted & unasserted claimsFASB 5 standardsConfirm understandingDated close to last dayDifficulties with attorneys

  • REVIEW MINUTESObtain minutes thru last dayAgenda & resolutions for recent meetingsObtaim minute representation letter from Corporate Secretary

  • MAKE INQUIRIES OF MANAGEMENTOn last day of fieldworkUse checklistDiscuss with CEO & CFO

  • OBTAIN MANAGEMENT REPRESENTATION LETTERPrepare draft for managementDated last day of fieldworkSigned by CEO & CFOFormalize oral & implied reps(720)Qualified opinion if management wont sign

  • MANAGEMENT REP LETTERManagement primarily responsibleFinancial statements present fairlySpecific financial statement mattersIssues addressed during auditOpinions of managementPlans/intentions of managementAll records available/none withheld

  • SUMMARIZE & CONCLUDEProposed journal entry scheduleFinal engagement memo

  • REVIEW PROCESSSenior reviewManager reviewPartner review

  • REVIEW PROCESS - All procedures complete - Sufficient evidence - GAAP & GAAS correct

  • ISSUE REPORT PHASEThe Sixth Phaseof the Audit Process

  • ISSUE REPORT PHASERIGHT . . . EXACTLY RIGHT . . . ON THE FIRST TRY! ! !

  • PROCESSING THE REPORTSenior drafts reportReview by client & audit teamProcessing changesComparing (calling) & footingReferencing by another seniorSecond partner reviewSigning by partner

  • ISSUE REPORTUnqualified reportQualified report - Scope limitation - GAAP deviation