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Completing Audit & Post-Audit Responsibilities
Completing an audit involves critical procedures like identifying subsequent events, addressing litigation and claims, obtaining written management representations, and performing wrap-up activities. Post-audit responsibilities extend to handling facts discovered after financial statements are issued, ensuring the integrity and reliability of the auditor's report and the financial information provided to users.
Key Takeaways
Finalize audits with specific procedures.
Subsequent events require adjustment or disclosure.
Management representation is crucial audit evidence.
Wrap-up procedures confirm financial statement fairness.
Post-audit duties address newly discovered material facts.
What procedures complete an audit?
To finalize an audit, auditors perform several critical procedures after fieldwork concludes but before issuing the report. These steps ensure all material events and conditions affecting the financial statements are properly identified and addressed. This phase includes evaluating subsequent events, assessing litigation and claims, securing management's written representations, and executing final wrap-up activities to form an overall opinion on the financial statements.
- Identify subsequent events.
- Identify litigation and claims.
- Obtain written management representation.
- Perform wrap-up procedures.
What are subsequent events and how do auditors handle them?
Subsequent events are significant occurrences between the financial statement date and the auditor's report date, or even after. Auditors must identify these events as they can impact financial statements. Events providing further evidence of conditions existing at year-end require adjustment, while those indicating new conditions post-year-end typically necessitate disclosure. Procedures include inquiring of management and reviewing minutes to ensure proper financial reporting.
- Defined as events after financial statement date but before report.
- Requiring adjustment: evidence of existing conditions.
- Requiring disclosure: conditions arising after date.
- Procedures: inquire management, review minutes, read reports.
- Events after report date: management informs auditor.
- Effect on report: dual dating or emphasis of matter.
How do auditors address litigation and claims?
Auditors address litigation and claims to ensure potential financial impacts are appropriately recognized and disclosed in financial statements. Management holds primary responsibility for identifying, evaluating, and accounting for these matters. Auditors perform specific procedures, including inquiries and reviewing legal correspondence, to corroborate management's assertions. A letter of inquiry to external legal counsel helps obtain evidence on known litigation and management's estimates, ensuring comprehensive assessment.
- Management's responsibility: identify, evaluate, account for claims.
- Auditor's procedures: inquire management, read minutes, review legal expense.
- Written representations from management confirm understanding.
- Letter to legal counsel corroborates management information.
- Meeting with counsel for significant risks or disagreements.
- Refusal by management or lawyer causes scope limitation.
Why is written management representation important in an audit?
Written management representations are crucial audit evidence, confirming management's responsibility for financial statements and the completeness of information provided. While important, these representations do not substitute for other audit procedures. They complement other evidence, ensuring management acknowledges their role in preparing and presenting financial statements in accordance with the applicable financial reporting framework, and that they have approved the final statements. Refusal to provide them signals significant issues.
- Purpose: obtain evidence, management acknowledges responsibility.
- Acquisition: request written representations from management.
- Signatories: CEO, CFO, or equivalent senior management.
- As evidence: important, but not sufficient alone.
- Form and content: letter includes responsibilities, framework adherence.
- Basic elements: addressed to auditor, dated, signed by management.
- Refusal: alerts to issues, considered a scope limitation.
What are the key wrap-up procedures in an audit?
Wrap-up procedures are performed at the audit's conclusion to form an overall opinion on the financial statements. These critical steps include conducting final analytical procedures to identify unusual fluctuations and corroborate conclusions. Auditors also evaluate the entity's ability to continue as a going concern, a fundamental principle, and assess all audit findings. This ensures that any material misstatements are corrected through adjusting entries before the audit report is issued, maintaining financial statement integrity.
- Definition: performed at the end of the audit.
- Key procedures: final analytical, going concern, evaluating findings.
- Final analytical procedures: overall conclusion, identify fluctuations.
- Going concern evaluation: management assesses, auditor considers.
- Evaluating audit findings: accept or request revision.
What are an auditor's responsibilities after the audit report is issued?
After issuing the audit report, auditors have specific post-audit responsibilities, primarily concerning facts discovered subsequently. While there is no obligation to actively search for new information, if an auditor becomes aware of a material fact that existed at the report date and could have altered the opinion, they must act. This involves discussing with management, advising them to inform users, and potentially preventing reliance on the original report if management fails to revise the statements.
- Subsequent discovery of facts: no inquiry obligation unless aware.
- Auditor's actions: discuss with management, advise users.
- Management refuses: notify persons, prevent reliance on report.
- Omitted procedures: no review requirement after issuance.
- Guidelines for omitted procedures: assess importance, undertake.
Frequently Asked Questions
What is a subsequent event in auditing?
A subsequent event is a significant occurrence between the financial statement date and the auditor's report date, or even after, that may require adjustment or disclosure in the financial statements.
Why do auditors obtain written management representations?
Auditors obtain written management representations to confirm management's responsibility for the financial statements and the completeness of information provided, complementing other audit evidence.
What happens if management refuses to provide written representations?
Management's refusal to provide written representations is considered a scope limitation, which typically leads to a disclaimer of opinion in the auditor's report.
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