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The main goals of this chapter are to: Identify major activities performed by auditors in completing the substantive procedures following the date of the financial statements; understand the role of attorney letters in evaluating litigation, claims, and assessments; explain why auditors obtain written representations and identify the key components of written representations. | Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Chapter 11 Completing the Audit “It ain’t over till it’s over.” – Yogi Berra, former catcher for the New York Yankees 11- Timeline for Major Activities in Audit Date of the auditors’ report (audit completion date) Beginning of year Year-End Date (date of the Financial Statements) Audit report release date Interim testing (tests of controls and substantive procedures Completing substantive procedures Attorney’s letters Written representations Going-concern assessment Adjusting journal entries Audit documentation review Subsequent events Subsequently discovered facts Subsequently discovered facts Omitted audit procedures Management letter Communications with those charged with governance 11- Completing Substantive Procedures Roll-forward procedures: Extend work from interim period to date of the financial statements Perform analytical procedures to identify unusual or unexpected relationships not previously identified Review accounts for “miscellaneous”, “other,” and “clearing” accounts (may relate to earnings management) Evaluate management estimates and process for developing estimates for reasonableness 11- Procedures for Litigation, Claims, and Assessments Inquiry of clients Review minutes of meetings of stockholders, directors, and committees Review contracts, loan agreements, and correspondence from taxing and governmental agencies Obtain information concerning guarantees from bank confirmations Review documentation related to legal services Attorney’s letters 11- Attorney’s Letters Contents of Attorney’s Letter Responsibilities for Attorney’s Letter Listing of pending litigation, claims, and assessments Description of each item or case included in the listing Evaluation of the likelihood of an unfavorable outcome Estimate of the range of potential loss Understanding regarding unasserted claims Auditors Initiate request for attorney letter | Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Chapter 11 Completing the Audit “It ain’t over till it’s over.” – Yogi Berra, former catcher for the New York Yankees 11- Timeline for Major Activities in Audit Date of the auditors’ report (audit completion date) Beginning of year Year-End Date (date of the Financial Statements) Audit report release date Interim testing (tests of controls and substantive procedures Completing substantive procedures Attorney’s letters Written representations Going-concern assessment Adjusting journal entries Audit documentation review Subsequent events Subsequently discovered facts Subsequently discovered facts Omitted audit procedures Management letter Communications with those charged with governance 11- Completing Substantive Procedures Roll-forward procedures: Extend work from interim period to date of the financial statements Perform analytical procedures to identify unusual or unexpected .
