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Chapter 11: Completing the Audit

analytical procedures
Procedures that allow auditors to evaluate financial information by studying relationships among both financial and non financial data. When used in the completion stage of the audit, analytical procedures allow auditors to assess the conclusions reached during the audit and evaluate the overall financial statement presentation
attorney letter
A communication sent from the client to its attorneys that details all pending litigation, claims, and assessments against the client and that requests the attorneys to comment on these matters directly to the client’s auditor
audit report release date
The date on which auditors allow the client to use their reports in conjunction with the financial statements; also the date on which the client’s financial statements are issued,
contingency
An existing condition, situation, or set of circumstances involving uncertainty as to possible gain (“gain contingency”) or loss (“loss contingency”) to an enterprise that will ultimately be resolved when one or more future events occur or fail to occur,
date of the auditors’ report
the date on which auditors have gathered sufficient appropriate evidence on which to base their opinions on the financial statements and internal control over financial reporting
date of the financial statements
The year-end date of the latest period covered by the client’s financial statements
dual date
The use of two dates in the auditors’ report to limit the responsibility beyond the date of the auditors’ report to a specific subsequent event identified in the report,
engagement quality review
A review of audit documentation by an additional person (normally, a partner or equivalent with the firm) who has not been involved with the audit to ensure that the quality of the audit work and reporting is consistent with the quality standards of the public accounting firm,
individual charged with governance
The person(s) responsible for overseeing the client’s financial reporting process, including the internal control over financial reporting; individuals charged with governance may include the client’s management and full board of directors, but typically refers to public entities’ audit committee of the board of directors,
iron curtain method
The process used when evaluating the effect of uncorrected misstatements that considers the aggregate effect of current and prior misstatements in the entity’s balance sheet
management letter
A communication that provides a summary of auditors’ recommendations resulting from the audit engagement that allows the client to improve the effectiveness and efficiency of its operations,
omitted procedures
The inadvertent failure of auditors to perform necessary audit procedures prior to the audit report release date
roll-forward procedures
The procedure(s) performed by auditors to extend the conclusions from an interim date to the date of the financial statements
rollover method
The process used when evaluating the effect of uncorrected misstatements that considers only the current-period income effect(s) of the potential adjustment
subsequent events
Events occurring between the date of the financial statements and the date of the auditors’ report
subsequently discovered fact
Information that becomes known to auditors after the date of their report that, had it been known at that time, may have caused the auditors to revise their report
unasserted claim
A representation that no formal lawsuit or assertion has been filed or threatened on behalf of others against the audit client but that circumstances such as a catastrophe, accident, or other physical occurrence could result in a suit or assertion being filed in the future
uncorrected misstatement
A misstatement that the auditor identified and accumulated during the audit that has not been corrected (or adjusted) by the client
written misrepresentation
A written assertion provided by management to auditors related to the entity’s financial statements, the information provided to the auditors, and management’s internal control over financial reporting to confirm certain matters and support other evidence obtained during the audit
Which is the role of analytical procedures in the review stages of the audit engagement?
To provide an overall review of the financial information and assessment of the adequacy of evidence gathered during the audit engagement
A major objective of written representations is to
impress on management its ultimate responsibility for the financial statements and disclosures
Which of these substantive procedures is not used to obtain evidence about contingencies?
scanning expense accounts for credit entries
the audit report release date
Auditors have a responsibility related to management’s disclosure of new information related to subsequent events until
the date of the auditors’ report
The auditing standards regarding subsequently discovered facts refers to knowledge obtained after
written representations
attorney letter
engagement letter
What documents (letters) are required by GAAS?
client’s outside attorney’s
which of these persons generally doesn’t participate in writing the management letter?
obtaining signed written representations
What action is ordinarily performed last in the audit examination?
what normally occurs earliest in the audit examination?
review of audit documentation
After the audit report release date, the auditors determine that an important auditing procedure was omitted. Which of the following initial courses of action is most appropriate?
a. perform the omitted procedure or an alternative procedure
b. notify the board and reg agencies that are currently relying on auditors’ reports
c. determine whether omitted procedure is important in supporting the auditors’ opinion on the entity’s f/s
d. engage another public acc. firm to conduct quality assurance review
c. determine whether omitted procedure is important in supporting the auditors’ opinion on the entity’s f/s
March 24, year 2
Hall accepted an engagement to audit the year 1 financial statements of XYZ Company. XYZ completed the preparation of the year 1 financial statements on February 13, year 2, and its auditors began the fieldwork on February 17, year 2. Hall completed gathering sufficient appropriate evidence on March 24, year 2; Hall’s report and XYZ’s financial statements were released on March 28, year 2. The written representations normally would be dated
which of the following statements is not true with respect to written representations?
a. the failure of management to furnish them is a significant scope limitation, resulting in an adverse opinion or disclaimer of opinion.
b. they should address management responsibility for designing internal control to prevent and detect fraud
c. auditors use them to corroborate info received during the audit from client and employees
d. they are dated the same date as auditors’ reports
a. the failure of management to furnish them is a significant scope limitation, resulting in an adverse opinion or disclaimer of opinion.
contingent liability has become a real liability and has been settled
A charge following the date of the financial statements to a notes receivable account from the cash disbursements journal should alert auditors to the possibility that a
compare the latest available interim f/s with the f/s being audited
Which of the following substantive procedures should auditors ordinarily perform regarding subsequent events?
True
T/F: investigating changes in shareholders’ equity occurring after the date of the f/s is the appropriate procedure to obtain evidence about he occurrence of subsequent events.
What is the primary reason auditors request response to attorney letters?
To prove auditors corroboration of the info furnished by management about litigation, claims, and assessments

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