Académique Documents
Professionnel Documents
Culture Documents
Chapter 11
Presentation Outline
B. Attorney Letters
1. Audit Procedures for Litigations, Claims,
and Assessments
2. Attorney Letters: Responsibilities
3. Attorney Letters: Contents
C. Management Representations
1. Purpose of Management
Representations
• Provided by management to the auditor in the
form of a letter (See example on p. 406 of text)
• Dated the last day of fieldwork
• Broad purpose
– Impress upon management its primary responsibility
for the financial statements
– May establish an auditor’s defense if a question related
to inquiries subsequently arises
• Qualify or disclaim an opinion if not provided by
the client
2. Management Representations
Required Regardless of Materiality
– Management responsibility for the fairness of the
financial statements
– Availability of all financial records and data
– Management responsibility for design and
implementation of programs and controls related
to fraud
– Disclosure of significant deficiencies in internal
control
– Information concerning fraud involving the client
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11-13
3. Some Representations Related
to Managements’ Assessment of
Internal Control (AS 2)
– Management has performed as assessment of
internal control
– Management’s conclusion with respect to the
operating effectiveness of its internal control
– No subsequent changes in IC that significantly
affect IC
– No control deficiencies from prior engagements
have not been properly resolved
F. Subsequent Events
1. Subsequent Period
2. Procedures in Subsequent Period
3. Types of Subsequent Events
4. Timing of Subsequent Events
Identification
1. Subsequent Period
Subsequent
Period
Audit Procedures
• Auditor performs procedures to evaluate events that may affect presentation
and disclosure in the financial statements
• Events occurring during this period are known as subsequent events
2. Procedures in Subsequent
Period
• Review latest interim financial statements
• Inquire of officers and other executives
• Read minutes of meetings of shareholders,
directors, and committees
• Obtain attorney letter
• Obtain management representations
4. Timing of Subsequent
Events Identification
• Prior to last day of fieldwork
– Perform audit procedures and ensure proper
disclosure
• Following last day of fieldwork but prior to
issuance of reports
– Dual date audit report
• Following issuance of audit reports
– “Subsequent discovery of facts”
A. Subsequent Discovery of
Facts
• Require disclosure of events if:
– Facts are reliable and existed at report date
– Facts affect financial statements and auditor’s report
– Persons are continuing to rely on financial statements
and auditor’s reports
• If client refuses disclosure, auditor should inform
board that he or she will notify regulatory agencies
and others relying on the reports
D. Management Letters
• Not required under GAAS
• Are prepared as a by-product of procedures
performed in audit
• Provide recommendations to client for
improving effectiveness and efficiency of
operations
• Delivered by auditor to client following
audit engagement
Summary of Audit
Communications