Learning Objectives

^Chapter 11
COMPLETING THE AUDIT

Learning Objectives
11.1

After studying this chapter, you should be able to:

1. Reiterate the procedures for the audit completion stage.

2. State the elements of a system of quality control of an audit firm.

3. Give the implications of the Sarbanes-Oxley Act for quality control and audit review.

4. Understand why letters from client legal counsel are necessary and what they contain.

5. Obtain evidence that management acknowledges its responsibility for the fair representation of the financial statements in a management representation letter.

6. Conduct a review for contingent liabilities and commitments.

7. Explain what a related party transaction is and the procedures required to determine the completeness of information provided by management.

8. Conduct a review after the balance sheet date for subsequent events and understand what events cause financial statement adjustments.

9. Know the auditor’s responsibilities when facts are discovered after the issuance of the audit report.

10. Explain the procedures involved in the review of financial statements including disclosures and other information presented with the audited financial statements.

11. Design and perform the wrap-up procedures.

12. Determine procedures to evaluate going concern issues.

13. Discuss the design and use of matters for the attention of partners.

ILLUSTRATION 11.1

Audit Process Model – Phase Flow Diagram





Phase I
Client Acceptance
Objective: Determine both acceptance of a client and acceptance by a client. Decide on acquiring a new client or continuation of relationship with an existing one and the type and amount of staff required.

Procedures:

1. 
   Evaluate the client's background andd reasons for the audit.
   
2. 
   Determine whether the auditor is able to meet the ethical requirements regarding the client.
   
3. 
   Determine need for other professionals.
   
4. 
   Communicate with predecesser auditor.
   
5. 
   Prepare client proposal.
   
6. 
   Select staff to perform the audit.
   
7. 
   Obtain an engagement letter.