Memo Flashcards
Outline sections
To, from, Re: ,
Reading time, writing time
Key dates
Required items and intended time on each
Audit planning memo sections
Risk
Approach
Materiality
Accounting Issues section
Issue Analysis Recommendation Audit Procedure (RAP) Overall impact on accounting issues
RAP
Risk
Assertion
Procedure
Income Statement account assertions
Occurrence, Completeness, Accuracy, Cut Off, Classification
Balance Sheet account assertions
Existence, Completeness, Valuation, Rights and Obligation
Procedure section
must be specific enough for a non-accountant to be able to follow
Accounting issue recommendation
conclude + quantify + explain impact on primary users
Materiality
\_\_\_\_ is based on the users (not based on risk). The following users have been identified: User 1 (what) + Concern (why or analysis)
Performance Materiality
based on the risk identified in the case (first year audit, etc.) we will use the lower end of PM (range = 60% - 80%, with 75% being normal)
Control Issues section
WIR: Weakness, Implication, Recommendation
Special Reporting options
Issue analysis -- option 1, pro/con -- option 2, pro/con Recommendation: based on above .... (cost + level of assurance must be considered as it is always based on user needs)
Risk section
(Inherent x Control x Detection = AR) x three to four risks based on time allocation
• What (issue) + Why (Analysis – explain impact on RMM – Risk of Material Misstatement) + type of risk (inherent risk or control risk, etc.)
• Recommendation – conclude on RMM – low, moderate, high – or risk relative to prior year. What impact to audit fees if any?
Approach section
explain the approach with case facts to support – combined (testing controls) vs. substantive (matching, etc.) – conclude. Scope limitation.
