Misstatements and I/C deficiencies, written representations and subsequent events Flashcards
uncorrected misstatements consider materiality in terms of..
-size
-nature
-circumstances
-impact on prior periods
misstatement materiality levels…
-based on risk and auditor judgment
-involve both quantitative and qualitative considerations
-based on smallest aggregate level
overstate current ratio leads to
overstated current assets
understate current ratio leads to
understated current liabilities
management must accept responsibility for..
the preparation and fair presentation of all F/S covered by period of the auditor’s review
management representation letters never reference
the resulting audit opinion
materiality must be determined by
management and the auditor
an accountant performing a review engagement must evaluate
the assumption that the entity will continue as a going concern for a reasonable time period
subsequently discovered fact occurs…
at any time during the year under audit
use these procedures to identify subsequent events
-obtain information about legal settlements or unusual transactions
-following up on transactions based on preliminary data
-reading minutes of financial information for the period after year end
-inquire with management
are the subsequently discovered facts:
- relevant to published F/S
- after audit report is issued
auditor action required regardless if no longer associated with a client
-discuss management steps taken–F/S should not be relied on
-determine if correction(s) needed
-prevent reliance on issued report if needed
type 1 subsequent event
condition exists at the F/S date and requires adjustment
type 2 subsequent event
conditional did not exist at the F/S date; wont adjust F/S but if material, needs to be disclosed in the F/S notes
if audit procedures were omitted and are subsequently discovered
see if performing alternative test or procedures will reveal the report and F/S are still reliable
dual date report
means auditor is assuming responsibility for all subsequent events occurring before date of completed field work AND take responsibility for only the single additional event
example
auditor is reponsible for all the events from:
the original report date March 6th AND ONLY THOSE at the dual date April 10th
BUT NOT between the dual date and report release date
change report date
auditor indicates they have obtained sufficient appropriate evidence for and are taking responsibility for all subsequent events up to the new report date
example
auditor is responsible for all the events from:
the original report date March 6th UP UNTIL the change report date to April 10th
BUT NOT between the change report date and report release date
when you use the original date on the reissued audit report, it….
removes any implication that records, transactions or events after the date of the audit report have been examined or reviewed
auditors report must be dated as the
end of fieldwork
