Auditing 300 Lecture 10.ppt

Joe Christopher Jan 2010 Auditing 300 Chapter 12Completion and Review Summary-Audit completion and review The nature of completion and review procedures Date of the Audit Report Important because it establishes date of auditor’s responsibility for knowledge of events that should be reflected in the financial report. Audit report should be dated when it is actually signed, and no earlier than date of directors’ declaration. Ensures financial report was completed and formally accepted by officers of company prior to auditor expressing an opinion. Audit procedures after balance date Many audit procedures performed after balance date as normal tests of balances, e.g.: cutoff tests; collectability of accounts receivable determined by subsequent payment; and search for unrecorded liabilities. Analytical procedures after balance date Auditor is also required to apply analytical procedures at or near completion of the audit to: assist in overall review of reasonableness of financial report; ensure financial report is consistent with auditor’s knowledge of entity; and corroborate conclusions formed during audit. Subsequent Events Review Financial reports should reflect the effects of certain events occurring up to time of completion (defined as date of directors’ declaration or approval of financial report by owners or controlling management). Auditor’s responsibility to consider subsequent events is extended up to the date on which auditor signs the audit report (ASA 560). Types of Events Subsequent to Balance Date Two types of events may materially affect financial reports. These are: Type 1 or adjusting events Type 2 or disclosing events. Type 1 or Adjusting Events Events, both favourable and unfavourable, that provide evidence of, or further elucidate conditions that existed at balance date. Financial effect of such events need to be brought to account (amounts in the financial statements need to be adjusted). Examples of Adjusting Events Subsequen