Modern Auditing:

Assurance Services and the Integrity

of Financial Reporting, 8th Edition

William C. Boynton
California Polytechnic State
University at San Luis Obispo
Raymond N. Johnson
Portland State University

Chapter 19 – Completing the Audit and Postaudit

Responsibilities
Chapter Overview
 Completing the Audit
• Do not pertain to specific transaction
cycles or accounts

• Performed after the balance sheet date

• Involve many subjective judgments

• Usually performed by audit managers or

other senior members of the audit team
 Completing the Fieldwork
• Making Subsequent Events Review
– Types of Events
• Type 1 subsequent events

• Type 2 subsequent events

– Auditing Procedures in the Subsequent

Period

– Effects on Auditor’s Report

Subsequent Events
 Completing the Fieldwork
• Reading Minutes of Meetings

• Obtaining Evidence Concerning

Litigation, Claims, and Assessments
– Audit Considerations

– Letter of Audit Inquiry

– Effects of Responses on Auditor’s Report

 Completing the Fieldwork
• Obtaining Client Representation
Letter
– Content of Representation Letter

– Effects on the Auditor’s Report

• Performing Analytical Procedures

– Overall Review
 Evaluating the Findings
• Making Final Assessment of Materiality
and Audit Risk
– Known Misstatements

– Projected Uncorrected Misstatements

(Sampling Techniques)

– Estimated Uncorrected Misstatements

(Analytical Procedures)

– Likely Misstatement

– Aggregate Likely Misstatement

 Evaluating the Findings
• Evaluating Going Concern
– Substantial Doubt Exists
• Obtain information of management’s plans
• Assess likelihood of effective
implementation

– Substantial Doubts Persists

• Consider adequacy of disclosure
• Include explanatory paragraph
 Evaluating the Findings
• Making Technical Review of
Financial Statements
– Financial Statement Checklist

• Formulating Opinion and Drafting

Audit Report on Financial
Statements
 Evaluating the Findings
• Formulating Opinion and Drafting Audit
Report on Internal Controls Over
Financial Reporting
– Opinion about fairness of management’s
assertion on internal controls
– Opinion about adequacy of internal controls

• Making Final Reviews of Working Papers

– First-level
– Manager
– Partner
– Cold Review
 Study Break
1. These types of events provide evidence
with respect to conditions that did not
exist at the date of the balance sheet
but arose subsequent to that date.
A. Type 1 subsequent events
B. Type 2 subsequent events
C. Overall review
D. Balance sheet date

B. Type 2 subsequent events

 Study Break
2. This item is obtained to complement
other audit procedures, including
confirmation of oral representations
given to the auditor by management.
A. Client representation letter
B. Letter of audit inquiry
C. Final review
D. Auditor’s report

A. Client representation letter

 Study Break
3. The total of uncorrected
misstatements, projected uncorrected
misstatements, and estimated
misstatements for an account is called
______.
A. Known misstatement
B. Likely misstatement
C. Aggregate likely misstatement
D. Tolerable misstatement

B. Likely misstatement
 Communicating with the Client

• Communicating Internal Control

Matters
– Significant Deficiency

– Material Weakness
 Communicating with the Client

• Communicating Matters Pertaining to

Conduct of Audit
– Auditor’s responsibility under GAAS

– Significant accounting policies

– Auditor’s judgment about the quality of the

entity’s accounting principles

– Management judgments and accounting

estimates
 Communicating with the Client
• Communicating Matters Pertaining to
Conduct of Audit
– Significant audit adjustments

– Disagreements with management

– Consultation with other accountants

– Major issues discusses with management

prior to retention

– Difficulties encountered in performing the

audit
 Communicating with the Client

• Preparing Management Letter

– Internal Control Matters

– Recommendations regarding the

management of resources

– Tax-related Matters
Summary of Completing the
Audit
 Postaudit Responsibilities
• Subsequent Events Between Report
Date and Issuance of Report

• Discovery of Facts Existing at

Report Date

• Discovery of Omitted Procedures

 Study Break
4. This is an internal control deficiency
that adversely affects the company’s
ability to initiate, record, process or
report external financial data reliably in
accordance with GAAP.
A. Material weakness
B. Corroboration
C. Misappropriation
D. Significant deficiency

D. Significant deficiency
 Study Break
5. The management letter may
include all of the following items,
except:
A. Internal control matters
B. Management recommendations
C. Tax-related matters
D. All of the above

D. All of the above