132CHAPTER 16_17

132CHAPTER 16_17 - Auditing Operations & Completing the...

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1 Bob Anderson, UCSB CHAPTERS 16&17-1 Auditing Operations & Completing the Audit CHAPTER 16 Auditor’s Reports CHAPTER 17 Auditing Operations and Completing the Audit Chapter 16 Bob Anderson, UCSB ChapterS 16&17-3 Relationships Between Balance Sheet and Income Statement Accounts Balance Sheet Item Revenue Expenses Accounts receivable Notes receivable Securities and investments Sales Interest, Interest, dividends, gains, investee’s income Uncollectible accounts Uncollectible notes Losses Inventories Purchases, cost of goods sold, payroll Property, plant and equip. Intangible assets Prepaid expenses Accrued liabilities Rent, gains Royalties Depreciation; repairs Amortization Various expenses Various expenses Interest-bearing debt Interest Bob Anderson, UCSB ChapterS 16&17-4 Substantive Tests for Selling, General and Administrative Expenses ± Perform analytical procedures ± Develop an expectation of the account balance ± Determine the amount of difference from the expectation that can be accepted without investigation ± Compare the company’s account balance with the expected account balance ± Investigate significant deviations from the expected account balance ± Obtain or prepare analyses of selected expense accounts ± Obtain or prepare analyses of critical expenses in the income tax return
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2 Bob Anderson, UCSB ChapterS 16&17-5 Audit Procedures Completed Near the End of Field Work ± Search for unrecorded liabilities ± Review the minutes of meetings ± Perform final analytical procedures ± Perform procedures to identify loss contingencies ± Perform the review for subsequent events ± Obtain the representation letter Bob Anderson, UCSB ChapterS 16&17-6 Loss Contingencies Letters of audit inquiry to client attorneys ± Use detail of “legal expense” to identify the attorneys to send to ± Must receive response once sent ± Must dispose of each matter raised in their response ± Their response must be dated near the date of audit report. Bob Anderson, UCSB ChapterS 16&17-7 Procedures to Identify Subsequent Events ± Review latest available financial statements and minutes of the board and selected committees ± Inquiry about matters dealt with at meetings for which minutes are not available ± Inquiry of management ± Obtain lawyer’s letter ± Obtain representations from management Bob Anderson, UCSB ChapterS 16&17-8 Required Communication With the Audit Committee ± Fraudulent or illegal acts ± Significant deficiencies in internal control (Reportable Conditions)- If material weakness disclose ± The auditors’ responsibilities for the audit and other information included with the financial statements ± Significant audit adjustments made ± Proposed audit adjustments evaluated by management as immaterial= summary of uncorrected misstatements ± Information regarding management’s selection of accounting principles ± Information regarding significant accounting estimates made by management ± Disagreements with management or other difficulties ±
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This note was uploaded on 08/06/2008 for the course ECON 132A taught by Professor Anderson during the Spring '08 term at UCSB.

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132CHAPTER 16_17 - Auditing Operations & Completing the...

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