Exam 17: Completing the audit

Because a management representation letter is a written statement from a non-independent source, it cannot be regarded as sufficient evidence of any assertions.

When auditing contingent liabilities, the primary objective at the initial stage of the tests is to determine:

The management representation letter is prepared on the client's letterhead, addressed to the audit firm, and signed by the chief executive officer and chief financial officer.

Although there is no professional requirement to do so on audit engagements, auditors normally issue a formal 'management letter' to their clients.This letter:

If a potential loss on a contingent liability is probable and amount of the loss can be reasonably estimated, the liability should be:

Which one of the following material events occurring subsequent to the balance sheet date would require an adjustment to the financial statements before they could be issued?

The following events all occurred after the balance sheet date of 30 June 2012, but prior to the date of the audit report, 15 August 2012.Which one would NOT require an adjustment to the account balances as at 30 June 2012?

An auditor performs interim work at various times throughout the year.The auditor's subsequent events work should be extended to the date of:

Discuss the circumstances in which an auditor would dual-date the audit report.

The following five categories of specific matters that might be included in a management representation letter are consistent with ASA 580:

A client has a calendar year-end.Listed below are four events that occurred after 31 December.Which one of these subsequent events might result in adjustment of the 31 December financial statements?

Which one of the following items would NOT be of concern to the auditor as a potential contingent liability, assuming each event could generate a loss of $20 000?

Which one of the following is NOT an audit procedure that is commonly used to search for contingent liabilities?

The audit standards set out a standard format for management letters.

List the five categories of specific matters that should be included in a management representation letter.Include an example from each category.

Which one of the following auditing procedures is ordinarily performed last?

Whenever subsequent events are used to evaluate the amounts included in the statements, care must be taken to distinguish between conditions that existed at the balance sheet date and those that came into being after the end of the year.The subsequent information should NOT be incorporated directly into the statements if the conditions causing the change in valuation:

If, after the accumulation of final evidence and during the evaluation of results, the auditor concludes that there is sufficient evidence but it does not support a conclusion of fairly presented financial statements, the auditor has several choices:

Your client's balance sheet date is 30 June 2012, the audit report date is 15 September 2012, and the financial statements and audit report are issued 30 September 2012.Your client suffers a material loss due to an uninsured loss of inventory as a result of fire that occurred 5 July 2012.This event warrants footnote disclosure in, but not an adjustment to, the 30 June 2012 financial statements.

If, during the completion phase of the audit, the auditor determines that he or she has obtained sufficient evidence, but it does not warrant a conclusion that the financial statements are fairly stated, there are three choices: the statements must be revised to the auditor's satisfaction, an except for opinion must be issued, or a disclaimer of opinion must be issued.