Completing
Audit
EXAMPLES OF CONTINGENT
LIABILITIES
V.
Obtaining
letter.
management
representation
LEGAL LETTERS
COMMON TYPES OF
LITIGATION
Breach of contract
Patent infringement
Product liability
Violations of governmental legislation
including:
PRIMARY COMPONENTS OF A
LEGAL LETTER
COMMITMENTS
Type II: Events that provide evidence about conditions that did not
exist at the date of the balance sheet but arose subsequent to that
date.
EXAMPLES OF TYPE I
EVENTS
EXAMPLES OF TYPE II
EVENTS
II.
III.
IV.
V.
VI.
EVALUATE GOING
CONCERN
Auditing standards state that the auditor
has a responsibility to evaluate whether
there is substantial doubt about the
entity's ability to continue as a going
concern for a reasonable period of time,
not to exceed one year beyond the date
of the financial statements being audited.
POOR RATIOS
Current asset/Current
liabilities
Net income/Total
liabilities
Profit before tax/Net
sales
Total liabilities/Total
assets
Internal problems
Default on loans
Dividend in arrears
No additional sources of financing
Uneconomic long term commitments
Dependence on the success of one particular project
External matters
Legal proceedings
Loss of major customers or suppliers
CONSIDERATION OF
MANAGEMENT'S PLANS
REPRESENTATION
LETTER
WORKING PAPER
REVIEW
FINAL ASSESSMENT OF
AUDIT RESULTS
Effects
of
detected
misstatements
compared to tolerable misstatement
EVALUATE FINANCIAL
STATEMENT PRESENTATION
AND DISCLOSURE
INDEPENDENT PARTNER
REVIEW
the
for
the
and
COMMUNICATIONS WITH
THE AUDIT COMMITTEE
COMMUNICATIONS WITH
THE AUDIT COMMITTEE
(continued)
MANAGEMENT LETTER
on observations made
SUBSEQUENT DISCOVERY
OF FACTS EXISTING AT THE
DATE OF THE AUDITOR'S
REPORT
SUBSEQUENT DISCOVERY
OF FACTS