Chapter 11: Completing The Audit

The situation where auditors failed to perform necessary audit procedures prior to the audit report release date is referred to as ______ procedures.

omitted

For public entities, the communication of all significant internal control deficiencies must be made to the client in writing ______.

prior to the audit report release date

Auditor recommendations for adjustments to the financial statements are considered to be ______ to indicate management's responsibility for the financial statements.

proposed

When auditors use the ______ method to evaluate the materiality of uncorrected mistakes, only current-period income effect(s) are considered.

rollover

Auditors should ensure that ______ have been properly disclosed.

both favorable and unfavorable contingencies

True or false: The auditor has no responsibilities related to the audit after the audit report release date.

False Reason: After the release date the auditor has some communications with the client and, in some cases, may have to take steps to ensure the audit report is not relied on.

True or false: Auditors are only required to communicate misstatements detected during the audit to the audit committee if they have a material effect on the financial statements.

False Reason: All misstatements must be communicated.

True or false: Auditors are expected to design and perform procedures solely for the purpose of identifying conditions that indicate going-concern uncertainties.

False Reason: Auditors are required to consider whether any evidence provides "substantial doubt" about going concern.

True or false: If management refuses to provide written representations, the auditor must withdraw from the engagement.

False Reason: Either a qualified opinion or a disclaimer of opinion must be issued.

Which of the following statements is correct?

Significant events occurring between the date of the audit report and the audit report release date may result in a dual dated report.

Which of the following statements regarding auditor evaluation of the materiality of misstatements are correct?

The rollover method only considers current-period income effects. Auditors may evaluate misstatements using either the rollover or iron curtain method.

Auditors are required to communicate ______ to the client's audit committee.

all misstatement detected during the audit

Written representations are ______.

also known as client representations required before the audit can be completed

An overall review of the reasonableness of accounting estimates is similar in nature and purpose to the role of ______ procedures conducted near the end of the audit.

analytical

When auditors assess the risk of material misstatement from pending litigation, they will request the client send a(n) ______ ______ to all lawyers who worked for the client during the period under audit.

attorney letter

When subsequently discovered facts are discovered prior to the audit report release date ______.

auditors generally dual date the audit report

Management letters ______.

can make the client aware of other business services offered are delivered to and discussed with the client

Responsibility for adjusting the financial statements for auditor proposed adjustments rests with the ______.

client

When subsequently discovered facts that would result in either the revision of the auditor's report or the financial statements are discovered after the audit report release date and individuals are continuing to rely on the statements, the ______ should notify the individuals that the statements should not be relied on.

client

The date of the auditor's report is also referred to as the audit ______ ______.

completion date

Auditors are required to ______.

consider evidence that provides substantial doubt about the client's ability to continue as a going concern obtain information from management regarding plans to mitigate the effects of going concern uncertainties

Auditors are responsible for ______ accounting estimates.

considering the reasonableness of

Potential warranty payments, tax disputes with the IRS and debt guarantees on behalf of another party are all examples of ______ liabilities.

contingent

Subsequently discovered facts become known to the auditor after the ______.

date of the auditor's report

The auditor's report on the entity's financial statements covers all events that occur up to the ______.

date of the auditor's report

The auditors have gathered sufficient, appropriate evidence on which to base their report at the ______.

date of the auditor's report

When subsequently discovered facts are discovered prior to the audit report release, auditors normally choose to ______ ______ the report.

dual date

Significant events occurring between the date of the audit report and the audit report release date may result in a(n) ______ ______ report.

dual dated

Auditors must be alert for adjustments made to meet analysts' profit expectations which is known as ______ ______.

earnings management

Reclassifying items that should be deferred or contra-assets or liabilities to miscellaneous or other revenues and expenses, especially at the end of a quarter or year is referred to as ______ ______.

earnings management

Subsequent events provide evidence of conditions that ______.

existed at or arose following the date of the financial statements

The persons responsible for overseeing the client's financial reporting process, including the internal control over financial reporting, are called individuals charged with ______.

governance

Audit work performed between the beginning of the year and the date of the financial statements is referred to as ______ ______.

interim testing

When auditors use the ______ method to evaluate the materiality of uncorrected mistakes, the aggregate effect of the misstatements on the entity's balance sheet are considered.

iron curtain

Engagement quality review ______.

is also known as concurring-partner review is required by GAAS reviews whether audit evidence was sufficient to support the audit opinion

Near the end of the audit, recommendations to the client are summarized in a document commonly referred to as the ______ ______.

management letter

Auditor communications to individuals charged with governance include ______.

judgment about the quality of critical accounting policies and estimates any disagreements with management auditors' responsibility under GAAS

Auditors should discuss pending litigation with the client's ______.

management and attorneys

Written representations are also known as ______ or ______ representations.

management client

After the audit report release date, the auditor ______.

may have to take steps to ensure the report is not relied on

For nonpublic entities, the communication of all significant internal control deficiencies must be made to the client in writing ______.

no later than 60 days after the audit report release date

Audit documentation review ______.

provides an evaluation of the firm's audit practices allows the firm to adhere to the performance principle can be a component of staff training and evaluation

Auditor communications to individuals charged with governance include ______.

representations requested from management overview of audit scope and timing significant difficulties encountered during the audit

Attorney letters should be ______.

requested to the client by the auditor and mailed by the auditor with responses sent back to the attorney

Professional standards procedures specifically performed to identify the existence of material subsequent events include ______.

reviewing interim financial statements reading applicable meeting minutes held after the financial statement date obtaining written representations as to the existence of events

When subsequently discovered facts that would result in either the revision of the auditor's report or the financial statements are discovered after the audit report release date and individuals are continuing to rely on the statements, ______.

revised financial statements should be issued as soon as practicable management must notify appropriate individuals that the financial statements should not be relied on

When omitted procedures are discovered ______.

revised reports may or may not be required

Examining material account transactions that occur between the interim testing date and the date of the financial statements is a common ______-______ procedure.

roll forward

If relevant internal controls are effective, auditors may use ______-______ procedures to move interim conclusions to the year-end date.

roll forward

Management's refusal to provide written representations ______.

should cause auditor skepticism constitutes a scope limitation

The attorney's response to an attorney letter ______.

should note any issues where the attorney's view is different from the client's view should be provided directly to the auditor

Events occurring between the financial statement date and the date of the auditor's report are referred to as ______ events.

subsequent

Reading minutes of meetings held after the date of the financial statements and reviewing the entity's latest interim financial statements are two procedures that can be performed specially to identify the existence of material ______ events.

subsequent

Facts that become known to auditors after the the date of the audit report that may have caused a report revision are known as ______ ______ facts.

subsequently discovered

Written representations ______.

support other evidence obtained during the audit are written on client letterhead and addressed to the auditor

In most public organizations, the phrase "individuals charged with governance" typically refers to ______.

the audit committee of the board of directors

Auditors must rely on the attorney to inform ______ if an unasserted claim must be disclosed.

the client

Interim testing occurs between the beginning of the year and ______.

the date of the financial statements

A contingent liability that requires special consideration by auditors is ______.

the outcome of litigation

Attorney letters should be sent ______.

to all attorneys who worked for a client during the period under audit

When no formal lawsuit or other action has been filed or threatened, but circumstances could result in an action in the future, a(n) ______ ______ exists.

unasserted claim

A proposed adjustment to the financial statements that the client decides not to make is called a(n) ______ misstatement.

uncorrected

A proposed adjustment to the financial statements that the client decides not to make is called a(n) ______ ______.

uncorrected misstatement