Professional Documents
Culture Documents
Communicating Clearly
Communicating Clearly
What is this?
Communicating Clearly
Communicating Clearly
Communicating Clearly
Purpose
Purpose of work paper To test the completeness assertion by performing a search for unrecorded liabilities
Conclusion
Conclusion completeness of payables is appropriate
No Purpose
If there is no purpose for the work paper, then ask: Do I need this work paper?
No Purpose
The purpose can refer to the appeasement of a particular audit risk; for example: Purpose - to address the completeness assertion in accounts payable - the risk is that payables are understated
GAAS Requirements
1. Provide clear understanding of work performed, evidence obtained and conclusions reached 2. Document how a departure from any presumptively mandatory GAAS requirement was justified and how alternative procedures were sufficient 3. Cannot delete or alter documentation for at least five years
Extent
Sufficient for an experienced auditor with no previous connection to the audit to understand: Nature, timing and extent of the procedures applied to comply with GAAS The results of the audit procedures The significant judgments made and conclusions reached on significant findings or issues
Documentation Requirements
1. Who performed the work and when the work was performed 2. Who reviewed the work and when Reviewer not required to sign off on every work paper Might be met by signing off a checklist or memo
Documentation Requirements
Identifying characteristics, such as invoice, part number, or location of information Abstracts or copies of entity records (when needed, e.g., debt agreements) Date the audit report was released
Documentation Requirements
Significant findings or issues Actions taken to address them Any additional evidence obtained Basis for final conclusion Discussions with others (such as management)
Retention Period
Files should be maintained for a minimum of five years from the release date Create system for appropriate removal of files after the retention period Dont retain files longer than necessary; can create litigation exposure
Work Papers
Engagement Letter Consultations with others (inside and outside the CPA firm) Risk assessment procedures Walkthroughs Planning analytics
Work Papers
Engagement team discussion Understanding of the entity and its environment Risk assessment Fraud considerations
Work Papers
Audit plan Audit strategy Oral confirmations If accounts receivable not confirmed how you overcame the presumption that receivables would be confirmed
Work Papers
Representation letter SAS 114 letter (or document oral communication) SAS 115 letter significant and material weaknesses Materiality
Work Papers
Adjusting journal entries (both passed and posted) Going concern Conclusion as to whether uncorrected misstatements cause the financial statements to be materially misstated
Engagement Letter
Objective and scope of the audit Responsibilities of the auditor and management
Statement that an unavoidable risk exists that some material misstatements may not be detected even though the audit is properly planned and performed
Identification of applicable reporting framework (e.g., GAAP)
Engagement Letter
Multi-year engagement letter
If the terms are not revised, that management has been reminded of the engagement terms
If the terms are revised, the new terms are added
Consultation
Nature and scope of the consultation
Conclusions reached Basis for conclusions
Work Papers
All reviews (in-charge, partner, quality control) should be performed prior to or concurrent with the opinion date Rendering an opinion without appropriate timely reviews may create legal exposure
Practical Considerations
Removeaphobia
Afraid to Remove?
Move the work paper to a central File 13
Questions
Email Charles Hall at chall@mmmcpa.com