Week 5 Planning PowerPoints- Part 4 recorded

Category: Education

Presentation Description

Part 4 of our planning discussion.


Presentation Transcript

Engagement Letters:

Engagement Letters When a new client is accepted or when an audit engagement continues from year to year, an engagement letter should be prepared. Acts as a contract between auditor and client. Serves as a means of reducing the risk of misunderstandings with the client and as a means of avoiding legal liability for claims that the auditors did not perform the work promised Should include: Objectives of the engagement Management ’ s responsibilities Auditors ’ responsibilities Any limitations of the engagement 3- 1

Audit Documentation:

Audit Documentation Definition The written record of the basis for the auditor ’ s conclusions that provides the support for the auditor's representations, whether those representations are contained in the auditor's report or otherwise. Objectives Improve audit quality Enhance public confidence 3- 2

Purposes of Audit Documentation:

Purposes of Audit Documentation Integral part of audit quality Documents the nature, timing and extent of work performed Evidence of due care Basis for conclusion – WHY the auditors made a decision or reached a conclusion. Facilitates planning, performance and supervision Provides basis for review 3- 3

Audit Documentation:

Audit Documentation Permanent files Information of continuing audit significance For example, key contracts, bylaws, organization chart, royalty and bond agreements Current files Includes the entire engagement administration file for the year under audit Includes all documentation that is sufficient to support all conclusions on the audit 3- 4

Audit Documentation Requirements:

Audit Documentation Requirements Audit documentation should be prepared in sufficient detail to enable an experienced auditor having no previous connection with the engagement to: Understand the nature timing, extent and results of procedures, evidence obtained and conclusions reached. Determine who performed the work, date of work, reviewer and date of review. Audit documentation should provide a clear link to significant findings or issues and Demonstrate compliance with professional standards. Support basis for conclusions for each relevant assertion. Document that accounting records agree with financial statements. 3- 5

Documentation Retention:

Documentation Retention Documentation must be retained seven years from report release date . If no report—from last day of fieldwork Documentation to be retained include those documenting discussion and subsequent resolution of differences in professional judgments among team members All documentation must be finalized within 45 days of the audit report ’ s release date 3- 6

authorStream Live Help