Audit W/P

Audit Procedures Initials Comments

Objectives Ref.
Commitments and Contingencies
1. Perform a search for commitments and
contingencies
Review the results of audit procedures applied
to specific accounts or other general procedures
for the existence of significant commitments or
contingencies.
a. Inquire of the owner/manager about the
possibility of unrecorded contingencies or
commitments such as:
1. pending or threatened litigation or
unasserted claims.
2. Communications from regulatory
agencies regarding violations or
possible violations.
3. Product warranties.
4. Purchase Commitments.
5. Anticipated losses on long-term
contracts.
6. Long-term leases with required
fixed payments for several years.
7. financial transactions or
arrangements with financial
institutions.
b. Determine if any commitments or
contingencies were highlighted in the
minutes.
c. Determine if any commitments or
contingencies were highlighted in the
contracts, loan agreements.
d. Obtain a legal representation letter from
the client’s attorneys and evaluate the
responses.
e. Consider confirming details of financing
arrangements involving commitments or
contingencies with appropriate parties at
financial institutions. Document the items
selected for confirmation and retain
returned confirmations.
f. Review confirmation responses received
from third-party depositories, e.g. banks or
others, indicating guarantees of
indebtedness of other entities or any other
commitments or contingencies.
g. Summarize in the workpapers information
about significant commitments or
contingencies for disclosure in the notes to
the financial statements.
Significant Estimates
1. Perform procedures necessary to assess whether
significant estimates have been identified and
considered for disclosure. Procedures would
include, but not necessarily be limited to the
following:
a. Evaluate information obtained by reading
minutes or performing other audit
procedures.
b. Consider whether the financial statements
include reasonable estimates for all matters
that require estimation that are material to
the client’s operating results or financial
position.
c. Consider assertions embodies in the
financial statements to identify the need for
estimates.
d. Inquire of the owner/manager about
circumstances that require accounting
estimates.
e. Conduct follow-up or corroboration of
owner/manager’s responses as considered
necessary.
f. Obtain representations from the
owner/manager regarding the completeness
of disclosures.
g. Summarize in the workpapers information
about significant estimates for disclosure in
the notes to the financial statements.
2. Perform a retrospective review of significant
accounting estimates reflected in the prior year
financial statements and consider whether
underlying assumptions in the prior year indicate a
possible bias on the part of management. Consider
whether the results of the review provide additional
information about possible bias in making current
year estimates. If possible bias is identified,
evaluate whether the circumstances represent a risk
of material misstatement due to fraud.

Subsequent Events
1. Perform a review for subsequent events to the date
of our auditor’s report (the completion of
fieldwork). Procedures would include, but not be
limited to, the following (coordinate this work with
the search for unrecorded liabilities in the audit plan
for accounts payable and other liabilities)
a. Scan cash receipts records for the subsequent
period for evidence of proceeds of loans,
significant sales of fixed assets, etc.
 b. Scan cash disbursements for the subsequent
period for significant unusual payments.
c. Review the sales journal and accounts
receivable ledger for large sales returns,
allowances, or credit memos that relate to the
balance sheet under audit.
d. Review general journal entries for significant
nonstandard entries or transactions that relate to
the balance sheet under audit.
e. Read the minutes for meetings held subsequent
to the date of the initial reading of minutes at the
start of the engagement for possible subsequent
events.
f. Read any financial statements or significant
financial reports that have been prepared since
the balance sheet date.
2.
a. Inquire of the owner/manager about the
existence of material subsequent events such as
plans to sell or merge, losses or impairment to
assets (for example, securities or deferred tax
assets), subsequent loss of major customers, etc.
Inquire about the status of items unresolved at
the balance sheet date.
b. Obtain an understanding of the business purpose
of significant subsequent events.
c. Summarize in the workpapers information about
subsequent events for disclosure in the notes to
the financial statements.

Related Party Transactions

1. Perform a review for related party transactions.
a. At the start of the audit, communicate to the
staff the names of known related parties and
related party transactions noted while
completing the “Audit Planning Form”.
b. Review the documents in the permanent file,
income tax returns, regulatory filings,
stockholder listings of closely-held
companies, and current year minutes for
possible related parties and related party
transactions.
c. Summarize related party transactions found
when applying audit procedures to specific
accounts, e.g. review of confirmation
responses relating to compensating
balances or guarantees and review of large,
unusual, or nonrecurring transactions.
d. Summarize related party transactions noted
during the review of subsequent events,
 including consideration of whether large or
unusual transactions identified in the review
of subsequent transactions involved related
parties.
e. Inquire of the owner/manager about the
existence of related party transactions.
f. Consider whether related party transactions
are occurring but not being recognized in
accounting records. Obtain an understanding
of the business purpose of significant related
party transactions. Consider whether
transactions, especially those involving
unconsolidated related, have been reviewed
and approved at an appropriate level, such as
by the owner/manager, board of directors, or
audit committee, if the company has one.
g. If the procedures performed reveal the
existence of previously undisclosed related
parties or related party transactions, consider
the effect on the fraud risk assessment and
the need to perform additional procedures.
h. Obtain written representations from
management regarding the completeness of
recorded transactions and the proper
accounting and disclosure of related party
transactions.
2. Consider whether the accounting for related party
transactions is appropriate. Summarize the
workpapers information about significant related
party transactions for disclosure in the notes to the
financial statements.

Evaluation and Other Completion Procedures

1. Consider whether audit procedures performed to
achieve other audit objectives or other general
procedures have identified conditions and events
that, when considered in the aggregate, indicate
there could be 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.
If you identify any conditions or events that cause
you to believe there is substantial doubt about the
entity’s ability to continue as a going concern,
complete the “Going Concern Checklist” and apply
any necessary audit procedures to obtain evidential
matter about identified conditions and events,
management plans for dealing with the adverse
effects of the conditions and events, or prospect
 information particularly significant to
management’s plans.

2. Apply final review analytical procedures to audited

financial statement amounts
a. Compare financial statement line items for
the current and preceding period, analyze
the results, and explain significant changes.
b. Update the analytical review of revenues
through the end of the reporting period, if
not already done.
Consider the adequacy of evidence gathered
in response to unusual or unexpected
balances identified by analytical procedures
previously applied. Also, consider whether
sufficient audit evidence has been obtained
in response to unusual or unexpected
balances or relationships.
c. Consider whether responses to inquiries
throughout the audit about analytical
relationships have been vague or
implausible or have produced evidence that
is inconsistent with other evidential matter
accumulated during the audit.
3. Consider whether the results of final review
analytical procedures as well as substantive
analytical procedures performed throughout the
audit indicate a previously unrecognized risk of
material misstatement due to fraud. Consider the
accumulated results of audit procedures in relation
to the audit risk assessment (including the risk of
material misstatement due to fraud) made in the
planning stage of the audit.
a. Evaluate the business rationale for
significant unusual transaction.
b. Consider whether the collective application
of significant accounting principles suggests
a bias that may be indicative of possible
fraud.
c. Consider whether audit procedures have
detected conditions or circumstances that
differ adversely from your expectations, and
whether those conditions or circumstances
indicate the likelihood of material
misstatement (including material
misstatement due to fraud).
d. If fraud risks or other conditions are
identified that require and audit response,
document those risks or conditions and your
response
 4. Summarize and evaluate misstatements noted
during the audit.
a. If possible, segregate normal closing entries
(those the client expects the auditor to make
to close the books) from planned audit
adjustments and audit differences.
b. Propose the normal closing entries to the
owner/manager, and post them to the
working trial balances (and the appropriate
lead schedules).
c. Consider the qualitative effects of audit
differences, including whether the nature of
audit differences (including unadjusted audit
differences) noted, may be indicative of
possible fraud.
d. Evaluate the net unadjusted audit differences
in relation to your assessment of financial
statement materiality. Propose any necessary
adjustments to the owners/manager, and post
them to the working trial balances (and the
appropriate lead schedules).
e. Document your conclusion as to whether the
net unadjusted audit differences cause the
financial statements to be materially
misstated.
5. Obtain a written representation letter from the
owner/manager.
6. Draft or assist the owner/manager in drafting the
financial statements. Ensure that the accounting
records agree or reconcile with the financial
statements. If not already done, discuss significant
accounting policies, accounting estimates, and the
implications of audit adjustments with the
owner/manager.
7. Draft the auditor’s report on the financial statements
after considering any GAAP Departures, scope
limitations, other auditors, or other matters.
8. Summarize reportable conditions in internal control
for communication to the audit committee or the
board of directors if the company does not have an
audit committee.
9. Summarize management points for possible
inclusion to the client in a management letter.

Supervision and Review

1. Supervise staff during the performance of the audit
procedures on the specific accounts.
2. Review the audit work performed on the specific
accounts and the financial statements in accordance
with firm policies.
3. If any situations have occurred that require
consultation, determine that such consultation has
been properly documented in a memo or notes in
the workpapers.
4. Determine that all significant audit findings or
issues have been adequately addressed and
documented in the workpapers.
a. Consider the need to apply one or more
additional procedures. Consider whether
information obtained or misstatements
detected by performing substantive tests or
from other sources during the audit alter
your judgment about the need to obtain a
further understanding of control procedures
or the assessed level of risk of material
misstatements (whether caused by error or
fraud), and evaluate whether the basic
procedures have been sufficient to achieve
the audit objectives (including responding to
identified fraud risks).
b. If you believe that fraud or an illegal act
may have occurred, apply the procedures for
potential fraud or illegal acts in the
additional procedures section of the audit
plan.
c. Attach the audit plan sheets to document
additional procedures.
5. Determine that all required checklists and audit
plans have been completed. Also, determine that all
questions, exceptions, or notes, if any, posed during
the audit have been followed up on and resolved,
and review notes and “to do” lists removed from the
workpapers.
Determine if there were any differences of
professional opinion among members of the
engagement team or between the engagement team
and a specialist. If so, determine that the
differences were properly resolved and documented
in the workpapers and that the documentation
addresses the considerations involved in the
resolution.
If firm policy requires the evaluation of staff after
each engagement conduct an evaluation interview
with each staff member based on that person’s
performance on the engagement.
CONCLUSION:

We have performed audit procedures sufficient to

achieve the general program audit objectives, and
the results of these procedures are adequately
presented in the accompanying work papers. (If you
are unable to conclude on any objective, prepare a
memo documenting your reason).