Completing the Audit - Assignment Example

GENERAL GAAS REQUIREMENTS REGARDING MANAGEMENT’S REPRESENTATIONS (AU SECTION 333 While auditing the Financial ments of an entity, an auditor is required to obtain management’s representations regarding the recognition, measurement, completeness and disclosure of the information presented in the financial statements. The auditor is also required to obtain management’s representation regarding any subsequent events of which management is aware and that may require adjustment of or disclosure in the financial statements.

If the management does not provide written representation, auditor may modify audit opinion in the auditor report. The auditor may qualify audit opinion, if the effect of management’s refusal to provide written representation is material but not pervasive. However, if the effect of such refusal is pervasive, the auditor may disclaim his/her opinion. The auditor may also withdraw from engagement if he thinks it appropriate and the legislative authority permits him to do so.GENERAL GAAS REQUIREMENTS FOR EVALUATING SUBSEQUENT EVENTS AFFECTING FINANCIAL STATEMENTS (AU SECTION 560):All events occurring after the date of Financial Statements are referred to as subsequent events.

Subsequent events that occur after Financial Statements date but the condition existed at the Financial Statements date are called adjusting events. Those events require adjustment in the Financial Statements. Subsequent events that occur after the date of Financial Statements but the condition did not existed at the date of the Financial Statements are called non-adjusting events.Auditor is required to perform cut-off procedures to evaluate subsequent events effects. He may also obtain management’s representation regarding subsequent events.

The auditor may also perform other audit procedures such as inquiring entity’s personnel, reading latest available interim Financial Statements and reading minutes of meeting of Board of Directors.QUESTIONS TO BE ASKED FROM CHIEF FINANCIAL OFFICER (CFO):Related to Inventory:1. Which approach is adopted by management regarding computation of inventory; LIFO, FIFO or Weighted Average.2. How the entity undertake stock count.3. Whether inventory value is reduced to lower of cost or Net Realizable value.4. What feedback is received or proposed to be received regarding the new product.5. Whether any event has occurred after the Balance Sheet date which may affect the valuation of inventory.6. What basic assumptions have been undertaken regarding the inventory valuation.

Related to Bonus Accruals:1. Whether the entity has sufficient funds to pay off these bonuses after the period end.2. Whether these bonuses will be paid off immediately subsequent to year end or they will be treated as long term loans.3. Whether these have been adequately classified in the Financial Statements.4. Whether any circumstances have occurred subsequent to period end which may cause significant doubt relating to payment of bonuses.5. The significant assumptions the entity made while calculating bonuses and any changes in these assumptions.

Reference:1. Interim Standards Copyright. Auditing. Public Company Accounting Oversight Board. American Institute of Certified Public Accountants, Inc, 2003-2013. Web. 15 April. 2013. .