The Issues of Auditing Process - Article Example

Dear Please notice I have added the info. reqested on the page before the references. Please look to see if and how you will edit this paperdown to size. I hope all the info. Will help you. I believe you will do well. There is no set way to prepare the info. At present the AICPA is saying less reliance should be placed on check list. They prefer us to use professional judgment. PLEASE DELETE THESE INSTRUCTIONS BEFORE SUBMITTING THE PAPER (smile). Apollo shoes McGrawHill The Audit Report The auditing process is being conducted under among other laws the Sarbanes Oxley Act (Brenner C Vincent et al). This was necessary since the financial scandals of corporations. The most notable was the Enron scandal. CPA responsibilities External The Certified Public Accountant (CPA) is a statutory designation. Such an individual is issued a license by a government. The person has to adhere to legal requirements in doing the work of an accountant. This person is responsible to a wider audience. The financial statements (Heintz, J.A. Parry R.W.2002) should conform to generally accepted accounting principles (GAAP) The CPA conducts such test as necessary. The task is to express an opinion as to the accuracy of the financial statements as a whole (Gleim I.Ray Jordan B. 2000). The standard in the audit is to give reasonable assurance to the statement user. ENGAGEMENT LETTER CPA Firm Date: July, 2009 Client: Apollo Shoes Case, Inc. Dear Apollo Shoes: This will confirm our understanding of the arrangements for our audit of the financial statements of Apollo Shoes Case, Inc., for the year ending 2005 DEC 31 We will audit the Companys balance sheet , and the related statements of income, retained earnings, and especially cash flows for the year then ended, for the purpose of expressing an opinion on them. The financial statements are the responsibility of the Company management. Our responsibility is to express an opinion on the financial statements based on our audit. We will conduct our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit will provide a reasonable basis for our opinion. Our procedures will include tests of documentary evidence supporting the transactions recorded in the accounts, and direct confirmation of receivables and certain other assets and liabilities by correspondence with selected customers, creditors, legal counsel, and banks. At the conclusion of our audit, we will request certain written representations from you about the financial statements and matters related thereto. Although the audit is designed to provide reasonable assurance of detecting errors and irregularities that are material to the financial statements, it is not designed and cannot be relied upon to disclose all fraud, defalcations, or other irregularities (Gleim I. Ray Jordan B.2000). However, we will inform you of any material errors, and all irregularities or illegal acts, unless they are clearly inconsequential, that come to our attention. If you intend to publish or otherwise reproduce the financial statements and make reference to our firm, you agree to provide us with printers proofs or masters for our review and approval before printing. You also agree to provide us with a copy of the final reproduced material for our approval before it is distributed. As part of our engagement we will review the federal and state income tax returns. Further, we will be available during the year to consult with you on the tax effects of any proposed transactions or contemplated changes in business policies. Assistance to be supplied by your personnel, including the preparation of schedules and analyses of accounts, is described in a separate attachment. Timely completion of this work will facilitate the completion of our audit. Our fees will be billed as work progresses and are based on the amount of time required plus out-of-pocket expenses. Invoices are payable upon presentation. We will notify you immediately of any circumstances we encounter that could significantly affect our initial estimate of total fees, which will range from $125,000 to $150,000. The working papers for this engagement are the property of The CPA FIRM and constitute confidential information. However, we may be requested to make certain working papers available to certain authorities pursuant to authority given to it by law or regulation. If requested, access to such working papers will be provided under the supervision of the senior partner. Furthermore, upon request, we may provide photocopies of selected working papers to authorities as required by law. If this letter correctly expresses your understanding, please sign the enclosed copy where indicated and return it to us. We appreciate the opportunity to serve you and trust that our association will be a long and pleasant one. Sincerely, FIRM NAME ______________________________ [Engagement Partners Signature] Accepted and agreed to: ______________________________ [Client Representatives Signature] ______________________________ [Title] ______________________________ [Date] ENGAGEMENT CHECKLIST - PROGRAM This is in two parts for the purpose of analysis. The first part relates to the process at the audit firm Plan and create the working papers Audit program Audit assignment Entrance Conference Interviews and surveys Flowcharts Internal control Questioner Internal control risk assessment Development sheets Background Information Program description Organization and resources Financial analysis Board Actions etc. Applicable laws and Regulations Significant Policies and Procedures Professional and performance standards Other Audits Audit Resources Strategy Meetings Fieldwork Audit Program Other AUDIT PROCEDURE Pre-audit meeting to discuss the plan Prepare List of Bank Accounts, Investments, Debt by Financial Institutions Board Minutes File Unusual Activities/Events during the period List of associated Attorneys Review Inventory valuations and Procedures Review External factors Affecting the business Review Internal factors, e.g. activities Review and document accounting and information System for Transaction flow Staffing Controls and Technology Changes Review nature and Timing of Interim Audit Work Review Account Balance Reconciliation Review and assess transaction Sampling Review Audit adjustment process and approvals The second relates to the field work at the audited corporation. TIMEFRAMES AND MILESTONES The constraints are based upon the audit staff available. Next is the results of the testing and the clarification of resulting issues. The exercise of professional judgment as it relates to materiality. The risk assessment will weigh heavily. The professional judgment as it relates to reliance on internal controls and procedures. The timing at each stage will be ahead or behind. In most cases behind the work will be longer than originally budgeted. Every effort must be made to document such adjustments in the working papers. It must also be shown why and how resolved. This checklist should be a start in the thinking process (CPA Australia Ltd). There is the reality that this is the first audit for an existing consulting customer. Therefore there should be a greater familiarity with the business in general and some of its personnel in particular. AUDIT ENGAGEMENT CHECK LIST with TIME FRAMES This audit is expected to be completed within 30 days NOTE - This check list is a tool and does not replace professional judgement (1) All Items must have a check mark. (2) All no items must be resolved in writing dated signed and coded to the working papers. (3) All significant differences between year balances must be ex- plained,, dated, signed and coded to the working papers. SATISFACTORY PREV YEAR YES NO DUE YEAR END DATE Confirmation letter Day 5 Representation letter Day 5 Conference Predecessor CPA Firm Day 5 Predecessor CPA documentation Day 5 Confirmation letter Day 5 Representation letter Day 5 Attorneys matters Day 5 Contingent Liab. Etc Day 5 Inter nal controls day 15 Information System day 15 Income statement items day 15 Balance sheet day 15 Post Balance Sheet Items day 15 Cash flow day 15 Taxation matters day20 Estimates day20 Industry analysis day20 Economic analysis day20 Financial ratios day20 Going concern concepts analysis day 25 Budgets and forecasts day 25 Notes to Statements day 25 End audit conference day 25 Audit Report Conference day 25 References Brenner C Vincent, Vincent C. Brenner, Jr., and Jeancola Monica New Reporting Standards for Non-controlling CPA Review Interests Review Retrieved 2009 July 9 Read More