Partner’s Audit Engagement Review

• Chapter 0 - Overview
  • Organization
• Chapter 1 - Working Paper Basics
  • Learning Objectives
  • Introduction
  • Audit Standards Affecting Workpaper Content
    • AU Section 339
    • Additional Guidance
  • What Information Must Working Papers Provide?
  • Structural Elements of Working Paper Files
    • Permanent Files or Carryforward Files
    • General Matters Files
    • Specific Accounts Files
  • Levels of Review
    • The In-Charge Accountant’s Review
    • The Manager’s or Partner’s Review
    • Independent Reviews
    • Benefits of the Review
  • Documenting the Review
  • Summary
  • Appendix 1A – AU Section 339
  • Appendix 1B – Statement on Auditing Standards, Audit Documentation (Redrafted)
• Chapter 2 - The Nuts and Bolts of Reviewing
  • Learning Objectives
  • Introduction
  • What to Look for in Reviewing Working Papers
    • Completion of the Audit Strategy
    • Appropriateness of the Financial Statements
    • Disposition of Complications
    • Communications
  • Case Study: Green Electronics
  • Summary
  • Appendix 2A – Partner Review Checklist
• Chapter 3 - Areas of Concern
  • Learning Objectives
  • Introduction
  • Client Acceptance and Retention
  • Independence
  • Audit Strategy
  • Audit Program
  • Case Study: Weiver Co
  • Preliminary Analytical Procedures
  • Case Study: ABC Company
  • Internal Control
  • Critical Audit Areas
  • Reports of Other Professionals
  • Consultations
  • Minutes
  • Case Study: Baxter Mills, Inc.
  • Final Analytical Procedures
  • Case Study: Military Supply Co.
  • Case Study: AM&A Corp.
  • Case Study: Spear Manufacturing
  • Misstatements Identified
  • Case Study: Rocky Corporation
  • Checklists
  • Financial Statements
  • Summary Memo
  • Open Items
  • Communications
  • File Completion
  • Summary
  • Appendix 3A – Practice Alert 2007-1
• Chapter 4 - Reducing the Risk When Working Papers Are Summoned
  • Learning Objectives
  • The Accountant’s Dilemma
  • Access to Working Papers
  • The Privileged Communications Right
  • Working Papers and the IRS
  • Working Papers and Regulatory Agencies
  • What Can Be Done?
  • Summary
• Chapter 5 - Latest Developments

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Chapter 0 - Overview

The objective of this course is to describe how audit partners and managers review working papers to

• Evaluate the judgment, skills, organization, and work efforts of staff members.

• Ensure that audit work was performed in accordance with generally accepted auditing standards.

• Ensure that adequate evidence has been collected and analyzed during the course of the audit to support the opinion on the client's financial statements.

This course discusses the goals of high-level working paper review, provides guidance on how to review documentation and illustrates through examples and cases common types of problems the high-level review should detect.

This course describes the high-level review as "partner review," but it is intended for managers as well as partners, as managers may perform some of these review functions depending on the size of the audit and structure of the firm. Organization

This course is organized as follows:

• Chapter 1, "Working Paper Basics," discusses the GAAS documentation requirements and the concept of working paper review.

• Chapter 2, "Nuts and Bolts of Reviewing," discusses how the partner review is conducted.

• Chapter 3, "Areas of Concern," covers specific areas that the partner focuses on and issues that arise in them.

• Chapter 4, "Reducing the Risks When Working Papers are Summoned," discusses issues attending review by outsiders such as regulators.

Chapter 1 - Working Paper Basics

Learning Objectives

After completing this chapter you will be able to understand:

• The basic documentation requirements in GAAS.

• The different levels of review working papers are subject to.

Introduction

This chapter discusses the requirements for working papers in audit engagements. First, you will study the authoritative literature on working papers. Next, you will consider the review process, including the concept of review, the different types of working papers, the mechanics of review, and the specific accounts to be reviewed.

AU Section 339 (previously indexed as SAS No. 103), Audit Documentation, establishes the basic documentation requirements in GAAS. Because it sets the basic working paper ground rules, it has been reproduced it in this workbook as Appendix 1A.

In 2008, the AICPA Auditing Standards Board embarked on its clarification project, which reformats existing SASs without changing the standards embodied in them. The new drafting conventions involve

• Stating the objectives of the standard,

• Including a section with definitions of technical terms used in the standard, and

• Presenting the requirements at the beginning of the standard followed by a separate section containing related application and other explanatory material.

As part of this project, the Board issued a new version of SAS No. 103 called Audit Documentation (Redrafted). After all of the SASs have been clarified, they will be issued in a single publication in codified format, all bearing the same effective date. Currently, the standard indicates an effective date of December 15, 2010; however, the Board recognizes that date might need to be deferred.

The reformatted standard is presented in Appendix 1B.

Audit Standards Affecting Workpaper Content

AU Section 339

AU Section 339, Audit Documentation, requires the auditor to prepare and maintain workpapers on every audit. It says that the form and content of workpapers should be designed to meet the circumstances of the particular audit engagement, but workpapers should be sufficient to

• Provide a clear understanding of the

- Nature, timing, and extent of auditing procedures applied,

- Results of the auditing procedures, - Evidence obtained and its source,

- Conclusions reached;

• Indicate who performed and reviewed the work and when the work was performed and reviewed;

• Show that the accounting records agree or reconcile with the financial statements or other information being reported on.

Although the level of detail to be provided is a matter of the auditor's professional judgment, the documentation should be sufficiently detailed that an experienced auditor with no previous connection to the audit can understand the scope and results of the work, the conclusions reached, and that the financial statements agree or reconcile to the underlying accounting records.

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