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Partner’s Audit Engagement Documentation and Review

Author/Moderator: Don Pallais, CPA
Publisher: AICPA
Availability: In Stock
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Description

It will be your signature on the report, but the staff did most of the work. In addition, the risk assessment standards substantially increased the GAAS documentation requirements. Don’t get dinged in peer review or litigation because you didn’t know it had to be written down. All audit partners and managers will benefit from this course.

Highlights include coverage of all the current AICPA rules regarding workpapers, including: work documentation, ethics requirements, workpaper access by outsiders, and workpaper retention. The course also shows you what to look for when performing a high-level review so you know what the staff did, what they found and what decisions they made without re-reviewing all the working papers. It contains lots of examples, cases and suggestions.

This course combines the courses Partner’s Engagement Documentation and Partner’s Audit Engagement Review at a bargain price!

Objectives: 

  • Identify what documentation is (and is not) required under current GAAS
  • Identify steps to ensure that the audit strategy has been implemented and that the partner is aware of all significant issues and all important judgments made by the staff

Prerequisite: Experience in managing audit engagements

Table of Contents

  • Chapter 0 - Overview
    • Introduction
    • Organization
  • Chapter 1 - Definition of Workpapers
    • Learning Objectives
    • Introduction
    • Why Workpapers Are Important
    • Basic Workpaper Requirements
    • Audit Standards Affecting Workpaper Content
      • AU Section 339
      • Additional Guidance
      • Other Factors Affecting Workpapers
    • Audits Done under PCAOB Standards
    • Other Professional Services – Summary of Standards
    • The Nature of Workpapers
    • Summary
  • Chapter 2 - Documentation of Planning and Supervision
    • Learning Objectives
    • Introduction
    • The First Standard of Fieldwork
    • Engagement Acceptance and Continuance
    • Independence
      • Threats to Independence
      • Provisions of Non-Attest Services
    • Engagement Letters
    • Audit Strategy and Detailed Audit Plan
      • Detailed Audit Plan
    • Risk
      • Documentation
    • Materiality
      • Documentation
    • Disagreements among Professional Staff
    • Summary
    • Appendix 2A – Examples of Matters the Auditor May Consider in Establishing the Overall Audit Strategy (From AU Section 311)
  • Chapter 3 - Documenting the Required Understanding of the Entity, Tests of Control and Assessment of Risk
    • Learning Objectives
    • Introduction
    • Understanding the Entity and Its Environment
      • Documentation
    • The Auditor's Understanding of the Client's Internal Control
      • Control Environment
      • Risk Assessment
      • Control Activities
      • Information System
      • Monitoring
    • Documenting the Understanding of the Client's Internal Control
    • Preliminary Analytical Procedures
    • Planning Discussions
      • Documentation
    • Risk Assessment
      • Documentation
      • Fraud Risk Assessment
    • Control Risk Assessment
    • Tests of Controls
      • Documenting Tests of Controls
    • Documentation of the Risk Assessment
    • Summary
    • Appendix 3A – Example Documentation of the Understanding and Evaluation of the Entity and Its Environment
    • Appendix 3B – Example Documentation of the Understanding and Evaluation of Entity-level Controls
    • Appendix 3C – Example Documentation of the Understanding and Evaluation of IT General Controls
    • Appendix 3D – Example Documentation of Understanding and Evaluation of Activity Level Controls
    • Appendix 3E – Example Documentation of the Assessment of Risks of Material Misstatement
  • Chapter 4 - Documenting Substantive Procedures and Audit Results
    • Learning Objectives
    • Introduction
    • Overall Response to Risk at the Financial Statement Level
    • Evidential Matter
      • Nature of Evidential Matter
      • Reliability
      • Sufficiency
    • Documentation
    • Types of Substantive Procedures
    • Tests of Details
      • Inspection of Records or Documents
      • Inspection of Tangible Assets
      • Observation
      • Inquiry
      • Confirmation
      • Recalculation
      • Reperformance
      • Other Procedures
    • Documentation of Tests of Details
    • Analytical Procedures
      • Documentation
    • Significant Findings
    • Misstatements Identified
    • Management Representation Letters
    • Attorney Letters
    • Analytical Procedures in the Final Review
    • Going Concern Issues
    • Required Communications
    • Consultations
    • Summary
  • Chapter 5 - Workpaper Administration
    • Introduction
    • Workpaper Control
    • Completing the Workpaper File
    • Retention of Workpapers
    • Outside Access to Workpapers
    • Changes in CPA Firm Ownership
    • Summary
  • Chapter 6 - 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
  • Chapter 7 - 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 7A – Partner Review Checklist
  • Chapter 8 - 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 8A – Practice Alert 2007-1
  • Chapter 9 - 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 10 - Latest Developments
  • Appendix A - AU Section 339, Audit Documentation
  • Appendix B - Specific Audit Documentation Requirements in Addition to AU Section 339
  • Appendix C - Statement on Auditing Standards, Audit Documentation (Redrafted)

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Excerpts

Chapter 0 - Overview

Introduction

The focus of this course is to provide practical guidance for developing and enhancing the auditor's ability to exercise professional judgment when creating appropriate, sufficient, and competent audit documentation for audit engagements. The course will then describe how audit partners and managers review working papers.

Although the form, content, and type of audit documentation is a matter of professional judgment, changes in quality control standards (including Peer Review Program requirements) increased oversight activities by regulators, and the ever-present litigation environment all combine to make effective and efficient workpaper documentation, including the rationale for modifying the generic forms, checklists, and practice aids provided by various vendors, more important than ever.

The emphasis in this course will be identifying ways to comply with the audit documentation requirements in professional standards. Specifically, attention will focus on how to document the processes related to

• Identifying and reaching appropriate conclusions as to engagement risk, business risk, and client risk for each engagement, and then designing appropriate responses to such risks.

• Planning the nature, extent, and timing of procedures to be performed.

• Analyzing the results of the work performed and forming appropriate conclusions.

• Supervising all aspects of the engagement to insure compliance with professional standards, including quality control.

Once the working papers are adequately documented, they are reviewed. Working papers are reviewed by audit partners and managers 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's chapters and their content are as follows:

• Chapter 1, "Definition of Workpapers," discusses the authoritative standards for workpapers.

• Chapter 2, "Documentation of Planning and Supervision," discusses how the auditor documents his or her compliance with the first standard of fieldwork.

• Chapter 3, "Documenting the Required Understanding of the Entity, Tests of Control and Assessment of Risk," discusses obtaining the understanding necessary to assess risk, flowcharting, use of narratives and checklists, and documenting tests of controls and findings.

• Chapter 4, "Documenting Substantive Procedures and Audit Results," discusses the types of evidence and the auditor's required documentation for the different types of substantive procedures.

• Chapter 5, "Workpaper Administration," discusses issues of workpaper access and retention.

• Chapter 6, "Working Paper Basics," discusses the GAAS documentation requirements and the concept of working paper review.

• Chapter 7, "Nuts and Bolts of Reviewing," discusses how the partner review is conducted.

• Chapter 8, "Areas of Concern," covers specific areas that the partner focuses on and issues that arise in them.

• Chapter 9, "Reducing the Risks When Working Papers are Summoned," discusses issues attending review by outsiders such as regulators.

Chapter 1 - Definition of Workpapers

Learning Objectives

After completing this chapter you should be able to

• Describe why workpapers are necessary.

• Identify the standards that impose specific workpaper requirements.

• Define the workpaper requirements in AU Section 339 (previously indexed as SAS No. 103) and other guidance.

Introduction

AU Section 339 (previously indexed as SAS No. 103), Audit Documentation, requires auditors on every audit engagement to prepare and maintain audit documentation, which is often referred to as working papers or workpapers. In this chapter, we examine that requirement and learn about specific workpapers that are required by other professional standards. We also look at the impact of practice-monitoring programs and the litigation climate on documenting the work performed.

Why Workpapers Are Important

It is often the case that in lawsuits accountants are criticized or penalized not because their work was deficient but because their workpapers did not reflect the work done. That is, they did the work or considered the appropriate matters but could not prove it because the workpapers provided inadequate documentation. These accountants paid the price even though they applied the procedures that were appropriate in the circumstances.

If the workpapers do not reflect what was done, a court may have no basis to conclude that the appropriate procedures were performed. Failure to adequately document what was done may be assessed essentially as failure to perform appropriate procedures. Workpaper documentation is very important.

Workpapers are crucial after the audit because they

• Provide information about whether the audit was conducted as planned and whether the financial statements are presented in conformity with GAAP.

• Demonstrate evidence of conformity with auditing standards for supervisory review, practice monitoring programs (e.g., peer reviews), and for litigation, if necessary.

• Leave a roadmap for future audits.

Basic Workpaper Requirements

Generally accepted auditing standards impose many specific documentation requirements based on the notion that documentation is an essential element of audit quality. The trend in standards has been towards more specific documentation requirements as the Auditing Standards Board came to believe that the need to document an item will drive practice to better incorporate required procedures and considerations into audits.

Although auditing standards establish specific workpaper requirements, decisions about the quantity, type, and content of workpapers is generally a matter of auditor judgment. That is, standards require that certain things be documented, but how you document them is up to you, based on your preferences and your firm's policies.

In this section, we examine the fundamental requirements imposed by AU Section 339 (previously indexed as SAS No. 103). Then, we review specific guidelines required by additional guidance. To reinforce the importance of these statements, we have reproduced the relevant portions. To do your job well as an auditor, it is essential that you understand the details in your professional standards and the reasons for them. Begin by reading AU Section 339 reproduced at Appendix A, taking special note of the functions and nature of workpapers, their contents, and ownership.

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Videocourse Details

NASBA Field of Study: Auditing
Level: Intermediate
Recommended CPE Credit: 9
Partner’s Audit Engagement Documentation and Review
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