Chapter 11 Completing the Audit. Chapter 2 Professional Standards.

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Presentation transcript:

Chapter 11 Completing the Audit

Chapter 2 Professional Standards

PCAOB RELEASE NO Chapter 11 – completing the audit On this audit, the Firm used the issuer's internal auditors to assist in auditing cash at an interim date. The Firm, however, failed to perform, or failed to have the internal auditors perform, audit procedures on the activity in the cash accounts between the interim date and year end.

PCAOB RELEASE NO Chapter 11 – completing the audit the Firm audited certain accounts receivable balances at an interim date, but did not audit the issuer's analysis of the roll-forward of these balances to the year end.

PCAOB RELEASE NO Chapter 11 – completing the audit the Firm tested the operating effectiveness of the controls over certain processes as of interim testing dates, but the work papers do not evidence any procedures to roll forward these tests to the balance sheet date, and the Firm therefore lacked a reasonable basis for extending its conclusions to the balance sheet date.

PCAOB RELEASE NO Chapter 11 – completing the audit ….. the Firm used analytical procedures as alternative procedures. The Firm, however, did not perform certain required steps, such as developing expectations and defining a significant difference threshold, when performing the analytical procedures.

PCAOB RELEASE NO Chapter 11 – completing the audit …, the Firm failed to obtain sufficient evidence, or failed to include sufficient evidence in its work papers, that the unallocated component of the allowance represented a supportable estimate of probable losses inherent in the issuer's loan portfolio. The Firm's documented testing specific to this aspect of the banks' ALL was limited to certain high level analytical procedures that were not substantive tests ….

PCAOB RELEASE NO Chapter 11 – completing the audit …the Firm was aware of indications of deficiencies in the operating effectiveness of the issuer's controls over the allowance for loan losses. Particularly in light of the highly judgmental nature of the area, the Firm's knowledge of such indications rendered its assessment of the control risk with respect to the allowance for loan losses as "minimum" inappropriate. (Issuers D, E, F, and G)

PCAOB RELEASE NO Chapter 11 – completing the audit.. the Firm apparently did not reconsider its assessment of risk and materiality or revisit its audit scope in light of the known and likely errors... and did not reconsider its fraud risk assessment related to an issuer that is unwilling to correct known errors.

PCAOB RELEASE NO Chapter 11 – completing the audit The work papers did not document the Firm's threshold for posting errors to the Score Sheet of Unadjusted Audit Difference, and several uncorrected errors noted in the work papers were not posted to the Score Sheet of Unadjusted Audit Difference, were not evaluated for materiality in the aggregate,

PCAOB RELEASE NO Chapter 11 – completing the audit During the issuer's first quarter of fiscal 2005, it reached a settlement with a customer that it included in net sales and did not disclose. As a result of including the entire settlement amount in net sales, the issuer's net sales increased from the first fiscal quarter of 2004 to the first fiscal quarter of If the entire settlement had been omitted from net sales, net sales would have decreased. The Firm failed to consider the appropriateness of including the settlement in net sales and not disclosing that fact.11/