Completing the Audit - Chapter 11

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Attorney Letter

A communication sent from the client to its attorney(s) that details a list of pending litigations, claims, and assessments involving the client. The attorney(s) is (are) requested to comment on these matters directly to the client's auditors.

Audit Completion Date

The date on which auditors have gathered sufficient appropriate evidence on which to base their opinions on the financial statements and internal control over financial reporting; this evidence includes the review of audit documentation, preparation of the financial statements and related disclosures, and management's assertion that they assume responsibility for the financial statements and disclosures.

Audit Report Release Date

The date on which the auditors allow the client to use auditors' reports in conjunction which the financial statements; this is also the date on which the client's financial statements are issued.

Contingency

An existing condition, situation, or set of circumstances involving uncertainty as to possible gain (gain contingency) or loss (loss contingency) to an enterprise that will ultimately be resolved when one or more future events occur or fail to occur.

Dual Date

To provide two dates by which auditors limit the responsibility beyond the audit completion date to a specific subsequent event identified in the report.

Engagement Quality Review

A review of audit documentation by an additional person (normally a partner or equivalent with the firm) who has not been involved with the audit; its purpose is to ensure that the quality of the audit work and reporting is consistent with the quality standards of the public accounting firm.

Individuals Charged with Governance

Person(s) responsible for overseeing the client's financial reporting process, including the internal control over financial reporting. While this phrase can include the client's management and full BoD, for public entities it would typically be the audit committee of the BoD.

Iron Curtain Method

When evaluating the effects of uncorrected misstatements, this method considers the aggregate effects of current and prior misstatements in the entity's balance sheet.

Management Letter

A summary of recommendations made by auditors resulting from the audit engagement that allow the clients to improve the effectiveness and efficiency of its operations.

Management Representations

Written assertions provided by management to auditors on matters such as the fairness of the organization's financial statements, availability of all financial records and related data, internal control over financial reporting, and other important matters.

Omitted Procedure

Situation in which a necessary audit procedure in inadvertently not performed by auditors prior to the audit report release date

Pro Forma Financial Data

The presentation of financial statements "as if" some important subsequent event had occurred at the balance sheet date

Rollover Method

When evaluating the effects of uncorrected misstatements, this method only considers the current period income effect(s) of the potential adjustment.

Subsequent Discovery of Facts

A situation in which auditors become aware of facts (unknown prior to the report release date) after the audit report release date.

Subsequent Event

An event occurring between the balance sheet date and audit report release date

Subsequent period

Time period between the balance sheet date and the audit report release date

Type I Subsequent Event

A subsequent event that provides new information about a conniption that existed (and could have been disclosed in the financial statements) at the balance sheet date

Type II Subsequent Event

An event that did not exist (and was not disclosed in the financial statements) at the balance sheet date but occurred prior to the audit report release date.

Unasserted Claim

A representation that no formal lawsuit or claim has been filed or threatened on behalf of others but the circumstances such as a catastrophe, accident, or other physical occurrence could result in a suit or claim being filed in the future.

Uncorrected Misstatement

A misstatement that the auditor has identified and accumulated during the audit that has not been corrected.

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