Completing the Audit: Presentation and Disclosures | Auditing and Attestation | CPA Exam
In this session, I discuss complete the audit. ✔️Accounting students and CPA Exam candidates, check my website for additional resources: https://farhatlectures.com/ 📧Connect with me on social media: https://linktr.ee/farhatlectures #cpaexam #accountingstudent #auditcourse Auditors evaluate evidence they obtained during the first three phases of the audit to determine whether they should perform additional procedures for presentation and disclosure-related objectives. Auditors approach obtaining evidence for presentation and disclosure objectives consistent with how they approach obtaining evidence for transaction-related and balance-related objectives. Perform procedures to obtain an understanding of controls related to presentation and disclosure objectives as a part of risk assessment procedures. Conduct tests of controls related to disclosures when the initial assessment of control risk is below maximum. Perform substantive procedures to obtain assurance that all audit objectives are achieved for information and amounts presented and disclosed in the financial statements. Often, procedures for presentation and disclosure-related objectives are integrated with the auditor’s tests for transaction-related and balance-related objectives. For example, as part of the audit of accounts receivable, auditors evaluate the need to separate notes receivable and amounts due from affiliates and trade accounts due from customers. They must also determine that current and noncurrent receivables are classified separately and any factoring or discounting of notes receivable is disclosed. While much of the information presented and disclosed in the financial statements is audited as part of the auditor’s testing in earlier phases of the audit, in phase IV auditors evaluate evidence obtained during the first three phases of the audit to assess whether additional evidence is needed for the presentation and disclosure objectives. In phase IV, auditors also evaluate whether the overall presentation of the financial statements and related footnotes complies with accounting standards. This includes an evaluation of whether individual financial statements reflect the appropriate classification and description of accounts consistent with accounting requirements and that the information is presented in proper form and with the proper terminology required by accounting standards. One of the auditor’s primary concerns related to presentation and disclosure-related objectives is determining whether management has disclosed all required information (completeness objective for presentation and disclosure). To assess risks that the completeness objective for presentation and disclosure is not satisfied, auditors consider information obtained during the first three phases of audit testing to determine if they are aware of facts and circumstances that should be disclosed. Due to the unique nature of disclosures related to contingent liabilities and subsequent events, auditors often assess the risk as high that all required information may not be completely disclosed in the footnotes. Audit tests performed in earlier audit phases often do not provide sufficient appropriate evidence about contingent liabilities and subsequent events. Therefore, auditors design and perform procedures in every audit to review for contingent liabilities and subsequent events as part of their phase IV testing. These procedures are discussed next.
In this session, I discuss complete the audit. ✔️Accounting students and CPA Exam candidates, check my website for additional resources: https://farhatlectures.com/ 📧Connect with me on social media: https://linktr.ee/farhatlectures #cpaexam #accountingstudent #auditcourse Auditors evaluate evidence they obtained during the first three phases of the audit to determine whether they should perform additional procedures for presentation and disclosure-related objectives. Auditors approach obtaining evidence for presentation and disclosure objectives consistent with how they approach obtaining evidence for transaction-related and balance-related objectives. Perform procedures to obtain an understanding of controls related to presentation and disclosure objectives as a part of risk assessment procedures. Conduct tests of controls related to disclosures when the initial assessment of control risk is below maximum. Perform substantive procedures to obtain assurance that all audit objectives are achieved for information and amounts presented and disclosed in the financial statements. Often, procedures for presentation and disclosure-related objectives are integrated with the auditor’s tests for transaction-related and balance-related objectives. For example, as part of the audit of accounts receivable, auditors evaluate the need to separate notes receivable and amounts due from affiliates and trade accounts due from customers. They must also determine that current and noncurrent receivables are classified separately and any factoring or discounting of notes receivable is disclosed. While much of the information presented and disclosed in the financial statements is audited as part of the auditor’s testing in earlier phases of the audit, in phase IV auditors evaluate evidence obtained during the first three phases of the audit to assess whether additional evidence is needed for the presentation and disclosure objectives. In phase IV, auditors also evaluate whether the overall presentation of the financial statements and related footnotes complies with accounting standards. This includes an evaluation of whether individual financial statements reflect the appropriate classification and description of accounts consistent with accounting requirements and that the information is presented in proper form and with the proper terminology required by accounting standards. One of the auditor’s primary concerns related to presentation and disclosure-related objectives is determining whether management has disclosed all required information (completeness objective for presentation and disclosure). To assess risks that the completeness objective for presentation and disclosure is not satisfied, auditors consider information obtained during the first three phases of audit testing to determine if they are aware of facts and circumstances that should be disclosed. Due to the unique nature of disclosures related to contingent liabilities and subsequent events, auditors often assess the risk as high that all required information may not be completely disclosed in the footnotes. Audit tests performed in earlier audit phases often do not provide sufficient appropriate evidence about contingent liabilities and subsequent events. Therefore, auditors design and perform procedures in every audit to review for contingent liabilities and subsequent events as part of their phase IV testing. These procedures are discussed next.