Completing an Audit Memo

Week 4 Assignment: Completing an Audit Memo

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Instructions

Background

For this assignment, you will complete a memo to help you continue building your auditing skill set as you apply the knowledge gained up to this point.

Instructions

To complete this assignment, you have two options:

Choose one of the above topics. For the memo, you will select a standard from the appropriate list and explain how it will affect your client’s audit. Here is how you do this:

1. Select a public company that you will be auditing. This should be a public company that will have financial statements available. Select a company you are interested in learning about for the semester.

2. Research your company sufficiently to understand its business model, products, customers, vendors and management/directors. Read the most recent financial statements to gain an understanding of the types of assets and liabilities on the balance sheet. Use the statements to be familiar with the sources of revenues and typical operating expenses. The 10-K will have this information. Use EDGAR to find the SEC filings at

sec.gov/edgar (Filings & Forms)

and/or the company’s own web site under investor information.

3. Write a memo for one of the topics listed based on your selection (memo 1 or memo 2).

4. The memo should be addressed to the Audit Committee Chair, the members of the audit committee, and the CFO. You will need to use their names, so research who they are. You may use the DEF 14 A (proxy statement) from EDGAR or the company’s website to find this information. The memo is from you as the Audit Partner.

5. For the memo, choose a professional standard topic to research from the list given for each assignment above. For example: If, for memo #1, you researched the topic of Audit Evidence, this means you will research AU 500 and AS 15. The topic is your choice; the only requirement is that it come from the list.

6. Research the appropriate standards at

www.aicpa.org

and

www.pcaob.org

. Read them and refer to the chapter material and any other resource to help you research and understand the standard’s requirements.

7. Write up the memo as a way of explaining to your client how the standard will be followed in the upcoming audit. For example, if you are auditing Walmart and you have selected the topic of External Confirmations (Standards AU 505 and PCAOB AU 330), you might write a memo that references the many accounts that must be confirmed because each store has one. Explain the document you will use for this and how the mailing will comply with the standard. If you chose the same standard for a company like Caterpillar, you would probably do less confirmation and can discuss similar details but referencing fewer accounts.

Memo #1: Acquistion and Expenditure Cycle
Topic
AU/ISA
Section
Consideration of Internal Control in an Integrated Audit
Audit documentation
Auditors’ Responses to Risks of Material Misstatement
Audit Planning
Consideration of Internal Control in an Integrated Audit
Materiality
Audit Considerations Relating to an Entity Using a Service Organization
Audit Evidence
External Confirmations
Analytical Procedures
Accounting estimates
Written Representations
PCAOB
Reference
AS 5
230
240
300
320
402
500
505
520
540
580
AS 3
AU 316
AS 10
AS 5
AS 11
AS 5
AS 15
AU 330
AU 329
AU 342
AU 342
Memo #2: Completing the Audit
Topic
AU/ISA
Section
PCAOB
Reference
Terms of Engagement
210
AU 310, AS 16
Quality Control for an Audit Engagement
Communicating with those charged in governance
Communicating Internal Control Related Matters Identified in an Audit
Evaluation of misstatements
Inquiry of a Client’s Lawyer
Analytical Procedures
Accounting estimates
Subsequent events and subsequently discovered facts
Going concern
Written representations
Omitted procedures
220
260
265
450
501
520
540
560
570
580
585
AS 7
AU 380, AS 16
AU 325, AS16
AS 14
AU 337
AU 329
AU 342
AU 560, 561
AU 341
AS 333, AS16
AU 390