Integrated audit practice case edition 7

assignment 1

Memo

To:      Charles Ward, Audit Partner

From: XXX, Audit Staff (Insert your name)

Date: X/XX/XX (Use the date given in the assignment)

Re:      Oceanview Marine Company – XXX (Add the particular audit area that is being summarized)

Purpose: Briefly describe what stage of the audit you’re working on. This section does not need to be longer than 1-2 sentences because you don’t want to have overlap with other sections. You just need to indicate the scope of the memo (i.e. the audit stage you’re working on).

The purpose of this memo is to summarize _____.

Procedures Performed: Include procedures performed during this audit area by all members of the audit team (include Bill Cullen’s work too). Make sure to include workpaper references in parentheses. Note that you do not need to write in full sentences here. Also, it’s okay to repeat verbs, but try to have some variation as well. An example related to Accounts Payable testing is shown below for guidance, but delete this example wording and instead add the steps that pertain to the case you’re working on.

1. Completed the Audit Program for A/P (w/p 30-3 through 30-5).
2. Completed the Tests of Balances Matrix for A/P (w/p 30-6).
3. Obtained the A/P Listing (w/p 30-7 through 30-10).
4. Obtained the Check Register for January 2019 (w/p 30-11 through 30-18).
5. Prepared a Summary of Subsequent Disbursements for A/P (w/p 30-19).
6. Performed a determination of the number of items to be tested for A/P (w/p 30-20).
7. Selected items for testing in the Search for Unrecorded Liabilities (w/p 30-21).
8. Evaluated the results of the Search for Unrecorded Liabilities (w/p 30-22 and 30-23).
9. Completed the Adjusting Journal Entries for A/P (w/p 30-2).
10. Completed the A/P Leadsheet (w/p 30-1).

Findings: Detail the key results from the audit stage here. Describe any issues, errors, exceptions, call-outs, etc. identified during the performance of the audit procedures described above. Include specific dollar amounts, percentages, etc. as applicable. Also include workpaper references. Make sure to consider and include any potential indicators of fraud risk, if applicable. An outline of an example finding is shown below, but note you do not need to copy this exact wording every time. There might not even be a proposed adjusting entry depending on the case.

Note the Findings section will likely be the longest section of the memo. It should be well developed and it should summarize all key issues so that the partner does not have to spend time flipping through the entire set of workpapers to get the key takeaways from this audit stage.

Also consider that some cases might not contain obvious issues or errors. If you find that to be the situation and you are struggling to add content to this section, then use this section to present your audit methodology, assumptions used, and/or audit risk model considerations. Depending on the case, that could mean writing about how you deemed certain accounts/assertions high risk, how materiality was calculated, how a sample was selected, etc.). For later cases, particularly 6 through 9, you could go into an analysis of what you investigated as a potential finding and explain why you ultimately did not determine it to be an error that needed immediate correction.

When completing our review of _____ at w/p X-X, we found that _____. The proposed adjusting entry is shown on w/p X-X.

Management Suggestions: Include suggestions for management related to the issues you’ve identified in the case. You’ll have to think critically to come up with these on your own. Although you’re not talking directly to management in this memo (you’re addressing the partner), management will receive these suggestions at the end of the audit in what’s called a “management letter.” An outline of an example management suggestion is shown below, but note you do not need to copy this exact wording every time. Make sure you’re providing suggestions here that would help the client – not recommendations directed at the audit team. ***You do not need to have a Management Suggestions paragraph for Case 3 (only) because the conclusions reached on materiality and inherent risk evaluation are not shared with management.***

We recommend management _____ in order to prevent _____ from occurring again.

Budget: Here you are to comment on whether the audit team was in line with the budget of audit hours. Pull the budgeted hours for the audit area being worked on from workpapers 6-3 & 6-4 and make up a number for the actual hours incurred. Also make up a reason(s) for the variance (or lack of variance) between budgeted hours and actual hours. Feel free to get creative and tell a [short] story here. The partner needs information on why there was a variance before making billing decisions.

Budgeted hours for completing this audit area was X hours (w/p 6-3 or w/p 6-4). The audit team actually incurred X hours. The variance of X hours is attributable to _____.

Overall Conclusion: Summarize the most critical takeaways from this stage of the audit. You may also include recommendations on how the audit team may need to adjust the current audit plan going forward or change the testing approach for future audits of this client. Feel free to adjust the wording below as needed.

The audit team completed the required audit procedures for _____. Our findings indicated _____. Our overall conclusion is _____.

Tips for writing effective memorandums:

• Make sure that the memo is written in clear, concise, and grammatically correct language.
• Do not use long and overly wordy sentences.
• Avoid lengthy paragraphs.
• Do not use a greeting or a salutation.
• Feel free to use bulleted lists and headings to organize content.
• Conclude the memo with any closing statements that may inspire the recipient to act.

Answer rating: 100% (QA)

1 Factors Favoring Acceptance 1 Responses to inquiries of predecessor auditor were complimentary abo... View the full answer