Scope, Timing, and Significant Findings of an Audit

Lesson: Scope, Timing, and Significant Findings of an Audit

In this lesson, Nick Palazzolo discusses the importance of communication between the auditor and those charged with governance, specifically focusing on scope, timing, and significant findings of an audit. The lesson covers the requirement of the auditor to communicate an overview of the planned scope and timing of the audit and inform the board of directors about any significant risks discovered during the process. Furthermore, the lesson elaborates on the auditor's responsibilities to communicate about qualitative aspects of the entity's accounting practices, sensitive accounting estimates, significant unusual transactions, difficulties encountered during the audit, disagreements with management, and other findings or issues that are considered significant and relevant for those charged with governance. This crucial communication ensures transparency and proper understanding among all parties involved in the financial reporting process.

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Instructor: Nick Palazzolo

Nick Palazzolo is head instructor of ExamPrep.ai CPA Review. Nick's teaching style is engaging & upbeat, combining practical Big 4 tax & assurance expertise with years of 1-on-1 coaching. His lessons are concise and emphasize what you need to know to pass. Whether you're a recent grad or working full-time, we’re confident you can conquer your CPA exams with Nick’s review.

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Now, specifically regarding the scope and the timing of the audit, right, we talked about the scope. We're going to do this during the audit. We're not going to do that. An audit, I mean, is the most in-depth of any engagement, so you're going to probably do the most procedures. If you're doing a review or, you know, another type of engagement, you're going to communicate that, hey, we are not going to do the things that we would do in an audit. Now, timing, we should communicate with those charged with governance an overview of the plan scope and timing of the audit. You know, we're going to have it done within a month. We're going to have weekly meetings. We're going to have deadlines. We're going to report back to you. This is also going to include communicating significant risks identified by the auditor. You discover management fraud, you should probably, not probably, I mean, this is the rule, you're going to tell the individuals on the board of directors right away, and you're going to let them know. Maybe you'll investigate a little bit further first to make sure it doesn't go deeper than just people in management, but that is going to be something that we will see. All right, now, in addition to discussing the scope and the timing of an audit, you're also going to communicate these other points, which are going to be pretty important to let those charged with governance know. We want to communicate the auditor's view about qualitative aspects of the entity's significant accounting policies, including accounting policies, estimates, and disclosures. These are all items that could have a level of subjectivity, and that's going to be important because you may have clashes with management about them. When applicable,

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