Explain the primary purpose of the Management letter.Discuss the various components of internal control in the COSO internal control framework.Explain the concept ‘review of subsequent events’ and their significance in the audit of a client.Explain the concept ‘Contingent liabilities’ and their significance in the audit of a client.

A management letter serves as a means of conveying to the management of the audited organization any…

Answered: Explain the primary purpose of the…

Auditing: A Risk Based-Approach to Conducting a Quality Audit

10th Edition

ISBN:9781305080577

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter7: Planning The Audit: Identifying, And Responding To The Risk Of Material Misstatement

Section: Chapter Questions

Problem 46RSCQ

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Explain the primary purpose of the Management letter.
Discuss the various components of internal control in the COSO internal control framework.
Explain the concept ‘review of subsequent events’ and their significance in the audit of a client.
Explain the concept ‘Contingent liabilities’ and their significance in the audit of a client.

Definition Definition Costs that a business is responsible for paying, should a particular event potentially occur in the future. Also called a potential liability, a contingent liability is generally recorded only when the amount of liability can be reasonably estimated and the contingency is likely to occur shortly. The Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Principles (IFRS) make it mandatory for the companies to record any contingent liability taking the principles of full disclosure, materiality, and prudence into consideration.

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