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The Essential Toolkit for Audits of Smaller Entities

The Essential Toolkit for Audits of Smaller Entities includes all of the following:

  1. Key Differences in Scope of Various Attest Services – Executive Summary: This executive summary clarifies the most significant differences in responsibilities related to the various scopes of attest services that external accountants provide. This tool can be shared with public accountants, client management and those charged with governance to avoid misunderstandings in the level of assurance provided in a compilation vs. review vs. audit.
  2. Potential Benefits and Pitfalls of Stepping Down Audit Engagements – Explanatory Letter to Clients: This illustrative letter to audit clients outlines the pros and cons of “stepping down” in scope of services from an audit to a review or compilation.
  3. Supporting Independence Conclusions When Providing Both Attest and Non-attest Services – Illustrative Memo to Workpaper Files: This illustrative memorandum may be placed in attest engagement files to help justifies the rationale and basis for independence conclusions when both attest and non-attest services (like bookkeeping or drafting financial statements) are provided for audit clients, as well as evaluation of deficiencies in internal controls that may need to be communicated to the client.
  4. Attest and Non-attest Services – Illustrative Engagement Letter: This illustrative engagement letter may be used by public accountants who provide clients with both attest and non-attest services.
  5. Risk Assessment Decision Tree – Step-by-Step Guide for Properly Performing Required Risk Assessment Procedures: This tool guides auditors through properly performing and documenting the required risk assessment procedures, including how the various risk assessment activities build upon each other to support ultimate conclusions regarding risks of material misstatement.
  6. Engagement Team Discussion – Sample Agenda of Key Discussion Points: This illustrative agenda and provides factors to consider during required engagement team discussions, including real-life examples of potential identified risks and the potential impact on the detailed audit plan.
  7. Designing an “Umbrella” of Internal Controls over Financial Reporting – Graphic Illustration of Key Aspects of Internal Controls in a Smaller Entity: This one-page graphic illustrates how the key components of internal controls “fit together” in a “top-down” approach to designing “key controls” over reliable financial reporting to avoid material weaknesses in design of internal control. This summary can be used as a tool to clarify with client management and those charged with governance the most important aspects of designing a sound system of internal controls within smaller nonissuers.
  8. Evaluating the Design and Implementation of Internal Controls – Illustrative Documentation of Key Controls in a Smaller Entity: This tool illustrates real-life, practical examples of documenting the identification and evaluation of the design and implementation of key internal controls for typical significant classes of transactions within smaller nonissuers.
  9. The Effect of Risk Assessments on the Detailed Audit Plan: Examples of the Impact of Risk Conclusions on the Design of Further Audit Procedures: These illustrative examples describe specific possible alterations to a typical detailed audit plan for a smaller non-issuer based on various risk of material misstatement assessments.
  10. Audit Quality Control Checklist: Documenting Further Audit Procedures and Engagement Wrap-up: This checklist contains typical quality control deficiencies related to documenting the nature, timing and extent of further audit procedures and conclusions. It also addresses typical engagement wrap-up issues and concerns.