| Course | ACC 640 Auditing |
|---|---|
| Module | Module 9 |
| Paper type | graduate milestone on completing the audit |
| Length | About 1,000 words, 6 pages |
| Format | APA 7 student paper |
| School | Southern New Hampshire University |
| Program | MS Accounting |
| Updated | October 2026 |
Free sample paper for ACC 640 Module 9
Completion Memo: Fiscal 2025 Integrated Audit
[Student Name]
Southern New Hampshire University
ACC 640: Auditing
Milestone Three
[Instructor Name]
[Date]
The organization, setting and figures below are a composite written as a model document. No real employer, client, colleague or patient is described.
Completion Memo: Fiscal 2025 Integrated Audit
Introduction
Fieldwork for the fiscal 2025 integrated audit is complete. This memo documents the evaluation of misstatements, subsequent events, going concern, internal control and the remaining steps required before the engagement partner signs the report, following AS 2810 on evaluating audit results (Public Company Accounting Oversight Board, 2016).
Summary of Misstatements
All misstatements above the $55,000 posting threshold, and projected misstatements from samples, were accumulated and communicated to management.
Summary of misstatements, effect on pretax income
| Item | Type | Amount | Status |
|---|---|---|---|
| Aged inventory below net realizable value | Judgmental | $(900,000) | Corrected |
| Unposted wholesale return credits | Factual | (610,000) | Corrected |
| Unrecorded freight on December receipts | Factual | (180,000) | Corrected |
| Returns reserve, difference from our expectation | Judgmental | (500,000) | Uncorrected |
| Wholesale pricing error, projected from sample | Projected | (11,000) | Uncorrected |
| Online cutoff error | Factual | (41,000) | Below threshold, not accumulated |
| Total uncorrected | $(511,000) |
The returns reserve item is the remainder after management increased its reserve by $900,000 following our independent expectation, which suggested $1.4 million. The remaining $500,000 is within the range of reasonable estimates but at its low end, and we recorded it as a judgmental misstatement measured to the closest point of that range.
Evaluating the Uncorrected Misstatements
Quantitatively, $511,000 is 46 percent of overall materiality and 2.8 percent of pretax income. We also considered the iron curtain effect of last year's opening reserve shortfall, $350,000, which was recorded as an out-of-period adjustment within 2025 and does not change the evaluation.
Qualitatively, AS 2810 and SEC staff guidance require asking whether the items could still matter. The uncorrected items do not affect segment results, compensation targets or covenant calculations, and none involve fraud. The most important test was earnings expectations: after tax, the items reduce earnings per share by about $0.01, which would leave the company still above the analyst consensus of $0.43. They do not turn a loss into income or reverse a trend. We concluded the uncorrected misstatements are not material, individually or together. Keune and Johnstone (2012) studied how managers, auditors and audit committees resolve detected misstatements, and their work is a reminder that the decision to leave items uncorrected should be documented and shared with the audit committee, as we will do.
Subsequent Events
On February 11, 2026, a regional sporting goods chain that owed the company $3.2 million at year end filed for Chapter 11 protection. Our review of its credit file showed that the chain had been paying late since October and had violated its own lender covenants in November. Because the bankruptcy confirms a deterioration that existed at December 31, it is a recognized subsequent event under AS 2801. Management increased the allowance for credit losses by $1.9 million, based on the expected recovery in similar retail bankruptcies, and we tested that estimate against the chain's first-day filings. No other events through the planned report date of February 27 require adjustment or disclosure.
Going Concern
The company had positive operating cash flow, $28 million of unused revolver capacity and no debt maturing within a year, and it complies with its covenants after the adjustments above. We found no conditions raising substantial doubt about its ability to continue as a going concern for a reasonable period, and management's own evaluation reached the same conclusion.
Internal Control Conclusion
The predecessor's IT access weakness was remediated in July and operated effectively through year end, as documented in the internal control assignment. The July lapse in reviewing payment reconciliations is a deficiency. The unposted wholesale return credits revealed that no control ensures every approved wholesale return produces a credit memo. Wholesale returns total about $6 million a year, the unposted credits found were $610,000 and customers' own reconciliations of statements give some detection; we judge there is a reasonable possibility of a misstatement that is less than material but merits the audit committee's attention, a significant deficiency rather than a material weakness. The opinion on internal control will be unqualified.
Overall Analytical Review
AS 2810 requires analytical procedures near the end of the audit to assess whether the statements as adjusted are consistent with our understanding of the business. After the adjustments, gross margin fell from 47.1 to 44.6 percent, consistent with the heavier discounting and higher returns that management described all year. Days sales outstanding for wholesale rose from 52 to 58, which the retailer bankruptcy and slower-paying independent outfitters explain. Inventory turnover fell, consistent with the aged-style buildup we tested. Selling expense rose with online volume. One relationship needed explanation: freight-in per unit rose 18 percent, more than the tariff and carrier changes alone suggest, and the team traced the rest to expedited air shipments in October that management confirmed and we agreed to invoices. Nothing in the final review suggested an unidentified misstatement.
Management Letter and Deficiency Communication
Beyond the audit committee communications, the firm will issue a letter to management listing every control deficiency found, with recommendations. It will cover the reconciliation review lapse, the wholesale return credit gap with a recommendation to generate credit memos automatically from warehouse return receipts, and three smaller observations about user access reviews. The significant deficiency will also be reported in writing to the audit committee before the report date, as AS 1305 requires. We will ask management to respond with remediation dates so that next year's plan can test the fixes.
Remaining Steps
Management's representation letter, dated February 27, must confirm responsibility for the statements and internal control, the completeness of information and minutes, the absence of unrecorded transactions, and that the uncorrected misstatements are immaterial, with the summary attached. Under AS 1301, we will communicate to the audit committee the significant risks and our responses, the critical accounting estimates, the uncorrected misstatements, the significant deficiency and any difficulties encountered. The engagement quality reviewer must complete review of the significant judgments, materiality, the returns reserve, inventory valuation and the internal control conclusion, before the firm grants permission to release the report (Arens et al., 2020). The draft report will include two critical audit matters, the returns reserve and inventory valuation, which the final project presents.
References
Arens, A. A., Elder, R. J., Beasley, M. S., & Hogan, C. E. (2020). Auditing and assurance services (17th ed.). Pearson.
Keune, M. B., & Johnstone, K. M. (2012). Materiality judgments and the resolution of detected misstatements: The role of managers, auditors, and audit committees. The Accounting Review, 87(5), 1641-1677. https://doi.org/10.2308/accr-50185
Public Company Accounting Oversight Board. (2016). Evaluating audit results (AS 2810). Author.
What the ACC 640 Module 9 instructions ask for
The third ACC 640 milestone usually asks you to complete the audit of the case company: accumulate and evaluate misstatements, consider subsequent events and going concern, obtain written representations, communicate with the audit committee and decide on the form of the auditor's report. Plan to prepare a summary of misstatements, evaluate uncorrected items quantitatively and qualitatively under AS 2810, classify any subsequent events as recognized or nonrecognized, and state the internal control conclusion for an integrated audit. Many versions also ask about the engagement quality review and the report date. Explain each judgment, especially qualitative materiality, rather than only comparing totals with a threshold, and keep the summary of misstatements as the anchor of the memo.
How this ACC 640 Module 9 milestone three example is built
The milestone summarizes six misstatements. Management corrected an inventory valuation shortfall of $900,000, unposted wholesale return credits of $610,000 and a $180,000 freight accrual. A $500,000 difference in the returns reserve and an $11,000 projected pricing error remain uncorrected, $511,000 in total, against $1.1 million materiality. The milestone checks qualitative factors, including whether the items change a trend or turn an earnings beat into a miss, and concludes they are not material. A retailer's February bankruptcy is a recognized subsequent event requiring a $1.9 million allowance. Internal control is effective, with a significant deficiency over wholesale return credits. The memo closes with the representation letter, audit committee communications and quality review.
Where the ACC 640 Module 9 rubric puts the points
Rubrics for the third ACC 640 milestone typically score the summary and evaluation of misstatements, qualitative materiality, subsequent events, going concern, representations, communications, the internal control conclusion and use of the standards. Top papers separate factual, judgmental and projected misstatements, consider qualitative factors in a structured way, classify subsequent events by when the condition arose and explain why a deficiency is or is not a material weakness. Graders also reward attention to the report date and the engagement quality review, and a final overall analytical review. Common deductions include evaluating only quantitative effects, treating all subsequent events as adjustments, omitting the representation letter and confusing significant deficiencies with material weaknesses.
ACC 640 Module 9 help: the mistakes that cost points
Completion milestones most often slip on qualitative materiality, comparing the total with a threshold and stopping, when the standards and SEC staff guidance require asking whether the uncorrected items mask a change in earnings, affect a covenant or analyst expectation, or involve fraud. A second weak spot is subsequent events, where the deciding question is whether the condition existed at the balance sheet date. If your case ends with a modified opinion, the same evaluation leads to the reason for the modification. Prepare the summary of misstatements first, labeled factual, judgmental or projected; the rest of the memo follows from it. Date every conclusion, since the report date limits what the evidence covers.
Get ACC 640 Module 9 written to your instructions
Send the ACC 640 Milestone Three guidelines and the case's audit findings. The milestone will evaluate misstatements, subsequent events, going concern and internal control, and document the completion steps with the standards behind each. Plan on roughly two days; your first costs nothing. The paper above is an original model document written by our desk, not a submitted student paper and not an official Southern New Hampshire University document.
More ACC 640 papers and related MS Accounting samples
- ACC 640 Module 1 Discussion: Who Audits the Auditors?
- ACC 640 Module 2 Client Acceptance Assignment: Taking Over After a Resignation
- ACC 640 Module 3 Milestone One: Materiality and the Risks That Matter
- ACC 640 Module 4 Discussion: Skepticism and the Returns Reserve
- ACC 640 Module 5 Internal Control Assignment: Controls Over Online Sales
- ACC 640 Module 6 Milestone Two: Inventory at Someone Else's Warehouse
- ACC 640 Module 7 Discussion: Testing Every Order With Data Analytics
- ACC 640 Module 8 Audit Sampling Assignment: Monetary Unit Sampling of Wholesale Receivables
- ACC 640 Module 10 Final Project: The Audit Plan and Critical Audit Matters
- ACC 610 Module 10 Final Project: The Technical Accounting Memo Package
- MBA 580 Module 4 Innovation Strategy Benchmark Study
- ACC 620 Module 2 Lease Accounting Assignment: A Terminal Lease and a Tractor Lease Side by Side
- MBA 687 Module 6 Strategic Considerations Presentation
ACC 640 Module 9 questions, answered
Where can I find a free ACC 640 Module 9 Milestone Three sample?
This page includes a full ACC 640 Milestone Three completing an audit, from evaluating misstatements to subsequent events and internal control.
How are uncorrected misstatements evaluated?
Individually and in the aggregate, quantitatively against materiality and qualitatively for factors such as effects on trends, earnings expectations, covenants, segments and whether fraud is involved.
What is the difference between recognized and nonrecognized subsequent events?
Recognized events provide evidence about conditions that existed at the balance sheet date and require adjustment; nonrecognized events arise after that date and may require disclosure only.
What is a management representation letter?
A letter from management confirming representations made during the audit, such as responsibility for the statements and completeness of information, dated as of the auditor's report date.
What is an engagement quality review?
A required review of the engagement team's significant judgments and conclusions by a qualified reviewer outside the team, which must be completed before the firm grants permission to release the report.