Some examples on Audit Responses ...

Some examples on Audit Responses: 

• If actual results for profit was higher than expectations, then a possible response is - reviewing sales and related cost data
• If actual results for losses on retired assets were materially higher than expectations a possible response is - review depreciation policies
• If actual results for PP&E acquisitions decreased than expectations a possible response is - review repairs and maintenance accounts
• If actual results for interest expense stayed flat than expectations of an increase a possible response is - examining new debt agreements
• If actual results for sales growth towards year end, a possible response is - review sales returns subsequently after the year. 
• An increase in wage expense and a increase in accrued liabilities - obtain management's bonus plan and employee list, and then recalculate expense
• A decrease in depreciation expense and a decrease in accumulated depreciation - confirm with controller changes in estimates (inclusive in this case, depreciation adjustments)
• An increase in investments for trading and a decrease for investments held-to-maturity - review board minutes for discussions in changing classification of long-lived assets
• An increase in repairs and maintenance expense, and a increase in accounts payable -  propose adjusting a debit to PY retained earnings given that the proper entry is not to adjust expenses but to adjust RE. 
• Recording subsidiary income - obtaining financial statements of the subsidiary

cc: Audit