Overall Audit Plan and Audit Program Chapter 13 http://www.authorstream.com/shengv n/ ©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley 5-5 Learning Objective Use the five types of audit tests to determine whether financial statements are fairly stated ©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley 13 - Types of Tests Risk assessment procedures Further audit procedures ©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley 13 - Further Audit Procedures and the Audit Risk Model Audit risk model Tests of controls AAR IR × CR = PDR Sufficient Substantive Tests of Analytical appropriate + tests of + procedures + details of = evidence transactions balances per GASS Further audit procedures ©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley 13 - Risk Assessment Procedures A major part of these procedures are done to obtain an understanding of internal control ©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley 13 - Role of All Audit Tests in the Sales and Collection Cycle ©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley 13 - Learning Objective Select the appropriate types of audit tests ©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley 13 - Relationship Between Further Audit Procedures and Evidence ©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley 13 - Audit Assurance at Different Levels of Internal Control Effectiveness ©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley 13 - Learning Objective Understand how information technology affects audit testing ©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley 13 - 10 Relationship of Transaction-related Audit Objectives to Balance-related Audit Objectives Transactionrelated Audit Objective Balancerelated Audit Objective Nature of Relationship Occurrence Existence or completeness Direct Completeness Completeness or existence Direct Accuracy Accuracy Direct Posting and Detail tie-in Direct summarization Classification Classification Direct Timing Cutoff Direct Realizable value None Rights and obligation None ©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley 13 - 22 Relationship Among Five Key Evidence-related Terms Phases Audit of the audit process objectives Types of tests Evidence Types decisions of evidence ©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley 13 - 23 Phases of the Audit Process I Plan and design an audit approach II Perform tests of controls and substantive tests of transactions III Perform analytical procedures and tests of details of balances IV Complete the audit and issue an audit report ©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley 13 - 24 Audit Objectives Transaction-related Balance-related Presentation and disclosure-related ©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley 13 - 25 Types of Tests Risk assessment procedures Tests of controls Substantive tests of transactions Analytical procedures Tests of details of balances ©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley 13 - 26 Evidence Decisions Audit procedures Sample size Items to select Timing ©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley 13 - 27 Types of Evidence Documentation Physical Evidence Inquiries of Client Confirmation Audit Evidence Analytical Procedures Recalculation Reperformance Observation ©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley 13 - 28 Learning Objective Integrate the four phases of the audit process ©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley 13 - 29 Summary of the Audit Process Plan and design Phase I an audit approach Perform tests of controls and Phase II substantive tests of transactions Perform analytical procedures and Phase III tests of details of balances Phase IV ©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley Complete the audit and issue an audit report 13 - 30 Summary of the Audit Process: Phase I Accept client and perform initial planning Understand the client’s business and industry Assess client’s business risk Perform preliminary analytical procedures ©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley 13 - 31 Summary of the Audit Process: Phase I Set materiality and assess acceptable audit risk and inherent risk Understand internal control and assess control risk Gather information to assess fraud risks Develop overall audit plan and audit program ©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley 13 - 32 Summary of the Audit Process: Phase II Plan to reduce assessed level of control risk? No Yes Perform tests of controls Perform substantive tests of transactions Assess likelihood of misstatements in financial statements ©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley 13 - 33 Summary of the Audit Process: Phase III Low Medium High or unknown Perform analytical procedures Perform tests of key items Perform additional tests of details of balances ©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley 13 - 34 Summary of the Audit Process: Phase IV Perform additional tests for presentation and disclosure Accumulate final evidence Evaluate results Issue audit report Communicate with audit committee and management ©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley 13 - 35 End of Chapter 13 ©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley 5-5 ... Publishing, Auditing 14/e, Arens/ Elder/Beasley 13 - Relationship Between Further Audit Procedures and Evidence ©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/ Elder/Beasley 13 - Audit Assurance. .. Publishing, Auditing 14/e, Arens/ Elder/Beasley 13 - Role of All Audit Tests in the Sales and Collection Cycle ©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/ Elder/Beasley 13 - Learning... Publishing, Auditing 14/e, Arens/ Elder/Beasley 13 - Types of Tests Risk assessment procedures Further audit procedures ©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/ Elder/Beasley 13