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8/12/2019 Arens14eArens14e_ch13_pp_ch13_ppt

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2012 Prentice Hall Business Publishing,Auditing 14/e,Arens/Elder/Beasley 5 - 5

Overall Audit Plan

and Audit Program

Chapter 13


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Learning Objective 1

Use the five types of audit tests todetermine whether financial statements

are fairly stated.


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Types of Tests

Risk assessment procedures

Further audit procedures


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Further Audit Proceduresand the Audit Risk Model

Audit riskmodel

Further audit procedures

Tests ofcontrols

Substantivetests of

transactions

+

AAR

IR CR= PDR

+Analyticalprocedures

Tests ofdetails of

balances

Sufficientappropriate

evidence

per GASS

+ =


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Role of All Audit Tests in theSales and Collection Cycle


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Select the appropriate types of audit tests.


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Relationship Between Further AuditProcedures and Evidence


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Audit Assurance at Different Levels ofInternal Control Effectiveness


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Understand how information technologyaffects audit testing.


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Impact of InformationTechnology on Audit Testing

SAS 80 (AU 326) and SAS 109 (AU 319)provide guidance for auditors of entities

that transmit, process, maintain, or accesssignificant information electronically.


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Impact of InformationTechnology on Audit Testing

Computer-assisted audit techniques may beused to test automated controls or data.

Reports produced by IT may be used to testthe effectiveness of IT general controls.

Program change controlsAccess controls


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Understand the concept of evidence mix andhow it should be varied in different

circumstances.


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Variations in Evidence Mix


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Design an audit program.


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Audit Program

Part 1:Tests of controls and substantivetests of transactions

Part 2:Analytical procedures

Part 3:Tests of details and balances


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Methodology for Designing Controlsand Substantive Tests

F S A h D i i


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Four-Step Approach to DesigningControl and Substantive Tests


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Methodology for Designing Tests ofBalancesAccounts Receivable


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Compare and contrast transaction-relatedaudit objectives with balance-related and

presentation and disclosure-related auditobjectives.

R l ti hi f T ti l t d


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Relationship of Transaction-relatedAudit Objectives to Balance-related

Audit ObjectivesTransaction-relatedAuditObjective

Balance-relatedAuditObjective

Nature ofRelationship

OccurrenceCompletenessAccuracyPosting and

summarizationClassificationTiming

Existence or completenessCompleteness or existenceAccuracyDetail tie-in

ClassificationCutoffRealizable valueRights and obligation

DirectDirectDirectDirect

DirectDirectNoneNone


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Relationship Among Five KeyEvidence-related Terms

Phases of the audit process

Audit objectives

Types of tests

Evidence decisions

Types of evidence


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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 anaudit report.


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Audit Objectives

Transaction-related

Balance-related

Presentation and disclosure-related


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Types of Tests

Risk assessment procedures

Tests of controls

Substantive tests of transactions

Analytical procedures

Tests of details of balances


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Evidence Decisions

Audit procedures

Sample size

Items to select

Timing


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Integrate the four phases of the auditprocess.


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Summary of the Audit Process

Phase IPlan and design

an audit approach

Phase II

Perform tests of

controls andsubstantive testsof transactions

Phase III

Perform analyticalprocedures andtests of details

of balances

Phase IV

Complete the

audit and issuean audit report


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Summary of the Audit Process:Phase I

Accept client and perform initial planning

Understand the clients business and industry

Assess clients business risk

Perform preliminary analytical procedures


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Summary of the Audit Process:Phase I

Set materiality and assess acceptableaudit risk and inherent risk

Understand internal control and assess control risk

Gather information to assess fraud risks

Develop overall audit plan and audit program


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Summary of the Audit Process:Phase II

Perform substantive tests of transactions

No

Yes

Perform tests of controls

Assess likelihood of misstatements infinancial statements

Plan to reduce assessedlevel of control risk?


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Summary of the Audit Process:Phase III

Perform analytical procedures

Perform tests of key itemsPerform additional testsof details of balances

Low MediumHigh or

unknown


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Summary of the Audit Process:Phase IV

Perform additional tests forpresentation and disclosure

Accumulate final evidence

Evaluate results

Issue audit report

Communicate with auditcommittee and management


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2012 P ti H ll B i P bli hi A diti 14/ A /Eld /B l 5 5

End of Chapter 13

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