overall audit plan and audit program l.
Download
Skip this Video
Loading SlideShow in 5 Seconds..
Overall Audit Plan and Audit Program PowerPoint Presentation
Download Presentation
Overall Audit Plan and Audit Program

Loading in 2 Seconds...

play fullscreen
1 / 39

Overall Audit Plan and Audit Program - PowerPoint PPT Presentation


  • 552 Views
  • Uploaded on

Overall Audit Plan and Audit Program. Chapter 13. Learning Objective 1. Use the five types of audit tests to determine whether financial statements are fairly stated. Types of Tests. Procedures to obtain an understanding of internal control. Tests of control.

loader
I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
capcha
Download Presentation

PowerPoint Slideshow about 'Overall Audit Plan and Audit Program' - paul


An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
learning objective 1
Learning Objective 1
  • Use the five types of audit tests
  • to determine whether financial
  • statements are fairly stated.
types of tests
Types of Tests

Procedures to obtain an understanding

of internal control

Tests of control

Substantive tests of transactions

Analytical procedures

Tests of details of balances

types of audit tests and the audit risk model

Audit risk

model

AAR

IR × CR

= PDR

Types of

audit

tests

Procedures

to obtain an

understanding

of internal control

+

Tests of

controls

(TOC)

+

Substantive

tests of

transactions

(STOC)

Types of Audit Tests andthe Audit Risk Model
types of audit tests and the audit risk model5

Audit risk

model

AAR

IR × CR

= PDR

Types of

audit

tests

Analytical

procedures

(AP)

+

Tests of

details of

balances

(TDP)

=

Sufficient

competent

evidence

per GASS

Types of Audit Tests andthe Audit Risk Model
role of all audit tests in the sales and collection cycle

Sales

Accounts

Receivable

Cash in

Bank

Sales

transactions

Cash receipts

transactions

Audited by

TOC, STOT, and AP

Audited by

TOC, STOT, and AP

Ending

balance

Ending

balance

Audited by APand TDB

TOC + STOT + AP + TDB

= Sufficient competent evidence per GAAS

Role of all Audit Tests in the Sales and Collection Cycle
learning objective 2
Learning Objective 2
  • Select the appropriate types
  • of audit tests.
relationship between types of tests and evidence

Type of Evidence

Physical

examination

Confirmation

Documentation

Observation

Type of Test

Procedures for internal control

Tests of controls

Substantive tests of transactions

Analytical procedures

Tests of details of balances

Relationship Between Types of Tests and Evidence
relationship between types of tests and evidence9
Relationship Between Types of Tests and Evidence

Type of Evidence

Analytic

performance

Inquiries of

the client

Reperformance

Type of Test

Procedures for internal control

Tests of controls

Substantive tests of transactions

Analytical procedures

Tests of details of balances

audit assurance at different levels of internal control effectiveness

C3

Acceptable

assurance

Audit assurance

from control risk

assessment and

tests of control

C2

AUDIT ASSURANCE

C1

Audit assurance

from substantive

tests

No

assurance

A

C

B

INTERNAL CONTROL EFFECTIVENESS

Weak control

Strong control

Reliance on controls: C3 – None, C2 – Some, C1 – Maximum

Audit Assurance at Different Levels of Internal Control Effectiveness
learning objective 3
Learning Objective 3
  • Understand how information
  • technology affects audit testing.
impact of information technology on audit testing
Impact of Information Technology on Audit Testing

SAS 80 (AU 326) and SAS 94 (AU 319)

provide guidance for auditors of entities

that transmit, process, maintain, or access

significant information electronically.

impact of information technology on audit testing13

Program change controls

Access controls

Impact of Information Technology on Audit Testing

Computer assisted audit techniques may be

used to test automated controls or data.

Reports produced by IT may be used to test

the effectiveness of IT general controls.

learning objective 4
Learning Objective 4
  • Understand the concept of
  • evidence mix and how it
  • should be varied in
  • different circumstances.
variations in evidence mix

Procedures to obtain

an understanding

of internal control

Tests

of controls

Audit 1 E E

Audit 2 M M

Audit 3 M N

Audit 4 M M

Amount of testing: Extensive, Medium, Small, None

Variations in Evidence Mix
variations in evidence mix16
Variations in Evidence Mix

Substantive

tests of

transactions

Analytical

procedures

Tests of

details of

balances

Audit 1 S E S

Audit 2 M E M

Audit 3 E M E

Audit 4 E E E

Amount of testing: Extensive, Medium, Small, None

learning objective 5
Learning Objective 5
  • Design an audit program.
audit program
Audit Program

Part 1:

Tests of controls and substantive

tests of transactions

Part 2:

Analytical procedures

Part 3:

Tests of details and balances

tests of controls and substantive tests of transactions
Tests of Controls and Substantive Tests of Transactions
  • Apply the transaction-related audit objectives
  • to the class of transactions being tested.

2. Identify key controls that should reduce

control risk for each audit objective.

3. Develop appropriate tests of controls.

4. Design substantive tests of transactions.

methodology for designing controls and substantive tests

Design tests of controls

and substantive tests

of transactions to meet

transaction-related

audit objectives.

Assess control risk.

Determine extent of

testing controls.

Methodology for Designing Controls and Substantive Tests

Perform procedures to

understand internal

control.

Audit procedures

Sample size

Items to select

Timing

four step approach to designing control and substantive tests

Identify key controls and

make a preliminary

assessment of control risk.

(Step 2)

Design substantive tests of

transactions. (Step 4)

Design tests of controls.

(Step 3)

Audit procedures

Audit procedures

Sample size

Sample size

Items to select

Items to select

Timing

Timing

Four-Step Approach to Designing Control and Substantive Tests

Apply transaction- related

audit objectives to a class

of transactions. (Step 1)

methodology for designing tests of balances accounts receivable

Set tolerable

misstatement and

assess inherent risk

for accounts receivable.

Assess control

risk for sales

and collection

cycle.

Design and perform

analytical procedures

for accounts

receivable balance.

Design and perform tests

of controls and substantive

tests of transactions for

sales and collection cycle.

Design tests of details of

accounts receivable balance

to satisfy balance-related

audit objectives.

Audit procedures

Items to select

Sample size

Timing

Methodology for Designing Tests of Balances – Accounts Receivable

Identify client

business risks

affecting accounts

receivable.

approach to designing tests of details of balances

Identify key controls

and make an assessment

of control risk.

Design substantive tests

of transactions.

Design tests of controls.

Audit procedures

Audit procedures

Sample size

Sample size

Items to select

Items to select

Timing

Timing

Approach to Designing Tests of Details of Balances

Apply transaction-related

audit objectives to a class

of transactions.

approach to designing tests of details of balances24

Apply balance-

related audit

objectives to an

account balance.

Decide tolerable

misstatement.

Make preliminary

judgment about

materiality.

Design analytical

procedures.

Assess inherent risk.

Decide acceptable

audit risk.

Design tests

of details of

balances.

Assess client

business risk.

Approach to Designing Tests of Details of Balances
learning objective 6
Learning Objective 6
  • Compare and contrast
  • transaction-related audit
  • objectives and balance-related
  • audit objectives.
relationship among five key evidence related terms
Relationship Among Five Key Evidence-Related Terms

Phases of the audit process

Audit objectives

Types of tests

Evidence decisions

Types of evidence

phases of the audit process
Phases of the Audit Process
  • Plan and design an audit approach.

2. Perform tests of controls and substantive

tests of transactions.

3. Perform analytical procedures and tests

of details of balances.

4. Complete the audit and issue an audit report.

audit objectives

Transaction-related

Balance-related

1. Existence

2. Completeness

3. Accuracy

4. Classification

5. Timing

6. Posting and

summarization

1. Existence

2. Completeness

3. Accuracy

4. Classification

5. Cutoff

6. Detail tie-in

7. Realizable value

8. Rights and obligations

9. Presentation and

disclosure

Audit Objectives
types of tests29
Types of Tests

1. Procedures to obtain an understanding

of internal control

2. Tests of controls

3. Substantive tests of transactions

4. Analytical procedures

5. Tests of details of balances

evidence decisions
Evidence Decisions
  • Audit procedures

2. Sample size

3. Items to select

4. Timing of performance

types of evidence
Types of Evidence

1. Physical examination

2. Confirmation

3. Documentation

4. Analytical procedures

5. Observation

6. Inquiry of the client

7. Reperformance

learning objective 7
Learning Objective 7
  • Integrate the four phases
  • of the audit process.
summary of the audit process

Phase I

Plan and design

an audit approach.

Phase III

Perform analytical

procedures and

tests of details

of balances.

Phase II

Perform tests of

controls and

substantive tests

of transactions.

Phase IV

Complete the

audit and issue

an audit report.

Summary of the Audit Process
summary of the audit process phase i

Understand the client’s business and industry.

Assess client’s business risk.

Perform preliminary analytical procedures.

Summary of the Audit Process:Phase I

Accept client and perform initial planning.

summary of the audit process phase i35

Understand internal control and assess control risk.

Gather information to assess fraud risks.

Develop overall audit plan and audit program.

Summary of the Audit Process:Phase I

Set materiality and assess acceptable

audit risk and inherent risk.

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.

Summary of the Audit Process:Phase II
summary of the audit process phase iii

Low

Medium

High or

unknown

Summary of the Audit Process:Phase III

Perform analytical procedures.

Perform tests of key items.

Perform additional tests of details

of balances.

summary of the audit process phase iv

Review for contingent liabilities.

Review for subsequent events.

Accumulate final evidence.

Evaluate results.

Issue audit report.

Communicate with audit

committee and management.

Summary of the Audit Process:Phase IV