Auditing 81.3550 Audit Planning and the Audit Program Chapter 10 Audit Planning and the Audit Program Chapter 10.

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Presentation transcript:

Auditing Audit Planning and the Audit Program Chapter 10 Audit Planning and the Audit Program Chapter 10

Highlights Examine the four types of audit test commonly used Relationship amongst evidence components Examine/review the relationships between transaction related and balance related objectives Review the design of an audit program Examine the four types of audit test commonly used Relationship amongst evidence components Examine/review the relationships between transaction related and balance related objectives Review the design of an audit program

Types of Tests Four basic types of test are used to ensure F/S are fairly presented –Procedures to obtain understanding of IC –Tests of Controls –Analytical procedures –Test of details of balances First 2 = aid in assessing control risk Next 2 = substantive tests Four basic types of test are used to ensure F/S are fairly presented –Procedures to obtain understanding of IC –Tests of Controls –Analytical procedures –Test of details of balances First 2 = aid in assessing control risk Next 2 = substantive tests

Test of Controls (review) Tests of controls are designed, in part, to determine whether the auditor’s understanding of internal control is accurate. Note: often used dual purpose test = procedures that are both test of controls and substantive procedures on the same acct balances or transaction for efficiency Tests of controls are designed, in part, to determine whether the auditor’s understanding of internal control is accurate. Note: often used dual purpose test = procedures that are both test of controls and substantive procedures on the same acct balances or transaction for efficiency

Types of Tests & Risk Model AR = IR x CR x (P)DR Understd IC procedures Test of Controls Analytical Procedures Test of Details of Balances Sufficient Appropriate Evidence GAAS

Tests & Costs Tests of details of balances Procedures Understanding IC and test of Controls Analytical Procedures

evidence mix? What is the evidence mix? the combination of the four types of audit tests used in the audit of a cycle

Evidence Mix In general, if the auditor assesses the controls and accounting system as relatively effective, the mix will involve more tests of controls and less substantive tests. Conversely, if the auditor assesses the controls and accounting system as relatively ineffective, the mix will involve less tests of controls and more substantive tests. In general, if the auditor assesses the controls and accounting system as relatively effective, the mix will involve more tests of controls and less substantive tests. Conversely, if the auditor assesses the controls and accounting system as relatively ineffective, the mix will involve less tests of controls and more substantive tests.

What is an audit program? Set of instructions for the audit specifically related to the collection of evidence Includes details on procedures, timing of procedures, sample sizes, items to be tested and associated assertions

What is an audit program? Many programs have a separate set of subaudit programs for each transaction cycle.

IV. Complete the audit and issue an audit report.