Chapter 13 Developing the Overall Audit Plan and Audit Program Copyright © 2014 Pearson Education Use the five types of audit tests to determine whether financial statements are fairly stated. Select the appropriate types of audit tests. Understand how information technology affects audit testing. Understand the concept of evidence mix and how it should be varied in different circumstances. 13-2 Copyright © 2014 Pearson Education Design an audit program. Compare and contrast transaction-related audit objectives with balance-related and presentation and disclosure-related audit objectives. Integrate the four phases of the audit process. 13-3 Copyright © 2014 Pearson Education 1 Use the five types of audit tests to determine whether financial statements are fairly stated. 13-4 Copyright © 2014 Pearson Education Risk assessment procedures Tests of Controls Substantive Tests of Transactions Tests of Details of Balances 13-5 Copyright © 2014 Pearson Education Audit risk model Tests of controls AAR IR × CR = PDR Substantive Tests of Sufficient Analytical + tests of + procedures + details of = appropriate transactions balances evidence Further audit procedures 13-6 Copyright © 2014 Pearson Education A major part of these procedures are done to obtain an understanding of internal control. 13-7 Copyright © 2014 Pearson Education 13-8 Copyright © 2014 Pearson Education 2 Select the appropriate types of audit tests. 13-9 Copyright © 2014 Pearson Education 13-10 Copyright © 2014 Pearson Education 13-11 Copyright © 2014 Pearson Education 3 Understand how information technology affects audit testing. 13-12 Copyright © 2014 Pearson Education Auditing standards provide guidance for auditors of entities that transmit, process, maintain, or access significant information electronically. 13-13 Copyright © 2014 Pearson Education 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. Program change controls Access controls 13-14 Copyright © 2014 Pearson Education 4 Understand the concept of evidence mix and how it should be varied in different circumstances. 13-15 Copyright © 2014 Pearson Education 13-16 Copyright © 2014 Pearson Education 5 Design an audit program. 13-17 Copyright © 2014 Pearson Education Part 1: Tests of controls and substantive tests of transactions Part 2: Analytical procedures Part 3: Tests of details and balances 13-18 Copyright © 2014 Pearson Education 13-19 Copyright © 2014 Pearson Education 13-20 Copyright © 2014 Pearson Education 13-21 Copyright © 2014 Pearson Education 13-22 Copyright © 2014 Pearson Education 6 Compare and contrast transaction-related audit objectives with balance-related and presentation and disclosure-related audit objectives. 13-23 Copyright © 2014 Pearson Education 13-24 Copyright © 2014 Pearson Education Phases of the audit process Audit objectives Types of tests Evidence decisions Types of evidence 13-25 Copyright © 2014 Pearson Education 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. 13-26 Copyright © 2014 Pearson Education Transaction-related Balance-related Presentation and disclosure-related 13-27 Copyright © 2014 Pearson Education Risk assessment procedures Tests of controls Substantive tests of transactions Analytical procedures Tests of details of balances 13-28 Copyright © 2014 Pearson Education Audit procedures Sample size Items to select Timing 13-29 Copyright © 2014 Pearson Education Types of Evidence Inspection Physical Evidence Inquiries of Client Confirmation Audit Evidence Analytical Procedures Recalculation Reperformance Observation 13-30 Copyright © 2014 Pearson Education 7 13-31 Copyright © 2014 Pearson Education Plan and design Phase I an audit approach Phase II 13-32 Perform tests of controls and substantive tests of transactions Perform analytical procedures and Phase III tests of details of balances Phase IV Complete the audit and issue an audit report Copyright © 2014 Pearson Education Accept client and perform initial planning Understand the client’s business and industry Assess client’s business risk Perform preliminary analytical procedures 13-33 Copyright © 2014 Pearson Education 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 strategy and audit program 13-34 Copyright © 2014 Pearson Education 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 13-35 Copyright © 2014 Pearson Education Low Low Medium High or unknown Perform analytical procedures Perform tests of key items Perform additional tests of details of balances 13-36 Copyright © 2014 Pearson Education Perform additional tests for presentation and disclosure Accumulate final evidence Evaluate results Issue audit report Communicate with audit committee and management 13-37 Copyright © 2014 Pearson Education 13-38 Copyright © 2014 Pearson Education Copyright All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America. 13-39 Copyright © 2014 Pearson Education
