Overall Audit Plan

and Audit Program

Chapter 13

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Learning Objective 1
Use the five types of audit tests to
determine 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 Procedures

and the Audit Risk Model
Audit risk
model

AAR
= PDR
IR CR

Sufficient
Substantive
Tests of
Tests of
Analytical
appropriate
+ tests of +
+ details of =
controls
procedures
evidence
transactions
balances
per GASS

Further audit procedures

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Risk Assessment Procedures

A major part of these procedures are
done to obtain an understanding
of internal control.

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Role of All Audit Tests in the

Sales and Collection Cycle

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Learning Objective 2
Select the appropriate types of audit
tests.

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Relationship Between Further

Audit Procedures and Evidence

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Audit Assurance at Different

Levels of Internal Control
Effectiveness

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Learning Objective 3
Understand how information
technology affects audit testing.

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Impact of Information
Technology on Audit Testing
SAS 80 (AU 326) and SAS 109 (AU 319)
provide guidance for auditors of entities
that transmit, process, maintain, or access
significant information electronically.

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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.
Program change controls
Access controls

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

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Variations in Evidence Mix

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Learning Objective 5
Design an audit program.

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Audit Program
Part 1:
Tests of controls and substantive
tests of transactions
Part 2:
Analytical procedures
Part 3:
Tests of details and balances
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Methodology for Designing

Controls and Substantive Tests

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Four-Step Approach to Designing

Control and Substantive Tests

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Methodology for Designing Tests

of Balances Accounts
Receivable

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Methodology for Designing Tests

of Balances Accounts
Receivable

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Learning Objective 6
Compare and contrast transactionrelated audit objectives with balancerelated and presentation and
disclosure-related audit objectives.

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Relationship of Transactionrelated 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
Cutof
Direct
Realizable value
None
Rights and obligation None
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Relationship Among Five

Key Evidence-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 an
audit 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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Types of Evidence
Documentation
Physical
Evidence

Inquiries of Client

Confirmation

Audit
Evidence

Analytical
Procedures

Recalculation

Reperformance
Observation

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Learning Objective 7
Integrate the four phases of the audit
process.

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Summary of the Audit

Process

Perform analytical
Plan and design
procedures and
Phase I
Phase III
an audit approach
tests of details
of balances

Perform tests of
Complete the
controls and
Phase II
Phase IV audit and issue
substantive tests
an audit report
of transactions

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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 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

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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
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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
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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
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End of Chapter 13

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