Overall Audit Plan and Program - Arens-Beasley-Elder
Overall Audit Plan and Program - Arens-Beasley-Elder
Overall Audit Plan and Program - Arens-Beasley-Elder
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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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Tests of
controls
AAR
IR CR
= PDR
Substantive
Analytical
tests of
+
+ procedures +
transactions
Tests of
details of
balances
Sufficient
competent
= evidence
per GASS
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Accounts
Cash in
Receivable
Bank
Sales
Cash receipts
transactions
transactions
Audited by
TOC, STOT, and AP
Ending
balance
Audited by
TOC, STOT, and AP
Ending
balance
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Learning Objective 2
Select the appropriate types
of audit tests.
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Confirmation
Tests of controls
Physical
examination
Documentation
Type of Evidence
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Recalculation
Reperformance
Tests of controls
Analytical
Procedures
Inquiries of
the Client
Type of Evidence
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Acceptable
assurance
No
assurance
AUDIT ASSURANCE
C2
Audit assurance
from control risk
assessment and
tests of control
C1
Audit assurance
from substantive
tests
A
C
B
INTERNAL CONTROL EFFECTIVENESS
Weak control
Strong control
Reliance on controls: C3 None, C2 Some, C1 Maximum
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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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Substantive
Tests of
Transactions
Analytical
Procedures
Tests of
Details of
Balances
Audit 1
Audit 2
Audit 3
Audit 4
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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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Assess
control
risk
Determine
extent
of testing
controls
Audit procedures
Sample size
Items to select
Timing
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Audit procedures
Audit procedures
Sample size
Sample size
Items to select
Items to select
Timing
Timing
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Set tolerable
misstatement and
assess inherent risk
for accounts receivable
Assess control
risk for sales
and collection
cycle
Audit procedures
Items to select
Sample size
Timing
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Audit procedures
Sample size
Items to select
Timing
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Decide tolerable
misstatement
Make preliminary
judgment about
materiality
Design analytical
procedures
Assess inherent risk
Design tests
of details of
balances
Decide acceptable
audit risk
Assess client
business risk
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Learning Objective 6
Compare and contrast
transaction-related audit
objectives and balance-related
audit objectives.
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Relationship of Transaction-related
Audit Objectives to Balance-related
Audit Objectives
Transactionrelated
Audit
Objective
Balancerelated
Audit
Objective
Nature of
Relationship
Existence
Completeness
Accuracy
Posting and
summarization
Classification
Timing
Existence or completeness
Completeness or existence
Accuracy
Detail tie-in
Direct
Direct
Direct
Direct
Classification
Cutoff
Realizable value
Rights and obligation
Direct
Direct
None
None
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Types of evidence
2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder
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Audit Objectives
Transaction-related
Balance-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
Inquiries of the client
Analytical procedures
Observation
Reperformance
Recalculation
Physical examination
Confirmation
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Learning Objective 7
Integrate the four phases
of the audit process.
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Phase I
Phase II
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
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No
Yes
Perform tests of controls
Perform substantive tests of transactions
Assess likelihood of misstatements in
financial statements
2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder
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Low
Medium
High or
unknown
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End of Chapter 13
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