Studies in Auditing- Lecture 10.pdf - Learning Objective 1...

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Auditing
Lecture 10
Chapter 13: Overall Audit Plan
and Audit Program
1 Dr. Mohamed Elmaghrabi
Learning Objective 1
Use the five types of audit tests to determine
whether financial statements are fairly stated.
• In developing an overall audit plan, auditors
use five types of tests to determine whether
financial statements are fairly stated.
2 Dr. Mohamed Elmaghrabi

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Types of Tests
 Risk assessment procedures
 Further audit procedures
3 Dr. Mohamed Elmaghrabi
Risk Assessment Procedures
• The second standard of fieldwork requires the auditor to
obtain an understanding of the entity and its environment.
• Risk assessment procedures are performed to assess the
risk of material misstatement in the financial statements,
represented by the combination of inherent risk and
control risk as described in Chapters 8 and 9.
• Additionally, a major part of the auditor’s risk assessment
procedures are done to obtain an understanding of internal
control.
• The other four types of tests (tests of controls, substantive
tests of transactions, analytical procedures, and tests of
details of balances) represent further audit procedures
performed in response to the risks identified.
4 Dr. Mohamed Elmaghrabi

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Further Audit Procedures
and the Audit Risk Model
Audit risk
model
Further audit procedures
Tests of
controls
Substantive
tests of
transactions
+
AAR
IR × CR
= PDR
+
Analytical
procedures
Tests of
details of
balances
Sufficient
appropriate
evidence
per GAAS
+ =
5 Dr. Mohamed Elmaghrabi
Tests of Controls
The procedures to test effectiveness of controls
in support of a reduced assessed control
risk are called tests of controls .
6 Dr. Mohamed Elmaghrabi

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Procedures for Tests of Controls
• Tests of controls, either manual or automated,
may include the following types of evidence.