09/12/2018 1 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
09/12/2018 2 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
09/12/2018 3 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
09/12/2018 4 Procedures for Tests of Controls • Tests of controls, either manual or automated, may include the following types of evidence.
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