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Chapter_Thirteen - Homework she handed out can be tough...

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Homework she handed out can be tough. Pinnacle IV due next Monday. Only do A through D for pinnacle IV Auditing Lecture Notes- Chapter Thirteen Overall Audit Plan and Audit Program Opening Vignette Discussion- Efficiency and Effectiveness – Cost benefit of additional testing issues Partner knows clients want solid audit, but at lowest cost possible. What do you do? Strive for balance! We have realities that we have to deal with 5 types of Audit Tests ( The four further audit procedures) Figure 1- Further Audit Procedures and the Audit Risk Model (Note how this Figure focuses on the “four further audit procedures” and stresses the relationship with the audit risk model.) 1. Procedures to Obtain an Understanding of Internal Control Structure – These represent the Auditor’s Risk Assessment Procedures Review Chp. 10 Remember he 5 components of ICS we studied! 1. Control Environment 2. Risk assessment 3. Control Activities 4. Information and Communication 5. Monitoring Both Design and Implementation of Controls should be considered . And were they properly implemented? Then control risk is assessed for each transaction related objective. Audit Risk Model Auditors deal with risk in planning audit evidence primarily by applying the audit risk model. Audit risk model helps auditors decide how much and what types of evidence to accumulate in each cycle PDR = AAR / IR x CR PDR = Planned Detection Risk = the risk that audit evidence for a segment will fail to detect misstatements exceeding tolerable misstatement o It determines the amount of evidence that the auditor needs to collect o If PDR is reduced the auditor needs to accumulate more evidence
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o A PDR of 5% means that the auditor plans to accumulate evidence until the risk of misstatements exceeding tolerable misstatements is reduced to 5%.
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