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Angela Walsh is a new staff auditor. On her first three engagements, she was assigned to perform tests of controls for acquisitions and payments and...

Angela Walsh is a new staff auditor. On her first three engagements, she was assigned to perform tests of controls for acquisitions and payments and test of details of balances for accounts payable. The approach taken in each audit is briefly described below:


Audit 1- The client is a medium sized company. Extensive tests of controls are performed for acquisitions and payments. Fairly extensive substantive analytical procedures were also performed. The tests of details of balances of the year-end accounts payable balance were minimal, and no confirmations were sent (confirmations are not required for testing accounts payable.)


Audit 2- This company is also medium sized. Extensive tests of controls were also performed, but after these tests were completed, additional substantive tests of transactions were performed. Extensive tests of the year-end accounts payable balance were performed, although no confirmations were sent.


Audit 3- Although the auditors gained an understanding of internal control, no tests of controls were performed over acquisitions and payments. However, extensive substantive tests of transactions were performed, and confirmations were sent as part of the extensive testing of year-end accounts payable. Although this company was smaller than the first two companies, the total audit time spent testing account payable was greater than for the first two audits.


Angela is confused by the apparent inconsistency in the audit approach on the three audits, and concludes that the audit approach and amount of audit evidence to collect depends on the audit partner in charge of the engagement.


I am looking for some help in understanding why each audit was different.

Top Answer

The four step approach for designing the test of controls and the substantive test of transactions are as follows:... View the full answer

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