Auditing and assurance services 14e by arens chapter 13

Overall Audit Plan
and Audit Program
Chapter 13
/>n/

©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley

5-5


Learning Objective 1
Use the five types of audit tests to
determine whether financial statements
are fairly stated.

©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley

13 - 2


Types of Tests
 Risk assessment procedures
Further audit procedures

©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley

13 - 3


Further Audit Procedures
and the Audit Risk Model

Audit risk
model

Tests of
controls

AAR
IR × CR

= PDR

Sufficient
Substantive
Tests of
Analytical
appropriate
+ tests of + procedures + details of = evidence
transactions
balances
per GASS

Further audit procedures
©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley

13 - 4


Risk Assessment Procedures
A major part of these procedures are
done to obtain an understanding

of internal control.

©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley

13 - 5


Role of All Audit Tests in the
Sales and Collection Cycle

©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley

13 - 6


Learning Objective 2
Select the appropriate types of audit tests.

©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley

13 - 7


Relationship Between Further Audit
Procedures and Evidence

©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley

13 - 8

Audit Assurance at Different Levels of
Internal Control Effectiveness

©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley

13 - 9


Learning Objective 3
Understand how information technology
affects audit testing.

©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley

13 - 10


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.

©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley

13 - 11

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

©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley

13 - 12


Learning Objective 4
Understand the concept of evidence mix
and how it should be varied in different
circumstances.

©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley

13 - 13


Variations in Evidence Mix

©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley

13 - 14


Learning Objective 5
Design an audit program.

©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley

13 - 15


Audit Program
Part 1:
Tests of controls and substantive
tests of transactions
Part 2:
Analytical procedures
Part 3:
Tests of details and balances

©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley

13 - 16


Methodology for Designing Controls
and Substantive Tests

©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley

13 - 17


Four-Step Approach to Designing
Control and Substantive Tests

©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley

13 - 18


Methodology for Designing Tests of
Balances – Accounts Receivable

©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley

13 - 19


Methodology for Designing Tests of
Balances – Accounts Receivable

©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley

13 - 20

Learning Objective 6
Compare and contrast transaction-related
audit objectives with balance-related and
presentation and disclosure-related audit
objectives.

©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley

13 - 21


Relationship of Transaction-related
Audit Objectives to Balance-related
Audit Objectives
Transactionrelated
Audit
Objective

Balancerelated
Audit
Objective

Nature of
Relationship

Occurrence
Existence or completeness Direct
Completeness
Completeness or existence Direct
Accuracy

Accuracy
Direct
Posting and
Detail tie-in
Direct
summarization
Classification
Classification
Direct
Timing
Cutoff
Direct
Realizable value
None
Rights and obligation
None
©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley

13 - 22


Relationship Among Five Key
Evidence-related Terms
Phases
Audit

of the audit process

objectives

Types

of tests

Evidence
Types

decisions

of evidence

©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley

13 - 23


Phases of the Audit Process
I.

Plan and design an audit approach.

II. Perform tests of controls and
substantive tests of transactions.
III. Perform analytical procedures and
tests of details of balances.
IV. Complete the audit and issue an
audit report.

©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley

13 - 24


Audit Objectives
 Transaction-related
Balance-related
Presentation and disclosure-related

©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley

13 - 25