Auditing is essentially a practical task. The auditor always needs to reflect the nature of the circumstances of the entity under audit. It is unlikely that any two audit assignments will ever identical. It is however possible to identify a number of standard stages in a typical external audit. These are as follows:
- Audit appointment
- Engagement letter
- Initial planning Knowledge of the business Risk Assessment Internal control review (procedures) Control procedures (authorities/approvals/segregation of duties)
- Preparation of the audit plan
- Accounting system review
- Analytical review techniques (Compliance procedures-Application of control test procedures)
like purchasing are according to the controls established.
- Considering the ways in which audit evidence can be sought
- Substantive testing (transaction level procedures)
- Reasonable assurance
- Review of the financial statements (compliance with the standards/material misstatement etc.)
- Preparation and signing of report
At the stage of considering the ways of seeking audit evidence the auditor will make a preliminary evaluation of the entity’s control system:
1. If the controls are likely to lead to a true and fair set of financial statements the auditor will test
those controls.
2. If they appear weak he will not rely on the controls but carry out extensive testing of the
transactions and balances which appear in the financial statements by means of substantive
procedures.
3. If the controls are operating effectively, the auditor can reduce the amount of substantive testing
described above and adopt a reliance approach.
4. If not then the auditor will be forced into a extensive substantive approach
- Audit appointment
- Engagement letter
- Initial planning Knowledge of the business Risk Assessment Internal control review (procedures) Control procedures (authorities/approvals/segregation of duties)
- Preparation of the audit plan
- Accounting system review
- Analytical review techniques (Compliance procedures-Application of control test procedures)
like purchasing are according to the controls established.
- Considering the ways in which audit evidence can be sought
- Substantive testing (transaction level procedures)
- Reasonable assurance
- Review of the financial statements (compliance with the standards/material misstatement etc.)
- Preparation and signing of report
At the stage of considering the ways of seeking audit evidence the auditor will make a preliminary evaluation of the entity’s control system:
1. If the controls are likely to lead to a true and fair set of financial statements the auditor will test
those controls.
2. If they appear weak he will not rely on the controls but carry out extensive testing of the
transactions and balances which appear in the financial statements by means of substantive
procedures.
3. If the controls are operating effectively, the auditor can reduce the amount of substantive testing
described above and adopt a reliance approach.
4. If not then the auditor will be forced into a extensive substantive approach
