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Types and Timing of Audit Procedures
Types and Timing of Audit Procedures
Procedures 6. Reperformance
7. Analytical Procedures (PSA 520)
8. Scanning
9. Inquiry
TEST OF SUBSTANTIVE
CONTROLS PROCEDURES
Inspection of documentation Inspection of documentation
Observation Inspection of assets
Reperformance External Confirmation
Inquiry Recalculation
Analytical procedures
Scanning
Inquiry
(1) INSPECTION OF DOCUMENTATION
provides audit evidence of
varying degrees of reliability
Examining Documents
invoices
payroll time cards
bank statements
Read contracts
Use of original source documents
Types of Audit Procedures
(2) INSPECTION OF ASSETS
provides reliable evidence
with respect to the
existence of the asset
(but not necessarily about the clients rights and
obligations or completeness of the asset)
Terms of agreement
with third parties
ACCOUNTS Property title
deeds
TESTED
AP balances Investments
and terms under custody
Loans from of trustees
lenders Types of Audit Procedures
The AUDITOR should make sure that:
POSITIVE NEGATIVE
CONFIRMATION CONFIRMATION
REQUEST REQUEST
Indicates agreement Respond directly
or disagreement on ONLY if confirming
the information party DISAGREES
Provides requested
information
Types of Audit Procedures
Types of Audit Procedures
EXTERNAL CONFIRMATIONS
PSA 505
EXTERNAL CONFIRMATION MANAGEMENTS REFUSAL TO ALLOW THE
PROCEDURES AUDITOR TO SEND A CONFIRMATION REQUEST
REQUIREMENTS
EVALUATING THE EVIDENCE OBTAINED
account terms of
balances agreements
transactions contracts
(b) Selecting the appropriate confirming party
KNOWLEDGEABLE
(c) Designing confirmation requests
F A C T O R S
Response rate
Assertion Method of communication
Reliability
Specific identified risk of Managements authorization
material misstatement Ability of the confirming party to
Layout and presentation
Nature confirm or provide the requested
Prior experience information
POSITIVE CONFIRMATION REQUEST
!RISK!
Without Lower
verification response rates
(d) Sending the requests
Follow-up on
confirmation request
GAME.
ENUMERATION
An oral response to a
confirmation request meets the
definition of an external
confirmation.
MODIFIED TRUE OF FALSE
AUDIT
AUDIT
CONCLUSIONS AND
PROCEDURES REPORTING
Opening Balances
1. Determining whether the prior periods closing balances have
been correctly brought forward or have been restated
2. If the opening balances reflect the application of appropriate
accounting policies
3. Performing one or more of the ff:
Reviewing the predecessors working papers (prior FS were
audited)
Evaluating whether audit procedures performed in the CP
provide evidence relevant to the opening balances; or
Performing specific audit procedures
Unable to obtain sufficient express a QUALIFIED or
appropriate evidence DISCLAMER of opinion
Consistency of Accounting Policies
Accounting policies
Current Periods
reflected in the openingCONSISTENT
financial statements
balances
express a QUALIFIED or
ADVERSE opinion
Modification to the Opinion in the Predecessors Report
EVALUATE
the effect in the current periods FS
MODIFY
GAME.
IDENTIFICATION
Footing
Cross-footing
Tests of extensions
Recalculating estimated amounts
evaluations of financial
information through analyzing
plausible relationships among
both financial and nonfinancial
data
TEST OF DETAILS
Client inquiry
Inspection of documents/assets
Confirmations
Types of Audit Procedures
(9) INQUIRY
Seeking information from knowledgeable persons, both
financial and nonfinancial, throughout the entity or
outside the entity.
Accounting system
Managements plans
Pending or actual litigation against the organization
Changes in accounting procedures or accounting principles
Managements approach and assumptions used in the valuation of key
accounts
Managements or the controllers assessment of complex financial matters
Types of Audit Procedures
1. Inspection of Documentation
2. Inspection of Assets
3. Observation
Types of 4. External Confirmation (PSA 505)
Audit 5. Recalculation
6. Reperformance
ANALYTICAL PROCEDURE
Review a lease contract to
determine the items it covers and
its major provisions
INSPECTION OF DOCUMENTS
Test the accuracy of sales invoice by
multiplying the number of items
shipped by the authorized price list to
determine extended cost. Foot the total
and reconcile it with the total invoiced.
RECALCULATION
Examine canceled checks returned with
the clients January bank statement as
support of outstanding checks listed on
the clients December year-end bank
reconciliation.
INSPECTION OF DOCUMENTATION
Perform test counts of the
clients marketable securities
held in a safe deposit box.
INSPECTION OF DOCUMENTATION
Tour the plant to determine that
a major equipment acquisition
was received and is in working
condition.
OBSERVATION; INSPECTION OF ASSETS
Request a statement from a major
customer as to its agreement or
disagreement with a year-end
receivable balance shown to be due
to the audit client.
EXTERNAL CONFIRMATION
Develop a spreadsheet to calculate
an independent estimate of the
clients warranty liability based on
production data and current
warranty repair expenditures.
RECOMPUTATION
Obtain information about the
clients processing system and
associated controls by asking the
clients personnel to fill out a
questionnaire.
INQUIRY
Application of
Audit Procedures to
Management Assertions
Assessing the
Consistency of
Evidence
Assessing the Consistency of Evidence
AS 15
Be profitable
Manage risk
Cost-Benefit Considerations When Selecting Audit Procedures
AUDIT PROCEDURES
more rigorous
higher quality COST
types of substantive procedures selected
DEPEND ON RISK
APPROPRIATE MIX
COST PROFITABILITY
OF EVIDENCE
AUDIT PROCEDURES
based on the auditors professional judgment about the expected
effectiveness and efficiency of available audit procedures
Substantive Substantive
procedures test of details
appropriate appropriate
COMBINATION
most responsive
Assessment of risk
Effective of internal control
Nature of the account
Availability of audit staff
Timing Procedures
ISSUES
perform additional audit procedures
ROLL-FORWARD PERIOD
(the period between the interim date and the balance sheet date)
CUTOFF PERIOD
(usually several days before and after the balance sheet date)
Timing Procedures
greatest risk
CUTOFF TESTS