Summary of the Audit Process
Phase I: Plan and Design an Audit Approach. In every audit there exist several ways an auditor can gather proof to congregate the general audit purpose of offering an opinion on the financial statements. There are two principal concerns that change the approach the auditor choose: adequate proper evidence must be collected to meet the auditor’s professional responsibility and the cost of collecting the evidence should be reduced. Three segments forms planning and designing an audit approach and those are: acquiring an understanding of its environment and the entity, recognize internal control and assess control risk and the last assess risk of material misstatement. Phase II: Perform tests of controls and substantive tests of transactions. The auditor must primary test the effectiveness of the controls before they can justify reducing planned assessed control risk. For example, the auditor might test the effectiveness of this control by examining a sample of duplicate sales invoices indicating that the unit selling price was verified. Also, auditors estimate the client’s recording of transactions by corroborating the monetary amounts of transactions. Phase III: Perform analytical procedures and tests of details of balances. There are two broad categories of this phase. Analytical procedures use similarities and relationships to review whether account balances or other data appear logical and test of details of balances are precise actions anticipated to test for monetary misstatements in the balances in the financial statements. Phase IV: Complete the audit and issue an audit report. To reach an overall conclusion it is necessary to combine the information obtain as to whether the financial statements are fairly presented.
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