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    Audit Chapter 14

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    Arfini Lestari
    audit chapter 14

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    © All Rights Reserved
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    Audit Chapter 14

    Uploaded by

    Arfini Lestari
    131 views36 pages
    audit chapter 14

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    audit chapter 14

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    audit chapter 14

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    131 views36 pages

    Audit Chapter 14

    Uploaded by

    Arfini Lestari
    audit chapter 14

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    of 36

    Overall Audit Plan

    and Audit Program


    Chapter 13
    http://downloadslide.blogspot.com

    ©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 AAR
    model = PDR
    IR × CR

    Sufficient
    Substantive Tests of
    Tests of Analytical appropriate
    controls + 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
    Transaction- Balance-
    related related
    Audit Audit Nature of
    Objective Objective 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 of the audit process

    Audit objectives

    Types of tests

    Evidence decisions

    Types 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


    Types of Tests

     Risk assessment procedures

    Tests of controls

    Substantive tests of transactions

    Analytical procedures

    Tests of details of balances

    ©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley 13 - 26


    Evidence Decisions

     Audit procedures

    Sample size

    Items to select

    Timing

    ©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley 13 - 27


    Types of Evidence

    Documentation

    Physical
    Inquiries of Client
    Evidence

    Audit
    Confirmation Recalculation
    Evidence

    Analytical
    Reperformance
    Procedures
    Observation

    ©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley 13 - 28


    Learning Objective 7

    Integrate the four phases of the audit


    process.

    ©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley 13 - 29


    Summary of the Audit Process

    Perform analytical
    Plan and design procedures and
    Phase I an audit approach Phase III tests of details
    of balances

    Perform tests of
    Complete the
    controls and
    Phase II substantive tests Phase IV audit and issue
    an audit report
    of transactions

    ©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley 13 - 30


    Summary of the Audit Process:
    Phase I
    Accept client and perform initial planning

    Understand the client’s business and industry

    Assess client’s business risk

    Perform preliminary analytical procedures

    ©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley 13 - 31


    Summary of the Audit Process:
    Phase I
    Set materiality and assess acceptable
    audit risk and inherent risk

    Understand internal control and assess control risk

    Gather information to assess fraud risks

    Develop overall audit plan and audit program

    ©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley 13 - 32


    Summary of the Audit Process:
    Phase II
    Plan to reduce assessed No
    level of control risk?

    Yes
    Perform tests of controls

    Perform substantive tests of transactions

    Assess likelihood of misstatements in


    financial statements
    ©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley 13 - 33
    Summary of the Audit Process:
    Phase III

    High or
    Low Medium
    unknown
    Perform analytical procedures
    Perform tests of key items
    Perform additional tests
    of details of balances

    ©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley 13 - 34


    Summary of the Audit Process:
    Phase IV
    Perform additional tests for
    presentation and disclosure

    Accumulate final evidence

    Evaluate results

    Issue audit report

    Communicate with audit


    committee and management
    ©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley 13 - 35
    End of Chapter 13

    ©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley 5-5

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