Bus 426 - Chapter 12

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Department
Business Administration
Course
BUS 426
Professor
Michael Favere- Marchesi
Semester
Fall

Description
Chapter 12 -Overall Audit Plan and Audit Program Audit Strategy: A planned approach to the conduct of audit testing, taking into account assessed risks Purpose of Different Audit Tests Auditors use 5 types of tests to determine whether financial statements are fairly stated 1. Risk Assessment Procedures 2. Procedures to Obtain an understanding of Internal Control 3. Tests of Controls 4. Analytical Procedures 5. Test of Details of Balances Substantive Procedures are audit procedures that are used to quantify the amount of potential error in an account or transaction stream  Analytical Procedures  Tests of Details Risk Assessment Procedures  Used to assess the likelihood of material misstatement (inherent risk plus control risk) in the financial statements Procedures to Obtain an Understanding of Internal Control  Procedures used by the auditor to gather evidence about the design and implementation of specific controls Tests of Controls  Audit procedures to test the effectiveness of controls in support of a reduced assessed control risk  Make inquiries of appropriate client personnel  Examine documents, records and reports  Observe control-related activities  Reperform client procedures Analytical Procedures  Use of comparisons and relationships to determine whether account balances or other data appear reasonable Procedures to Obtain an Understanding of Internal Control  Procedures used by the auditor to gather evidence about the design and implementation of specific controls Test of Details of Balances  Audit procedures testing for monetary errors or fraud and other irregularities to determine whether the eight balance- Chapter 12 -Overall Audit Plan and Audit Program related audit objectives have been satisfied for each significant account balance Dual-Purpose Tests  Auditing procedures that are both tests of controls and substantive procedures on the same sample of transactions or account balances for efficiency  These tests provide evidence of whether or not the controls being tested were operating effectively during the period and whether there are misstatements in the data produced by the accounting system Figure 12-3 Relationship Between Tests and the Evidence they Gather Table 12-3 Relative Costs of Tests  Listed in order of increasing costs  Least Costly: Analytic
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