Chapter 13

Developing the
Overall Audit Plan
and Audit Program

Copyright 2014 Pearson Education

Use the five types of audit tests to

determine whether financial statements
are fairly stated.
Select the appropriate types of audit tests.
Understand how information technology
affects audit testing.
Understand the concept of evidence mix
and how it should be varied in different
circumstances.
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Design an audit program.

Compare and contrast transaction-related
audit objectives with balance-related and
presentation and disclosure-related audit
objectives.
Integrate the four phases of the audit
process.

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1
Use the five types of audit tests to
determine whether financial
statements are fairly stated.

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 Risk assessment procedures

Tests of Controls
Substantive Tests of Transactions
Tests of Details of Balances

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Audit risk
model

AAR
= PDR
IR CR

Substantive
Tests of
Sufficient
Tests of
Analytical
+ tests of +
+ details of =appropriate
controls
procedures
transactions
balances
evidence

Further audit procedures

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A major part of these procedures are

done to obtain an understanding
of internal control.

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2
Select the appropriate types of audit tests.

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3
Understand how information technology affects
audit testing.

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Auditing standards provide guidance for

auditors of entities that transmit, process,
maintain, or access significant information
electronically.

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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

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4
Understand the concept of
evidence mix and how it should
be varied in different
circumstances.
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13-16

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5
Design an audit program.

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Part 1:
Tests of controls and substantive
tests of transactions
Part 2:
Analytical procedures
Part 3:
Tests of details and balances

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6
Compare and contrast transaction-related
audit objectives with balance-related and
presentation and disclosure-related audit
objectives.
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Phases of the audit process

Audit objectives
Types of tests
Evidence decisions
Types of evidence

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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.

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Transaction-related
Balance-related
Presentation and disclosure-related

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 Risk assessment procedures

Tests of controls
Substantive tests of transactions
Analytical procedures
Tests of details of balances
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 Audit procedures
Sample size
Items to select
Timing

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Inspection
Physical
Evidence

Inquiries of Client

Confirmation

Audit
Evidence

Analytical
Procedures

Recalculation

Reperformance
Observation

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Phase I

Plan and design

an audit approach

Phase II

Perform tests of
controls and
substantive tests
of transactions

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Perform analytical
procedures and
Phase III
tests of details
of balances

Phase IV

Complete the
audit and issue
an audit report

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Accept client and perform initial planning

Understand the clients business and industry
Assess clients business risk
Perform preliminary analytical procedures

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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 strategy and audit program

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Plan to reduce assessed

level of control risk?

No

Yes
Perform tests of controls
Perform substantive tests of transactions
Assess likelihood of misstatements in
financial statements
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Low
Low

Medium

High or
unknown

Perform analytical procedures

Perform tests of key items
Perform additional tests
of details of balances
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Perform additional tests for

presentation and disclosure
Accumulate final evidence
Evaluate results
Issue audit report
Communicate with audit
committee and management
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Copyright

All rights reserved. No part of this publication may

be reproduced, stored in a retrieval system, or
transmitted, in any form or by any means, electronic,
mechanical, photocopying, recording, or otherwise,
without the prior written permission of the
publisher. Printed in the United States of America.
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