AUDIT ASSURANCE
Acceptable assurance
C3
Audit assurance
C2
from control risk assessment and
tests of control
C1
No assurance
Audit assurance from substantive tests
Tests of details of balances
©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Eldetween Further Audit Procedures and Evidence
Select the appropriate types of audit tests.
©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder
13 - 7
Relationship Between Further Audit Procedures and Evidence
Analytical procedures
Tests of details of balances
©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder
13 - 9
Audit Assurance at Different Levels of Internal Control Effectiveness
Cash in Bank
Sales transactions
Cash receipts transactions
Audited by TOC, STOT, and AP
Audited by TOC, STOT, and AP
Ending balance
Ending balance
Audited by AP and TDB
A
C
B
INTERNAL CONTROL EFFECTIVENESS
Weak control
Strong control
©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder
13 - 2
Types of Tests
➢ Risk assessment procedures ➢ Further audit procedures
©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder
13 - 5
Role of All Audit Tests in the
Sales and Collection Cycle
Sales
Accounts Receivable
Overall Audit Plan and Audit Program
Chapter 13
©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder
13 - 1
Learning Objective 1
Use the five types of audit tests to determine whether financial statements are fairly stated.
Type of Evidence
Inquiries of the Client Reperformance Analytical Procedures Recalculation
Further Audit Procedures
Tests of controls
Substantive tests of transactions
TOC + STOT + AP + TDB = Sufficient appropriate evidence per GAAS
©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder
13 - 6
Learning Objective 2
= PDR
Tests of controls
Substantive
+ tests of + transactions
Analytical procedures
+
Tests of details of balances
Sufficient
=
competent evidence
per GASS
Further audit procedures
©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder
13 - 3
Further Audit Procedures and the Audit Risk Model
Audit risk model
AAR IR × CR
©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder
13 - 4
Risk Assessment Procedures
A major part of these procedures are done to obtain an understanding of internal control.
Type of Evidence
Physical examination Confirmation Documentation Observation
Further Audit Procedures
Tests of controls
Substantive tests of transactions
Analytical procedures