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Audit Approach

1. The document defines the audit approach as focusing on risk analysis considering the client's environment, management information, financial results, and internal controls. 2. Audit tests are used to assess financial statement assertions and are performed by both internal and external auditors to achieve audit objectives. 3. The main audit tests are control tests to evaluate internal controls and substantive tests to directly validate financial statement balances using procedures like analytical reviews and confirmations.

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pratama aditara
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50 views

Audit Approach

1. The document defines the audit approach as focusing on risk analysis considering the client's environment, management information, financial results, and internal controls. 2. Audit tests are used to assess financial statement assertions and are performed by both internal and external auditors to achieve audit objectives. 3. The main audit tests are control tests to evaluate internal controls and substantive tests to directly validate financial statement balances using procedures like analytical reviews and confirmations.

Uploaded by

pratama aditara
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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AUDIT APPROACH

CHAPTER 1
Define Audit Approach
 A methodology of risk analysis that focuses on the combined
impact of the environment in which a client operates, management
information and financial results and effectiveness of internal
controls.
DEFINE AUDIT TEST ?
 A test used to assess the accuracy of various financial statement
assertions.

 Performed by both internal and external auditor.

 To reach establish the audit objectives.

AUDIT OBJECTIVES ?

FINANCIAL STATEMENT ASSERTIONS ?

ACCACOVER
TYPES OF AUDIT TEST
1. Main audit test :
 Control test (compliance test)

 Substantive test

2. Other audit test :


 Vouching

 Verification

 Walk-through test

 Depth test

 Weakness test

 Rotational test
TEST OF CONTROL
 To ascertain the authenticity and reliability of the accounting
books and records.

 Focus more on management review and standards.

 Prevent and detect misstatements.

 3E – Existence, Efficient & Effective.

 Example : sending confirmation to third party.


SUBSTANTIVE TEST
 Direct test which validates the financial statement balances.

 Normally used a procedures such as analytical review, direct


confirmation.

 Also known as test of transactions and balances.


OTHER TESTS
Vouching
Aim to ensure the underlying records are accurately reflect the
nature of the transactions.

Verification
To ascertain the authenticity of the subject matter.

Walk-through Test
 Tracing a few transactions through the accounting system to get
a nature of business environment.
 The procedures can be treated as part of test of control.
 The result would not provide appropriate audit evidence.
OTHER TESTS
Depth Test
 Retracing the document.
 Similar to walk-through test but involves a large number of
transactions.

Weakness Test
Additional test done when there is an error found in depth test.

Rotational Test
 Test the internal control procedures on a selected departments
or branch.
 Suitable for clients with many departments or branches and
also known with a good internal control.
AUDIT PROCESS
AUDIT PROCESS
AUDIT PROCESS
TUTORIAL
QUESTION 1
Atikah has just been engage as an audit partner in the firm of
Hamid, David & Co. Her first assignment with the firm is to
audit Majid Resources, a heavy construction company. What
should Atikah do in order to familiar with the company?
QUESTION 2
Syarikat Ramli financial statement has been prepared using
UBS system. The auditor found that the audit trail in UBS
system has been obscured. Help the auditor to proceed
with the auditing process.
QUESTION 3
In the audit of SongSong Bhd., you have noticed that :
a. The turnover of the inventory has been decreased for the
past four years.
b. The number of days of sales in account receivable has
been steadily increased for three years.
c. The amount of bad debts for account receivable has
steadily decreased for three years.

List and explain the suitable audit test approach for each
situation given.
QUESTION 4
Your firm has been performing audit for Raja Gopal
Company for more than 2 years. Along the auditing
process, you found that Raja Gopal Company internal
control was in good condition. As an auditor what audit test
approach should you use? Explain.

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