GENERAL FLOWCHART OF AUDIT

ISSUE AUDIT REPORTISSUE AUDIT REPORTEvaluate audit risk

PERFORM SUBSTANTIVE TESTPERFORM SUBSTANTIVE TESTEstablish detection risk

UNDERSTAND & TEST INTERNAL CONTROLUNDERSTAND & TEST INTERNAL CONTROLAssess control risk

PLAN THE AUDITPLAN THE AUDITAssess inherent risk

PLANNING PHASE

CONFIRM AUDITARRANGEMENTSCONFIRM AUDITARRANGEMENTS

ASSESSINHERENT RISK

ASSESSINHERENT RISK

ESTIMATERELIANCE ON

INTERNALCONTROL

ESTIMATERELIANCE ON

INTERNALCONTROL

ESTABLISHPLANNING

MATERIALITY

ESTABLISHPLANNING

MATERIALITY

PERFORMANALYTICALPROCEDURES

PERFORMANALYTICALPROCEDURES

IDENTIFYPOTENTIAL

PROBLEM AREAS

IDENTIFYPOTENTIAL

PROBLEM AREAS

DEVELOP ANAUDIT STRATEGY

DEVELOP ANAUDIT STRATEGY

PREPARE THEAUDIT PROGRAM

PREPARE THEAUDIT PROGRAM

SCHEDULE THEAUDIT WORK

SCHEDULE THEAUDIT WORK

SUCCESSOR & PREDECESSORSUCCESSOR INITIATES

COMMUNICATION

OBTAINS PERMISSION FROMPROSPECTIVE CLIENT TO INQUIRE

OF PREDECESSOR

CLIENTRESPONSE

INQUIRIES OF PREDECESSOR AS TO:Integrity of managementDisagreements with managementReasons for change

CONSIDER REJECTINGPROSPECTIVE CLIENT

NO

YES

The work is to be adequately planned andassistants, if any are to be properly supervised

An audit should be planned with an attitude of PROFESSIONAL SKEPTICISM:

The auditor assumes that management is neither honest ordishonest.

THROUGHOUT THE PLANNINGPROCESS THE AUDITOR SHOULD

CONSIDER FRAUD RISK FACTORS

IN PLANNING THE AUDIT, ANAUDITOR SHOULD CONSIDER:

Inherent riskAnticipated reliance on internalcontrolPreliminary judgment aboutmaterialityPotential problem areas in thefinancial statementsType of audit report anticipatedP

LAN

NIN

G P

HA

SE

ERRORS

UNINTENTIONAL MISSTATEMENTS OROMISSIONS OF AMOUNTS OR

DISCLOSURES.

UNINTENTIONAL MISSTATEMENTS OROMISSIONS OF AMOUNTS OR

DISCLOSURES.

MISTAKES INGATHERING OR

PROCESSINGACCOUNTING DATA

MISTAKES INGATHERING OR

PROCESSINGACCOUNTING DATA

MISINTERPRETATION OR OVERLOOKFACTS, CAUSING

ACCOUNTINGESTIMATES TO BE

INCORRRECT

MISINTERPRETATION OR OVERLOOKFACTS, CAUSING

ACCOUNTINGESTIMATES TO BE

INCORRRECT

MISTAKES INAPPLICATION OF

ACCOUNTINGPRICIPLES RELATING

TO AMOUNT,CLASSIFICATION,

MANNER OFPRESENTATION, OR

DISCLOSURE

MISTAKES INAPPLICATION OF

ACCOUNTINGPRICIPLES RELATING

TO AMOUNT,CLASSIFICATION,

MANNER OFPRESENTATION, OR

DISCLOSURE

FRAUD

INTENTIONAL MISSTATEMENTS OROMISSIONS OF AMOUNTS OR

DISCLOSURES IN FINANCIAL STATEMENTS.

INTENTIONAL MISSTATEMENTS OROMISSIONS OF AMOUNTS OR

DISCLOSURES IN FINANCIAL STATEMENTS.

MANIPULATION,FALSIFICATION, OR

ALTERATION OFACCOUNTINGRECORDS ORSUPPORTINGDOCUMENTS

MANIPULATION,FALSIFICATION, OR

ALTERATION OFACCOUNTINGRECORDS ORSUPPORTINGDOCUMENTS

MISINTERPRETATIONOR INTENTIONAL

OMISSION OFDISCLOSURES OF

EVENTS,TRANSACTIONS, OROTHER SIGNIFICANT

INFORMATION.

MISINTERPRETATIONOR INTENTIONAL

OMISSION OFDISCLOSURES OF

EVENTS,TRANSACTIONS, OROTHER SIGNIFICANT

INFORMATION.

INTENTIONALMISAPPLICATION OF

ACCOUNTINGPRINCIPLESREATING TOAMOUNTS,

CLASSIFICATION,MANNER OF

PRESENTATION, ORDISCLOSURE.

INTENTIONALMISAPPLICATION OF

ACCOUNTINGPRINCIPLESREATING TOAMOUNTS,

CLASSIFICATION,MANNER OF

PRESENTATION, ORDISCLOSURE.

ERRORS & FRAUD

AUDITORS RESPONSIBILITY

DESIGN & PERFORM AUDIT TO PROVIDE REASONABLE ASSURANCEDESIGN & PERFORM AUDIT TO PROVIDE REASONABLE ASSURANCE

OPINION IS BASED ON REASONABLE ASSURANCE, AUDITOR NOT ANINSURER

OPINION IS BASED ON REASONABLE ASSURANCE, AUDITOR NOT ANINSURER

SUBSEQUENT DISCOVERY OF MATERIAL MISSTATEMENT DOES NOT,IN & OF ITSELF, EVIDENCE INADEQUATE PLANNING, PERFORMANCE,

OR JUDGMENT

SUBSEQUENT DISCOVERY OF MATERIAL MISSTATEMENT DOES NOT,IN & OF ITSELF, EVIDENCE INADEQUATE PLANNING, PERFORMANCE,

OR JUDGMENT

ASSESS RISKASSESS RISK

GENERAL FLOWCHART OF AUDITPLANNING PHASESUCCESSOR & PREDECESSORSlide 4ERRORSFRAUDERRORS & FRAUD