What happens during the execution stage of an audit?
Planned procedures are carried out to gather sufficient and appropriate evidence; follows planning and precedes completion/reporting.
What procedures are applied during the execution phase?
Substantive procedures and tests of controls to respond to assessed risks.
What are tests of controls?
Procedures that evaluate the effectiveness of internal controls in preventing or detecting material misstatements.
What are substantive procedures?
Procedures used to detect material misstatements at the assertion level.
What are tests of details?
Substantive procedures that directly verify balances or transactions.
What are substantive analytical procedures?
Substantive procedures that assess reasonableness of account balances or trends using relationships.
What does CIIROAR stand for?
Confirmation, Inspection, Inquiry, Recalculation, Observation, Analytical procedures, Reperformance.
When is confirmation used?
To obtain evidence from independent third parties; mainly for tests of details.
When is inspection used?
Examining records or physical assets; used in tests of controls and details.
When is inquiry used?
Seeking information from knowledgeable personnel; used in all types of tests.
When is recalculation used?
Checking mathematical accuracy of documents; used in controls and detail tests.
When is observation used?
Watching processes; mostly for tests of controls.
When are analytical procedures used?
Ratios, trends, and comparisons; mainly as substantive analytical procedures.
When is reperformance used?
Auditor independently executes procedures originally performed by client; mostly controls, sometimes details.
Step 1: Develop an expectation
Predict values using historical data, budgets, or industry norms.
Step 2: Define significant difference
Set a threshold or precision level based on materiality.
Step 3: Compare actual to expected results
Identify variances between recorded and expected amounts.
Step 4: Investigate significant differences
Inquire, recalculate, or gather evidence to explain discrepancies.
Step 5: Conclude on assertion
Decide if account balance is reasonable or if further testing is needed.
How do ADAs/CAATs help in analytical testing?
Automate ratio/trend analysis using large datasets.
How do ADAs/CAATs help in sample selection?
Identify high-risk transactions using filters, rules, or statistical methods.
How do ADAs/CAATs help in data analysis?
Combine, sort, filter, or segment client data for targeted review.
How do ADAs/CAATs help in recalculation?
Re-perform formulas or models to test accuracy.
How do ADAs/CAATs help in data mining?
Detect anomalies or patterns suggesting fraud or error.
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Chapter 1 - Assurance and Audit Defined23
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Chapter 5 - Client Acceptance and Continuance26
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Chapter 6 - Planning — Introduction to Audit Planning23
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Chapter 7 - Planning — Risk Assessment29
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Chapter 8 - Planning — Going Concern Considerations22
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Chapter 9 - Planning — Fraud and Other Risk Considerations20
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Chapter 4 - Ethics & Legal Considerations30
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Chapter 10 - Planning — Approach and Strategy Considerations17
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Chapter 11 - Materiality17
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Chapter 3 - Codes of Professional Conduct12
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Chapter 12 - Planning — Assertions and Procedures*34
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Chapter 13 - Planning — Evidence and Documentation30
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Chapter 16 - Execution — Substantive Procedures*49
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Chapter 14 - Internal Controls37
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Chapter 18 - Audit of Cash Balances and Investments23
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Chapter 19 - Audit of the Revenue, Receivables, and Receipts Cycle40
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Chapter 20 - Audit of the Purchases, Payables, and Payments Cycle49
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Chapter 21 - Audit of the Inventory and Distribution Cycle*31
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Chapter 23 - Audit of the Payroll Cycle*32
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Chapter 22 - Audit of Property, Plant, and Equipment*30
