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1. Chaper 4: Overview of Audit process and preliminary activities

2. Audit prosedures May be categorized in (1)major audit prosedures and (2) specific audit prosedures .

3. Major audit prosedures 1. Risk assessment prosedures – the audit prosedures performed to obtain an understanding of the entity and its environment, including the entity’s internal control.

4. 2. Test of controls – an audit procedure to evacuate the effectiveness of internal control. 3. Substantive procedure – an audit procedure design to delect material misstatements at the assertion level

5. Specific audit prosedures 1. Inspection of report and documents 2. Inspection of tangible assets

6. 3. Observation – consists of looking at a process or procedure being performed by others.

4. Inquiry - consists of seeking information of knowledge persons, both financial and non financial , within the entiry or outside the entity.

7. 5. Confirmation – A specific type of inquiry that is the process of obtaining a representation of information or of an existing conditions directly from a third party.

6. Recalculation – checking the mathematical accuracy.

8. 7. Reperfomance – auditor independently executes the procedures that were originally performed as part of the entity’s internal control.

8. Analytical procedures – evaluations of financial information

9. Sub- phases audit process 1. Investigative phase – performance of audit procedures and gathering of audit evidence. 2. Reporting phase – expression of opinion and cummunicating the result.

10. Audit Process: A More Details Approach 1. Preliminary engagement activities – deciding whether to accept a new client or continue relationship with the existing one. 2. Planning an audit of fs – development of audit strategy, audit plan and audit program. Preliminary assessment of risk and materiality is made during this phase.

11. 3. Study and evaluation of internal control 4. Evidence gathering (Substantive Testing) – will always be performed by the auditor. 5. Completing the audit – conclusion are reached, and overall opinion is formed.

12. 6. Insurance of the audit report 7. Post-audit responsibilities – auditor performs procedures to determine compliance with quality controls and identify improvements for future audit engagement.

13. Limitations on Scope Prior to Audit Engagement Acceptance The auditor shall not accept a limited engagement as an audit engagement, unless required by law or regulation to do so.

14. Recurring audit The auditor may decide not to send new engagement letter each period.