Audit Process Model

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• Phase I - Client Acceptance

• Phase II - Planning

• Phase III - Testing and Evidence

• Phase IV - Evaluation and Judgment

 

Phase I Client Acceptance

Objective: The client acceptance phase of the audit plan, Phase I, involves deciding whether to

accept a new client or continue with an existing one.

Procedures:

(1) Evaluate the client's background and reasons for the audit.

(2) Determine whether the auditor is able to meet the ethical requirements regarding the client.

(3) Determine need for other professionals.

(4) Communicate with predecessor auditor

(5) Prepare client proposal.

(6) Select staff to perform the audit, and

(7) Obtain an engagement letter.

 

Phase II Planning the audit

Objective: Determine the amount and type of evidence and review required to give the auditor assurance that there is no material misstatement of the financial statements.

Procedures :

(1) Perform audit procedures to understand the entity and its environment, including the entity‘s internal control;

(2) Assess the risks of material misstatements of the financial statements.

(3) Determine materiality; and

(4) Prepare the planning memorandum and audit program, containing the auditor‘s response to the identified risks.

Phase III Testing and Evidence

Objective Test for evidence supporting internal controls and the fairness of the financial statements.

• Procedures:

(1) Tests of controls;

(2) Substantive tests of transactions;

(3) Analytical procedures;

(4) Tests of details of balances.

(5) Search for unrecorded liabilities.

Phase IV, Evaluation and Reporting

Objective: Complete the audit procedures and issue an opinion.

Procedures:

(1) Evaluate governance evidence;

(2) Perform procedures to identify subsequent events;

(3) Review financial statements and other report material;

(4) Perform wrap-up procedures;

(5) Prepare Matters of Attention for Partners;

(6) Report to the board of directors; and

(7) Prepare Audit report.

 

 


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