GENERAL FLOWCHART OF AUDIT

PLAN
THE
AUDIT
Assess
inherent
risk
UNDERSTAND & TEST INTERNAL CONTROL
Assess control risk

PERFORM
SUBSTANTIVE TEST
Establish detection risk
ISSUE AUDIT REPORT
Evaluate audit risk

PLANNING PHASE
CONFIRM AUDIT
ARRANGEMENTS

IDENTIFY
POTENTIAL
PROBLEM AREAS

DEVELOP AN
AUDIT STRATEGY

ASSESS
INHERENT RISK

PERFORM
ANALYTICAL
PROCEDURES

PREPARE THE
AUDIT PROGRAM

ESTIMATE
RELIANCE ON
INTERNAL
CONTROL

ESTABLISH
PLANNING
MATERIALITY

SCHEDULE THE
AUDIT WORK

SUCCESSOR & PREDECESSOR

SUCCESSOR INITIATES
COMMUNICATION

OBTAINS PERMISSION FROM

PROSPECTIVE CLIENT TO INQUIRE
OF PREDECESSOR

CLIENT
RESPONSE

YES

NO

CONSIDER REJECTING
PROSPECTIVE CLIENT
INQUIRIES OF PREDECESSOR AS TO:
Integrity of management
Disagreements with management
Reasons for change

PLANNING PHASE

The work is to be adequately planned and

assistants, 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 or
dishonest.

THROUGHOUT THE PLANNING

PROCESS THE AUDITOR SHOULD
CONSIDER
FRAUD RISK FACTORS

IN PLANNING THE AUDIT, AN

AUDITOR SHOULD CONSIDER:
Inherent risk
Anticipated reliance on internal
control
Preliminary judgment about
materiality
Potential problem areas in the
financial statements
Type of audit report anticipated

ERRORS
UNINTENTIONAL MISSTATEMENTS OR
OMISSIONS OF AMOUNTS OR
DISCLOSURES.

MISTAKES IN
GATHERING OR
PROCESSING
ACCOUNTING DATA

MISINTERPRETATIO
N OR OVERLOOK
FACTS, CAUSING
ACCOUNTING
ESTIMATES TO BE
INCORRRECT

MISTAKES IN
APPLICATION OF
ACCOUNTING
PRICIPLES RELATING
TO AMOUNT,
CLASSIFICATION,
MANNER OF
PRESENTATION, OR
DISCLOSURE

FRAUD
INTENTIONAL MISSTATEMENTS OR
OMISSIONS OF AMOUNTS OR
DISCLOSURES IN FINANCIAL STATEMENTS.
MANIPULATION,
FALSIFICATION, OR
ALTERATION OF
ACCOUNTING
RECORDS OR
SUPPORTING
DOCUMENTS

INTENTIONAL
MISINTERPRETATION MISAPPLICATION OF
OR INTENTIONAL
ACCOUNTING
OMISSION OF
PRINCIPLES
DISCLOSURES OF
REATING TO
EVENTS,
AMOUNTS,
TRANSACTIONS, OR
CLASSIFICATION,
OTHER SIGNIFICANT
MANNER OF
INFORMATION.
PRESENTATION, OR
DISCLOSURE.

ERRORS & FRAUD

AUDITORS RESPONSIBILITY

ASSESS RISK

OPINION IS BASED ON REASONABLE ASSURANCE, AUDITOR NOT AN

INSURER

SUBSEQUENT DISCOVERY OF MATERIAL MISSTATEMENT DOES NOT,

IN & OF ITSELF, EVIDENCE INADEQUATE PLANNING, PERFORMANCE,
OR JUDGMENT

DESIGN & PERFORM AUDIT TO PROVIDE REASONABLE ASSURANCE