Professional Documents
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Chapter 13
Tests of control
Analytical procedures
Procedures Substantive
Types of Tests of
to obtain an tests of
audit + controls +
understanding transactions
tests (TOC)
of internal control (STOC)
Tests of Sufficient
Types of Analytical
details of competent
audit procedures + balances = evidence
tests (AP)
(TDP) per GASS
Ending Ending
balance balance
Audited by AP and TDB
Documentation
Confirmation
examination
Observation
Physical
Type of Test
Procedures for internal control
Tests of controls
Substantive tests of transactions
Analytical procedures
Tests of details of balances
2006 Prentice Hall Business Publishing, Auditing 11/e, Arens/Beasley/Elder 13 - 8
Relationship Between Types of
Tests and Evidence Type of Evidence
Reperformance
performance
Inquiries of
the client
Analytic
Type of Test
Procedures for internal control
Tests of controls
Substantive tests of transactions
Analytical procedures
Tests of details of balances
2006 Prentice Hall Business Publishing, Auditing 11/e, Arens/Beasley/Elder 13 - 9
Audit Assurance at Different Levels of
Internal Control Effectiveness
Acceptable C3
assurance AUDIT ASSURANCE
Audit assurance
C2 from control risk
assessment and
tests of control
C1
Audit assurance
from substantive
No tests
assurance
A C B
INTERNAL CONTROL EFFECTIVENESS
Weak control Strong control
Reliance on controls: C3 None, C2 Some, C1 Maximum
2006 Prentice Hall Business Publishing, Auditing 11/e, Arens/Beasley/Elder 13 - 10
Learning Objective 3
Procedures to obtain
an understanding Tests
of internal control of controls
Audit 1 E E
Audit 2 M M
Audit 3 M N
Audit 4 M M
Amount of testing: Extensive, Medium, Small, None
2006 Prentice Hall Business Publishing, Auditing 11/e, Arens/Beasley/Elder 13 - 15
Variations in Evidence Mix
Substantive Tests of
tests of Analytical details of
transactions procedures balances
Audit 1 S E S
Audit 2 M E M
Audit 3 E M E
Audit 4 E E E
Amount of testing: Extensive, Medium, Small, None
2006 Prentice Hall Business Publishing, Auditing 11/e, Arens/Beasley/Elder 13 - 16
Learning Objective 5
Part 1:
Tests of controls and substantive
tests of transactions
Part 2:
Analytical procedures
Part 3:
Tests of details and balances
Items to select
Determine extent of
testing controls. Timing
2006 Prentice Hall Business Publishing, Auditing 11/e, Arens/Beasley/Elder 13 - 20
Four-Step Approach to Designing
Control and Substantive Tests
Identify key controls and
Apply transaction- related
make a preliminary
audit objectives to a class
assessment of control risk.
of transactions. (Step 1)
(Step 2)
Design analytical
procedures.
Audit objectives
Types of tests
Evidence decisions
Types of evidence
2. Tests of controls
4. Analytical procedures
1. Audit procedures
2. Sample size
3. Items to select
4. Timing of performance
1. Physical examination
2. Confirmation
3. Documentation
4. Analytical procedures
5. Observation
6. Inquiry of the client
7. Reperformance
Perform analytical
Plan and design procedures and
Phase I an audit approach. Phase III tests of details
of balances.
Perform tests of
Complete the
controls and
Phase II substantive tests Phase IV audit and issue
an audit report.
of transactions.
Yes
Perform tests of controls.
High or
Low Medium
unknown
Evaluate results.