AUDIT PROCESS (OVERVIEW)
1. Client acceptance and Continuance decisions
2. Performing risk assessments
3. Obtaining evidence about internal control
operating effectiveness [test of controls]
4. Substantive test
5. Completing the audit and making reporting
decisions]
I. WHEN TO ACCEPT
1. client acceptance
a) competence,
capability,
resources
[auditor/audit team must obtain these]
b) ethical requirements – code of ethics [integrity,
confidentiality, objectivity, professional dure
care, and independence]
c) integrity of the client management – this is on
the part of the client. When there is integrity,
there can be reliance of true information. The
auditor must avoid clients without integrity
because it may affect public’s trust.
 Paano malalaman ang integrity? Thru
PREDECESSOR AUDITOR (dating auditor
ng client. Need ng consent ni client para
pedeng makausap si P.auditor dahil
bound pa rin ng confidentiality si client.
Si p.auditor din need humingi ng
consent. If nagreject si auditor, pwedeng
maging grounds yon ng lacking of
integrity.
d) Agreement of terms of audit engagement
 Engagement letter – responsibilities of
client and auditor, type of engagement,
scope of engagement. [bawal magstart
ang audit nang walang engagement
letter]
 Management representation letter –
responsibility of management. Sinasabi
ni management na ina-acknowlegde
niya ang responsibility niya, and lahat ng
evidence na binigay niya ay valid. Sa dulo
ng process binibigay.
2. Initial Audit Planning
a) Client continuance
 May nagbago ba? Are there any
revisions? Para matignan if applicable pa
bas a competence ng auditor, or baka na
aapektuhan na ang integrity ng
management
 Reminder on terms of audit engagement
– baka need na magsend ng engagement
letter ulit if meron change in
management or ownership, or kapag
nakalimutan na ng terms. Pero if hindi,
not necessary.
b) Initial Audit Planning
- Planning is not a discrete
phase, but continual and
iterative
- Hindi siya sa una lang
ginagawa, continuous siya
ginagawa hanggang ma-issue
ang audit report.
II. RISK ASSESSMENTS
- revisions of assessment is continuous
a) Risk assessment procedures
 INQUIRY
 Analytical procedures – ratios and trends
[bakit biglang tumaas/bumaba? Notice
abnormalities]
 Observation and inspection – hindi sapat
na magtanong ka lang. need mo ng
inspections of documents, etc.
 Other factors considered – prior
information, and engagement team
discussion [malaking tulong pag naguusap usap ang key members para ma
share ang assessment or info to asses
risks,
normally
obtained
thru
experience]
b) Understanding the entity and its environment
 Industry – accounting practices, and
laws and regulations
 Nature – operations, ownership and
governance
[partnership/corpo],
structure
 Accounting Policies – estimates [ano ang
procedures niya pag may uncertainty]
 Objectives and Strategies – baka hindi
sila nagkakaparehas ng objectives and
strategies na pwedeng magpataas ng
risk
 Methods of measuring and reviewing
performance – may material ba siyang
bonus kapag tumaas ang revenue, etc
[baka kasi may pressure doon ang
management para lang ma achieve ang
targets]
c) Understanding the entity’s internal control
 Over financial reporting
d) Materiality