Audit Procedures and Factors Samples †MyAssignmenthelp.com

Question: Discuss about the Audit Procedures and Factors. Answer: Impact on audit procedure There are various factors which can affect the audit procedure conducted by auditors of a company. In this part of the report, we will discuss three of these factors that are a Risk assessment, Audit procedures and Audit evidence. Risk assessment For preparing an efficient audit plan auditor should risk assessment procedure. Risk assessment procedure can be defined as a process of identification of areas of business which are more likely to have material misstatement as compared to other areas. During the effective audit, process auditor should ensure that more importance is given to these areas. If there is ineffective risk assessment procedure then there is a chance that auditor may ignore such areas while preparing samples for examination of books and accounts (Arens et.al, 2012). These areas should be included in samples so that sample represents the whole population. Audit procedure Auditor procedure adopted by an auditor during an audit is dependent upon the quality of financial statement and books of accounts presented by the client. Auditor prepares audit procedure to test the quality of financial statement so that he can obtain sufficient audit evidence. If proper audit procedures are not implemented by auditor then there is a high chance of the wrong opinion on such financial statements. For this purpose, the auditor should take written representation from the management that all the transactions are being recorded in books of accounts. Audit evidence Audit evidence can be defined as the information and facts collected by an auditor of a company to review companies internal control, books of accounts and financial statements. Main objective collection of audit evidence is to determine whether the financial statements and books of accounts are in line with applicable regulations and generally accepted accounting standards (Arens et.al, 2012). If sufficient audit evidence is not collected then there is the risk that audit opinion doesnt reflect the true position of the company. Audit approaches Following are the four essential audit approaches- Substantive procedure audit approach In this audit approach, the main focus of the audit is on transactions of the company instead of internal control implemented on such statements. This approach is very useful when there is no internal control or the internal control is very weak. The sample size taken in such approach is very high as there is a risk of detection risk in such cases. Balance sheet approach In this approach main focus of the audit is on high-value items of the balance sheet of a company. Auditor works on an assumption that if values in the balance sheet are correct than the related transactions will also be correct. System based approach This approach is just opposite of substantive procedure audit approach. In this approach, the auditor decides audit sample on the basis of risk assessed on examination of internal controls implemented by the company. To ensure that internal controls are sufficient, auditor needs to conduct regressive testing and validation Risk-based approach This is the most commonly used audit approach in which auditor tries to reduce the work to be done in audit through identification of high-risk areas of the business organisation. Details examination is conducted for such areas and other areas are examined leniently (Johnstone et.al, 2013). References Arens, A.A., Elder, R.J. and Mark, B., 2012.Auditing and assurance services: an integrated approach. Boston: Prentice Hall. Johnstone, K., Gramling, A. and Rittenberg, L.E., 2013.Auditing: a risk-based approach to conducting a quality audit. Cengage Learning.