Summary of the Audit Process

Pre-Engagement Activities

Volume II – Form # and Volume I

Function Title Reference
1. Acceptance of client. AP 1 Engagement Acceptance
Obtain preliminary Form (for new clients) Sections 3.1 and
understanding of client’s 3.2
business and assess AP 2 Client Continuation Form
risk/benefit of (for existing clients) Section 3.1
acceptance.
2. Prepare Audit
Engagement Letter Letter 1 Engagement Letter Section 3.3
and/or contract.

Audit Planning Activities

Volume II – Form # and Volume I

Function Title Reference
1. Obtain in-depth AP 3a Knowledge of Client’s
understanding of Business
client’s business and AP 3b Knowledge of Client’s Sections 4.2 and
internal control Internal Control System 4.3
structure. AP 3c Knowledge of Client’s
Accounting and Financial
Reporting Systems
AP 3d Walk-Through Checklist
AP 3e Financial Reporting
Documentation Form

2. Perform evaluation of AP 3h Questionnaire for Risk of

control and inherent Fraud Section 4.4
risk. AP 3j Inherent and Combined
Risk Assessment Form
3. Determine materiality AP 3f Materiality Worksheet for
limits. Audit Planning Purposes Section 4.5
4. Determine the audit AP 3g Planning Worksheet to
approach Determine Extent of Substantive Section 4.6
Testing
5. Design substantive AP 10 – 80 Audit Work Programs
tests (should be modified for specific Section 5
engagement)
6. Assign audit personnel
and prepare a time AP 3i Personnel Assignment and Section 4.7
budget for audit work Time Budget for the Audit

Audit Fieldwork Activities

Volume II – Form # and Volume I

Function Title Reference
1. Perform analytical Audit Work Programs (modified
procedures and for specific engagement): Section 6.1. 6.2
substantive testing. AP 10 Cash and 6.3
AP 15 Accounts Receivable and
Sales
AP 20 Prepaid Expenses and
Other Assets
AP 25 Investments
AP 30 Inventories
AP 32 Physical Inventory Counts
AP 35 Fixed Assets
AP 50 Accounts Payable and
Purchases
AP 55 Accrued Liabilities
AP 60 Debt
AP 70 Revenue and Expense
AP 80 Equity
AP 4a Summary of Audit
Differences
C-1 through C-4 Sample Audit
Confirmations
2. Document audit
procedures performed Section 6.4 and
and conclusions Appendix II
reached.
Finalizing the Audit

Volume II – Form # and Volume I

Function Title Reference
1. Review audit working
papers at appropriate All documentation prepared in Section 6.4
levels (in accordance planning and conducting the audit
with firm policy). work.

2. Evaluate audit AP 4b Evaluation of Audit

differences. Differences Section 7
3. Obtain and review
financial statements AP 125 Audit Report Checklist Section 8
prepared by the client
(or assist client in
preparing).
4. Perform audit AP 100 Subsequent Events
conclusion procedures: AP 105 Contingencies and
Perform review of Litigation Section 8
subsequent events and AP 110 Audit Review and
contingencies. Approval Form
Consider going AP 115 Audit Completion
concern assumption. Questionnaire
Obtain Management AP 120 Going Concern
Representation Letter Questionnaire
and Legal Letter 2 Management
Representation Letter. Representation Letter
Perform final Review Letter 3 Legal Representation
and Approval. Letter

5. Issue the Audit Example Audit Reports 1-11 Section 9

Report.