03 AF L1 Flow of The Audit LM 00 LSL

Flow of the
audit
Audit Foundations Level 1
Internal use only
Agenda 3.1
At the end of this module, you will

1 Introduction be able to:
1. Identify the order and phases in
an audit.
2 Discover the flow of the audit
3 Wrap up
© 2021 Copyright owned by one or more of the KPMG International entities. KPMG International entities provide no services to clients. All rights reserved. 2
Discover the
flow of the audit
Activity: The flow of the audit 3
Purpose: Determine the order of phases in the flow of the audit 3.2
and what activities happen in each phase.
Steps
1 Determine where to place the phases on the flow of the audit

circle.
2 Brainstorm what kind of activities might be included in each

of the phases.
3 Turn to Activity 3.2 in your learner workbooks to write down

your responses.
The KPMG Clara workflow
Phase vs. activity
Phase Activity (or attachment)

 Preliminary activities  The work necessary to
 Risk assessment complete the audit
and planning  May be referred to as
 Interim response ‘milestones’
 Final response
 Completion
Phase vs. activity
Activities are
mapped to
phases!
Phase Activity (or attachment)

 Preliminary activities  The work necessary to
 Risk assessment complete the audit
and planning  May be referred to as
 Interim response ‘milestones’
 Final response
 Completion
It’s an iterative process!
Preliminary
Risk assessment
activities
and planning
Completion
Final response
Interim response
It’s an iterative process!
 Constantly revisit risk
Preliminary
assessment and activities
Risk assessment
planning decisions. and planning
 Risk assessment and

planning is not Completion
something you do
once and then forget
about.
Final response
Interim response
What is done in each phase?
Preliminary activities
► Perform pre-engagement activities
► Establish an understanding of the terms of the audit
Interim and Final

Risk assessment and planning response
► Perform procedures to identify risks ► Perform control
► Develop an audit response to the procedures
risks identified ► Perform substantive
procedures
Completion
► Perform procedures to conclude sufficient and appropriate audit
evidence was obtained in response to the identified risks
► Draft and issue the audit opinion
10
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Risk assessment and planning
► 2.1.1. Entity and environment
► 2.1.2. Minutes
► 2.1.3. Planning analytics
► 2.1.4. Inquiries
Preliminary activities ► 2.1.5. Business processes
► 1.1.1. Pre-engagement ► 2.1.6. RAPD
► 1.1.2. Strategy ► 2.2.1. Components of IC: CERAMIC
► 1.2.1. Initial independence ► 2.2.2. Components of IC: IT Understanding
► 1.3.1. Materiality ► 2.3. Fraud
► 2.4. Overall response
► 3.X. Business process
► 3.X.1. Understanding (walkthroughs)
► 3.X.2. Risks
► 3.X.3. Response
— CA. Control activities (D&I)
— SUB. Substantive procedures
Completion ► 1.1.3. Audit plan
► 1.2.2 Independence ► 1.1.5. Internal audit
confirmations ► 1.3.2. PM & AMPT
► 1.3.3. Re-evaluate materiality ► 1.4.1. Communicate plan
► 1.4.2. Communicate results
► 2.2.3. Components of IC: SICD
► 3.1.4. SAM Interim response
► 3.1.6. Subsequent events Final response ► 1.0.2. D&A Assessment
► 3.X.4. Results (Business process) ► CA. Control activities Aide
► 4. Conclusions and reporting (TOE) ► CA. Control activities
► SUB. Substantive (TOE)
► 3.1.5. Evaluate FS ► SUB. Substantive
11
Two-phase audit
Planning Final response
► Perform pre-engagement ► Perform control procedures
activities ► Perform substantive procedures
► Establish an understanding ► Obtain sufficient and appropriate
of the terms of the audit evidence that responds to the
► Perform procedures to identified risks so you can form
identify risks your conclusions
► Develop an audit response ► Draft and issue the audit opinion
to the risks identified
12
Engagement structure in the
Workflow
Risk assessment and

Preliminary activities
Interim response
Final response
Completion
Planning
planning
Engagement
Engagement type structure # of phases
ISA: Larger
5-phase structure 5 X X X X X
* Theengagement*
use of the 2-phase structure template is intended for engagements executed in two smaller phases, and generally fewer
than 1,000 hours in total. All other private engagements should use the 5-phase structure template.
ISA: Smaller
2-phase structure 2 - - X - X -
engagement*
The number of phases does not impact the activities performed – it impacts how the activities are grouped and tracked.
13
Carrie is wondering …
Why do I need to know about the

flow of the audit?
Some join
here
Preliminary activities Risk assessment and
planning
Completion
Some join
here
Final response
Most join Interim response

here
15
Carrie seems concerned …
Wait, let me write this all down in

my notes. This is a lot to remember...
Wrap up
Question 1
In which phase of the audit do you expect to spend most
of your time?
A Risk assessment and planning
B Interim response
C Final response
D Completion
Key points to remember!
Risk assessment and planning is an iterative process.
The five phases of the audit are Preliminary activities, Risk

assessment and planning, Interim response, Final response
and Completion.
It’s important to understand where in the flow of the audit you

are joining your engagement and how your work fits into the
audit phases.
Activities represent the work necessary to complete the audit

and are mapped to phases.
What
questions
do you have?
Internal use only
© 2021 Copyright owned by one or more of the KPMG International entities. KPMG International entities
provide no services to clients. All rights reserved.
KPMG refers to the global organization or to one or more of the member firms of KPMG International
Limited (“KPMG International”), each of which is a separate legal entity. KPMG International Limited is a
private English company limited by guarantee and does not provide services to clients. For more detail
about our structure please visit home.kpmg/governance.

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03 AF L1 Flow of The Audit LM 00 LSL

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Flow of the

At the end of this module, you will

1 Determine where to place the phases on the flow of the audit

2 Brainstorm what kind of activities might be included in each

3 Turn to Activity 3.2 in your learner workbooks to write down

Phase Activity (or attachment)

Phase Activity (or attachment)

 Risk assessment and

Interim and Final

Risk assessment and

Why do I need to know about the

Most join Interim response

Wait, let me write this all down in

A Risk assessment and planning

The five phases of the audit are Preliminary activities, Risk

It’s important to understand where in the flow of the audit you

Activities represent the work necessary to complete the audit

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