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Chapter 10

8.2 Audit planning

 Objectives of the audit.

 Conduct of the audit.

 Resources and timing.

8.3 Audit risk

 Inherent risk The risk that an amount in the financial statements might
be stated as a materially incorrect amount, ignoring the
existence of existing internal controls.

 Control risk The risk that the existing controls are not sufficient to
prevent or detect a material misstatement.

 Detection risk The risk that the auditors’ substantive tests will not reveal
a materially incorrect amount in the financial statements, if
such an error exists.

8.4 Systems investigation and documentation - Ascertaining systems

 Flowcharts.

 Interviews.

 Systems documentation.

 Observation.

8.5 Types of audit testing

 Compliance testing Test of controls

 Substantive testing Test of balances or transactions

 Analytical review Examination of ratios, trends and changes in balances.
Can be used at planning, substantive testing and overall
review stages of an audit

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