AngelAngelAngel sent a query into AccountancyStudents asking for a brief summary on what an auditor does from the start of an audit to the end.  A basic outline of the audit process can be summarised using a step-by-step list:

Step 1
The auditor will do the audit planning including risk assessments.

Step 2
As part of the audit planning, the auditor will assess the entity’s internal control environment and accounting systems and relate these to the risk assessment.

Step 3
The auditor devises the audit strategy including considering how audit evidence is going to be obtained.

Step 4
The auditor will obtain audit evidence on the amounts and disclosures in the financial statements by undertaking a mix of tests of control and detailed substantive testing.  In testing the internal controls, the auditor considers whether these controls reduce the risk of material misstatement.  If the auditor concludes there are weaknesses in the control environment, then the auditor defaults back to more detailed substantive testing.  Any weaknesses are notified to management, or those charged with governance, as soon as is reasonably practical.

Step 5
The auditor undertakes a review of the financial statements.

Step 6
The auditor’s report is issued.

The above is a basic interpretation of the audit process but students need to bear in mind the overall objective of the audit, which is to form an opinion on whether the financial statements give a true and fair view (or present fairly in all material respects) of the state of an entity’s affairs at the reporting date.  There is a lot more to the audit process than the rudimentary step-by-step approach detailed above!

The audit section of the articles contain lots more articles regarding the subject of auditing.

Kind regards

Steve Collings