1. Prepared by :Marzanur Rahman
Discussion on
Different Stages of
Audit and Contents
of Audit Working
Files Re: Audit
Practice Manual

2. DIFFERENT STAGES OF AUDIT
 CLIENT ACCEPTANCE/RETENTION
 AUDIT PLANNING
 TEST OF CONTROL
 SUBSTANTIVE PROCEDURES
 OPINION FORMULATION
 AUDIT COMPLETION FILES

3. According to Bangladesh Standard Auditing (BSA) 200 - Client
acceptance / retention is quality control procedure in conjunction with
relevant ethical requirements for an audit of financial statements.
The objective of performing client acceptance and retention is to
provide assurance to auditor in engagement level regarding :
CLIENT ACCEPTANCE/RETENTION
 No interest likely to conflict with carrying out the audit properly with
professional standard,
 Complying with BSA 200.4 requires compliance with ICAB and IFAC
code of ethics.
 The auditor’s report issued is appropriate in the circumstances

4. Issues dealing with acceptance procedure
1. Dependence on an audit client
2. Loans to or from a client; guarantees; overdue fees
3. Goods and services: hospitality
4. Litigation
5. Family or other personal relationships
6. Ex-partners or senior employees
7. Mutual Business Interest
Beneficial Interest And Trusteeships
8. Associated Firms
9. Provisions Of Other Services, Specialist Valuations And Advocacy
10. Rotation Of Audit Engagement Partner
11. Adequate Resources

5. AUDIT PLANNING
Naturally, it is reasonable to assume that planning occurs towards the
start of an audit engagement. however, according to BSA 300,
planning should not be seen as a discrete and separate part of the
overall audit. Planning often begins shortly after, or in connection
with, the completion of the previous audit
Similarly, the audit plan may be revised as the audit progresses, and
should not be viewed as being fixed in place once the main planning
phase has ended. for example, a significant event may take place as the
audit is in progress, meaning that the audit plan needs to be changed
The nature and extent of planning activities depends on the size and
complexity of the audit client, previous experience of the audit firm
with the client, and any changes in circumstance that may occur during
the audit

6. BAS 300 contains a requirement that the auditor shall undertake the
following activities at the beginning of the current audit engagement:
 Performing procedures regarding the continuance of the client
relationship and the specific audit engagement.
 Evaluating compliance with relevant ethical requirements, including
independence.
 Establishing an understanding of the terms of the engagement.
BAS 300 also states that audit planning activities should:
 Establish the overall audit strategy for the engagement
 Develop an audit plan.
Preliminary activity of audit planning

7. Audit Strategy
The audit strategy sets out in general terms how the audit is to be
conducted and sets the scope, timing and direction of the audit.
the audit strategy then guides the development of the audit plan,
which contains the detailed responses to the auditor’s risk
assessment. The features of audit strategy is described bellow :
1. Identify the characteristics o f the engagement
2. Ascertain the reporting objectives of the engagement to plan the
timing of the audit
3. Consider the factors that are significant in directing the audit
team’s efforts in the auditor’s professional judgment
4. Consider the results of preliminary engagement
5. Ascertain the nature, timing and extent of resources necessary to
perform the engagement

8. Audit Plan
According to BSA 300, once the overall audit strategy has been established,
an audit plan can be developed to address the various matters identified in the
overall audit strategy, taking in to account the need to achieve the audit
objectives through the efficient use of the auditor’s resources.
BAS 300 provides guidance on what should be included in the audit
plan, stating that the audit plan should describe:
 The nature, timing and extent of planned risk assessment
procedures
 The nature, timing and extent of planned further audit procedures
at the assertion level
 Other planned audit procedures that are required to be carried out
so that the engagement complies with BASs.

9. Test of Control
To obtain an understanding and audit evidence of design and
implementation of internal controls relevant to the audit.
Objective :
 To test the operational control system designed in appropriate
manner
 To test the implement effectiveness of control system
Nature of test of control
 Enquire or meeting
 Understating on Standard operating procedure (SOP)
 Walk through test with sample documents
 Physical verification

10. Timing of Tests of Controls
The timing of tests of controls depends on the auditor’s
objective and determines the period of reliance on those
controls. If the auditor tests controls throughout a period, the
auditor obtains audit evidence of the effectiveness of the
operation of the controls during that period. However, If
auditor plan to use the control test of the prior year, they just
need to test the control of extended period.

11. Extent of Tests of Controls
The more the auditor relies on the operating effectiveness of
controls in the assessment of risk, the greater is the extent of
the auditor’s tests of controls. In addition, as the rate of
expected deviation from a control increases, the auditor
increases the extent of testing of the control.
However, the auditor considers whether the rate of expected
deviation indicates that the control will not be sufficient to
reduce the risk of material misstatement at the assertion level,
the auditor may determine that tests of controls for a particular
assertion may not be effective.

12. Substantive Procedure
Substantive procedures are performed in order to detect
material misstatements at the assertion level. Substantive
procedure includes :
 Tests of details of classes of transactions,
 Verifying account balances,
 Examining material journal entries and other adjustment
entries,
 Checking disclosures requirements and
 Substantive analytical procedures.
Irrespective of the assessed risk of material misstatement, the
auditor should design and perform substantive procedures for
each material class of transactions, account balance, and
disclosure

13. Nature of substantive Procedure
The nature of substantive procedure depends on the objective
of the audit on particular accounts head. Like –
Substantive analytical procedures are generally more applicable
to large volumes of transactions that tend to be predictable over
time and where risk of material misstatement is acceptably low .
i.e. House rent, Investment
Tests of details are ordinarily more appropriate to obtain audit
evidence regarding certain assertions about account balances,
including existence and valuation. i.e. Inventory, Receivable

14. Timing of substantive Procedure
As like as nature the timing of substantive procedure depends
on the objective of the audit . Substantive test can be
performed at end of audit period or at any interim time. Before
choosing the time of substantive procedure, auditor should
consider –
• The control environment of audited entity
• Availability of the information
• Objective of substantive procedure
• Assessed risk of material misstatement
• The nature or class of transaction

15. Extend of substantive Procedure
The greater the risk of material misstatement, the greater the
extent of substantive procedures. Because the risk of material
misstatement takes account of internal control, the extent of
substantive procedures may be increased as a result of
unsatisfactory results from tests of the operating effectiveness
of controls. However, increasing the extent of an audit
procedure is appropriate only if the audit procedure itself is
relevant to the specific risk.

16. Audit Opinion
The final outcome of an audit is to form an independent audit
opinion based on the evaluation of previous stages. The
evaluation should include whether the financial statements are
prepared, in all material respects, in accordance with the
requirements of the applicable financial reporting framework
That conclusion shall take into account:
 The auditor’s conclusion, in accordance with ISA 330,
whether sufficient appropriate audit evidence has been
obtained
 The auditor’s conclusion, in accordance with ISA 450,
whether uncorrected misstatements are material, individually
or in aggregate

17. Opinion Tree

18. Audit Completion
Audit completion procedures are to ensure that. competent,
relevant and reasonable audit evidence was obtained to form an
opinion on the appropriate manner. There are several process
need to be carried out for audit completion. Those are :
 Audit file index
 Partner completion (initial & final)
 Audit standard review questionnaire
 File complétion questionnaire (initial & final)
 Critical review
 Justification of report
 Summary of unadjusted error
 Final analytical review

19. COMPONENT OF AUDIT WORKING
FILE
 AUDIT PLANNING FILES
 AUDIT CONTROL FILES
 AUDIT PROCEDURES FILES
 AUDIT PROGRAM FILES
 AUDIT PERMANENT FILES
Details of audit working file will be described in next session