Discuss the major activities and procedures performed by the auditor in each of the four phases of an audit.

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Discuss the major activities and procedures performed by the auditor in each of the four phases of an audit.


Answer:
The major activities performed in the planning and design phase (Phase I) are: preplan the engagement; obtain background information about the client; obtain information about the client’s legal obligations; perform preliminary analytical procedures; set materiality, and assess acceptable audit risk and inherent risk; obtain an understanding of internal control, and assess control risk; and develop an overall audit plan and audit program.
Phase II involves tests of controls, substantive tests of transactions, and an assessment of the likelihood of misstatements in the financial statements.
Phase III involves analytical procedures and tests of details of balances.
In Phase IV, the auditor performs the review for contingent liabilities, the review for subsequent events, accumulates final evidence, evaluates results, issues the audit report, and communicates with the client’s audit committee and management.


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