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Understanding the 7 major audit phases

Posted on May 25, 2016 4:00 pm;

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By Rebecca Langdon


An external auditor passes through 7 key formalised phases when they are auditing financial

statements for clients. The purpose of this article is to explain each of these phases at a high level.


1- Audit Planning

At this stage the auditor will work with the client to establish the scope of the audit, timescales, and,

resources. Responsibilities of the auditor and client are usually outlined within an engagement

letter. There will of course be a reliance by the auditor on key resources of the client, and provision

of key artefacts.


2- Obtain Client Understanding

The auditor needs to establish a sufficient level of background information on the client to assess

materiality of risk relating to misstatement of the financial statements.


3- Risk Assessment

The auditor will perform a risk assessment which questions:

  • What might go wrong?
  • What is the likelihood of it going wrong?
  • What is the monetary value of the exposure?


4- Test of Controls

The auditor will perform tests to check if key controls are operating efficiently, and are appropriately



5- Perform Audit

This stage is where the auditor checks if the account balances are correct. They will also check

transactions and disclosures.


6- Complete the Audit

The audit is finalised and some procedures are re-performed to ensure validity. At this point, final

decisions will be made relating to the financial statement disclosures. The auditor will hold meetings

with senior management at the client to discuss the findings.


7- Audit Report

The auditor will issue a standard unqualified audit report.

As outlined above, auditors follow a formalised process in their interactions with clients. For further

information and training, please take a look at the certification programs we offer such as the CIA or  CPA course.

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