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Just to confirm, in terms of obtaining sufficient appropriate audit evidence, you use two approaches in the following sequence:
1. Carry out a risk assessment to determine which areas are more susceptible to misstatement, using analytical procedures such as ratio analysis to identify interrelationships in data and trends that do not coincide with other findings.
2. Carry out tests of controls to determine the effectiveness of the internal control system at preventing, detecting and correcting material misstatements at the assertion level.
3. Carry out substantive procedures on all material items. These can be split into tests of details and analytical procedures. Tests of details include re-performance, recalculation, inquiry and confirmation etc, and analytical procedures again look at the interrelationships of data.
Is that about right?
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Further on from that, the tests of controls and substantive procedures are used to confirm the assertions (such as existence, valuation, completeness, rights and obligations etc.)?
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