|
ACTIV- ITIES |
STAGES | ||||
|---|---|---|---|---|---|
| CA/R | AP | CT | ST | OF | |
| PL | SP | TP | OP | OP | OP |
| EG | PK | DK | EofO | EofM | CFS |
| EE | AR1 | DR*2 | DR*3 | AR4 | AR5 |
| DM | A/R | AA | CR? | CAB | AO |
After the auditor evaluates the extent and significance of any exceptions found, the auditor decides whether reliance can continue to be placed upon those internal control procedure upon which s/he has planned reliance. The auditor is assisted in this decision by comparing the values of CR2 and CR3.
For example, if the value of CR3 is more than the value of CR2 (i.e. control procedures are not as effective as first believed) then, assuming there are no changes to either AR*2 and IR2 (i.e. assuming AR*2=AR*3 and IR2=IR3), by substituting the new value of control risk in the audit risk equation, the value of DR*3 must reduce relative to the previously estimated value of DR*2. This means the auditor will revise the audit approach so that less reliance is placed on control procedures and more (and/or more reliable) substantive evidence is gathered. To determine the revised audit approach, refer to the audit approach table in he glossary.
On the other hand, if the value of CR3 is less than the value of CR2 (i.e. control procedures are more effective than first believed) then, using the audit risk equation as described above, the value of DR*3 must increase, in comparison to the previously estimated value of DR*2. As a consequence, the auditor may revise the audit approach so that more reliance is placed on control procedures and less (and/or less reliable) substantive evidence is gathered. However, in this instance, if the revised approach is less efficient than the approach first planned, the auditor will, if acting rationally, revise the audit approach [fn].
If the value of CR3 is the same as CR2 and assuming there are no changes to the values of either AR*2 and IR2, then the planned audit approach will remain unaltered.
This completes the third audit stage.
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