Niño Mary N.

Savillo BSA

“Phases of Audit Process”

According to the American Accounting Association, auditing is a systematic

process by which a competent, independent person objectively obtains and evaluates
evidence regarding assertions about economic actions and events to ascertain the
degree of correspondence between those assertions and established criteria and
communicating the results to interested users. Its objective is to provide a reasonable
assurance that every engagements are fairly presented, conducted effectively and
efficiently, and an organization confirms with the Philippine Standards on Auditing.

In an auditing process, the first phase is planning. This is where an auditor

should gain awareness on the organization’s policies, procedures and inquiring related
regulations that are applied in the operation of it. In this phase, an auditor must have
evidence that an organization complies with those laws or regulations. Testing phase
is the second stage in an auditing process. The auditor evaluates the financial
information whether there may be noncompliance or not. This checks if fairness is
achieved in evaluating those information. In this stage, an auditor may also indicate
possible fraud or discrepancies in the organization’s operation. The auditor will
discuss this to the management of an organization and documentation is also needed.
The next stage is the completion phase. During this phase, the auditor will review all
the evidences gathered during the evaluation. A written representation will be shown
to the management. The representation will comprise of processes which help the
management to improve its operation, a summary of misstatements and discussed
whether the effect would be material to the entity. The auditor’s report must also be
considered. If it affects materially, the auditor will request the management to revise
its financial statements. A qualified or adverse opinion will be issued by the auditor in
case there is noncompliance with the laws or regulations and if the management
refused to revise the financial statements. An auditor may issue a qualified or
disclaimer opinion in case there is a scope of limitation that hinders the auditor from
obtaining sufficient appropriate evidence in evaluating the effect of noncompliance
with laws or regulations.
 Those phases in an auditing process play a vital role in ensuring that an auditor
provided a reasonable assurance that an entity is free from any material
misstatements. Without the planning phase, an auditor cannot analyze the operation of
the management whether if there are risks of material statements arising and fraud is
usually obscured making it difficult for an auditor to notice it. The testing phase is
also important in determining whether the management’s policies and procedures are
strictly implemented according to its applicable financial reporting framework or
standards. It also exemplifies what opinion will be issued based on the evidences that
will be gathered by the auditor.