Audit Procedures: When designing tests of controls and substantive tests of transactions, auditors emphasize satisfying the transaction-related audit objectives developed in Chapter 6. Auditors follow a four-step approach to reduce assessed control risk:
1. Apply the transaction-related audit objectives to the class of transactions being
tested, such as sales.
2. Identify key controls that should reduce control risk for each transaction-related
audit objective.
3. Develop appropriate tests of controls for all internal controls that are used to reduce
the preliminary assessment of control risk below maximum .
4. For potential types of misstatements related to each transaction-related audit objec-
tive, design appropriate substantive tests of transactions, considering deficiencies
in internal control and expected results of the tests of controls in step 3.
