Red items block “ready”
While an open point remains in the cockpit, the engagement cannot be marked as finished. The software enforces this, not a reminder.
The audit process
One engagement. Five phases. Every decision with its reasoning.
A statutory audit is a cycle, not a checklist. Audit Chen maps it the way it runs in practice: we start with the question whether we may audit at all, and end with an opinion that matches the evidence. Where something is missing, the path loops back.
Phase 1
Engagement acceptance
Before the first entry is looked at, it is settled whether we may audit, and on which conditions.
What happens here
- Clarify audit obligation and size class
- Check independence and ethics
- Have the engagement terms and acceptance checklist signed off
- Send the document request to the client
Tools in this phase
Size classEthics & independenceDocument requestAudit controllingRead documents
Decisions
Is an audit obligation given?
YesContinue to independence.
NoThe engagement lapses. The reason is recorded.
Is independence threatened without an effective safeguard?
YesAcceptance is declined. Reasoning goes into the record.
NoContinue to acceptance.
Has the engagement partner signed off on the acceptance?↺ Loop until the point is cleared
YesThe document request goes to the client.
NoBack to the checklist.
Phase 2
Planning & preliminary work
We understand the client before we assess its numbers. Planning follows risk, not chance.
What happens here
- Think through the business and fraud risks
- Set up the overall plan and progress tracking
- Cleanse journal data and check its quality
- Set the risk focus areas
Tools in this phase
Overall planAudit program generatorKPI dashboardRisk networkProcess miningAML checkData cleansingData quality
Decisions
Is the journal complete and plausible?↺ Loop until the point is cleared
YesContinue to risk assessment.
NoCorrect the import or the data, then check again.
Are there significant risks?
YesAn audit program with a focus on these risks.
NoStandard procedures.
Phase 3
Fieldwork & journal workshop
This is where the evidence is built: entry by entry, with sampling, reconciliation and analysis.
What happens here
- Set and justify materiality
- Document internal controls for each process
- Run the journal agents and analyses
- Work through confirmations, reconciliations and samples
Tools in this phase
MaterialityInternal control documentationJET engineJournal agentsMoney-flow forensicsConfirmationsSamplingAnalyticsDocument & bank matchingThree-way matchFixed-asset roll-forwardOpen-items matchingLead sheetsFinCrime studio
Decisions
Are there suspicious entries?
YesCheck the money flow and the document trail, obtain evidence.
NoContinue with analytics.
Do analytics deviate beyond the tolerance?↺ Loop until the point is cleared
YesFind the cause. Explained: continue. Unexplained: individual item review.
NoContinue to sampling.
Are there errors in the sample?
YesProject them. If the total exceeds tolerable misstatement, a correction is requested. Otherwise it is documented.
NoContinue to completion.
Phase 4
Completion
The financial statements are checked as a whole: cut-off, obligations, going concern and disclosures.
What happens here
- Check cut-off and unrecorded liabilities
- Assess going concern
- Reconcile notes and management report with the figures
- Check mandatory content against the document text
Tools in this phase
Cut-offUnrecorded liabilitiesGoing concernNotes tie-outManagement reportDocument reconciliation
Decisions
Is there a material uncertainty about going concern?
YesDisclose it in the report. The duty to report is checked.
NoNo concern, continue.
Is there a need for reorganisation under the URG?
YesNote it in the report.
NoContinue to reporting.
Phase 5
Reporting
An opinion that fits the evidence, and a file that explains itself.
What happens here
- Go through the completion cockpit traffic lights
- Draft the auditor's report and the management letter
- Choose the opinion and release it with a second person
- Complete the file checklist and archive the file
Tools in this phase
Completion cockpitAuditor's reportManagement letterReview cockpitFile checklistAudit file
Decisions
Are uncorrected misstatements material?
YesCheck whether the opinion must be qualified or adverse.
NoContinue.
Does the chosen opinion fit the analysis?↺ Loop until the point is cleared
YesContinue to release.
NoThe app points it out. Reasoning or adjustment.
Are there open red items in the cockpit?↺ Loop until the point is cleared
YesNot ready. Back to the affected phase.
NoRelease by a second person, then the checklist.
Opinionsunqualifiedqualifiedadversedisclaimer
Principles
Three rules that cannot be bypassed
Four eyes on release
The person who prepares and the person who releases are never the same. The opinion is released with a second person.
Every decision with reasoning
Whether an item was closed, deferred or declined: the reasoning is in the record and can be traced.
Simplified illustration. The audit follows the applicable standards. Audit Chen supports the work but does not replace the auditor's judgement.
Try the process yourself
The academy explains each phase in short lessons with an animated film, free of charge and at your own pace.