Audit procedures are designed to gather evidence and should be viewed as processes that continuously seek to obtain and evaluate sufficiently appropriate audit evidence. However, in practical terms, the bulk of appropriate audit evidence supporting the auditor’s financial statement assertions is the result of testing conducted during Phase III of the Federal Government’s audit model. The testing phase encompasses both internal control and substantive testing.
Throughout the audit process, the objective is the continual assessment and validation of the nature of audit risk, which, in its simplest form, is the risk of the auditor unknowingly issuing a clean audit opinion when the financial statements are materially misstated. AU-C 200 states that audit risk encompasses: