Stages of Audit

Stages of Audit

The audit can be broadly classified into three stages i.e. identification of risk of material misstatement, obtain information (audit evidence) whether or not material misstatement exist, and forming an opinion based on conclusion drawn from the audit evidence.

1.    Identification of Risk

Auditor in first place identifies the risk of material misstatement in the financial statement. This is more like a planning of audit. In this stage auditor take detail information about entity and its operations for identification of risk areas.

2.    Obtain Audit Evidence

Second stage of audit is to get audit evidence (information) about the misstatement. Audit evidence is obtained by applying different audit procedures. Information gathered during risk assessment is used to design appropriated audit procedures.

3.    Forming opinion

Third and final stage of audit is forming an opinion based on the conclusion drawn on the bases of audit evidence obtained during the audit. Auditor is supposed to give appropriate opinion in the relevant circumstances.