Integrated Audit
An integrated audit is when there is an audit of internal controls over financial reporting and an audit of financial statements both being conducted on an entity. The integrated audit integrates the audit of financial statements and the audit of internal controls and is conducted by the same auditor. Both the audit of financial statements and the audit of internal controls are conducted not only by the same auditor but are conducted at the same time. An integrated audit includes both an analysis of internal controls and analysis of potentially misstated accounts which is how the integrated audit mainly differs from a primarily substantive approach. The results of the audit of internal controls will provide relevant evidence for the audit of the financial statements and vice versa, thus creating an “integrated” audit. The results of the internal controls audit may alter an auditor’s planned substantive tests for the financial statement audit. For example, if an auditor detects an internal control that is ineffective it will know what accounts that internal control affect thus allowing the auditor to easily identify accounts for it to analyze for possible material misstatements. The evaluation of the internal controls is also affected by the results of the financial statement substantive tests. For example, if the financial statement audit finds an account to be misstated, the auditor will be able to identify what internal controls could have prevented or detected this misstatement, thus allowing the auditor to easily identify which controls to test for ineffectiveness. `
The audit of an entity’s internal controls over financial reporting is conducted in a similar manner to the financial statement audit. The internal control audit is first planned and auditors must analyze which internal controls should be tested with the top-down, risk-based approach. After identifying which controls need to be tested, the design and operating effectiveness the controls are tested for control deficiencies which are then evaluated. After the previous steps are completed, the auditor must form an opinion on whether the entity’s internal controls over financial reporting are effective or not. The financial statement audit is similar as it first plans out the audit and then analyzes the risks involved with the audit and the financial statements. The auditor must analyze the possibility of misstatement and what accounts are the most probable to contain these