AUDIT PROGRAM INCOME STATEMENT

1.0 IDENTIFY ACCOUNTS THAT REQUIRE FURTHER AUDIT ASSURANCE

1.1 Identify income statement accounts that require further audit assurance by considering:

           Audit tests of related asset and liability accounts,

           The results of analytical procedures (e.g., annual fluctuation analysis and comparative analyses of income statement accounts), and

            The reasonableness of income statement accounts based on knowledge of the division and its business.

GUIDANCE:

In deciding on the appropriate audit procedures for income statement

accounts the auditor should assess the risk of error and fraud in those

accounts. Relevant considerations include information gathered or

updated about the division, including the adequacy of the division's

accounting records and procedures; the nature of the account balance;

key performance indicators; management information identified when

assessing the control environment; and conclusions reached when assessing

other aspects of the control environment.

The auditor should bear in mind that the assessment of the risk of error

and fraud in these accounts is addressed primarily by audit procedures

directed at the balance sheet accounts and analytical procedures. For

example, assurance is obtained about the completeness of revenues by

auditing trade accounts receivable and identifying and testing

completeness controls; assurance is obtained about depreciation and

possibly repairs and maintenance expenses by auditing property, plant and

equipment and related accounts; assurance is obtained about interest

expense by auditing notes payable and related accounts. The risks that

remain within the income statement relate to a material misclassification

within the accounts and to fraud. It is normally sufficient to perform

analytical procedures to address these risks. If those procedures do not

provide the necessary assurance, the auditor may need to examine evidence

in support of the account balance by performing tests of details.

It may also be appropriate to examine evidence in support of the account

balance for other reasons, such as:

           Statutory or regulatory requirements, or

           To obtain information useful in identifying other risks.

2.0 PERFORM ANALYTICAL PROCEDURES

For those accounts requiring further assurance, perform analytical

procedures at a more detailed level, combined, where appropriate,

with analysis and tests of items in the account balance. The

procedures should be limited to those necessary to provide the

particular audit assurance sought.