John Josephs, an audit manager for Tip, Acanoe & Tylerto, was asked to speak at a dinner meeting of the local Small Business Administration Association. The president of the association has suggested that he talk about the various phases of the audit process to help small business owners better understand what auditors do. John has asked you, his trusted assistant, to prepare an outline for his speech. He suggests that you answer the following: Match the definition of each phase of the audit with the specific phase it relates to. Audit Phase Definition The auditor understands and evaluates the client's internal controls in order to assess the risk that they will not prevent or detect a material misstatement. In the case of a public company, the auditor will conduct an audit of internal control over financial reporting. Based on the collection and evaluation of evidence, the auditor issues a report on whether the financial statements are fairly presented. During this phase of the audit, the auditor uses the knowledge of the client to plan the audit and perform preliminary analytical procedures. The auditor decides to accept a new client or retain an existing client The auditor searches for contingent liabilities and subsequent events, and performs a final review of the evidence gathered. This phase involves (1) determining the audit engagement team requirements, (2) ensuring the independence of the audit team and audit firm, and (3) establishing an understanding with the client regarding the services to be performed and the other terms of the engagement. The auditor conducts substantive tests, including analytical procedures and the details of the account balances, searching for material misstatements. ia Audit business processes and related accounts Client acceptance/continuance Complete the audit Consider and audit internal control Evaluate results and issue the audit report Complete the audit Consider and audit internal control Evaluate results and issue the audit report Plan the audit Preliminary engagement activities