During Testing phase, what does the auditor perform?

• A. The auditor gains an understanding of the auditee
• B. The auditor performs control, compliance, and substantive testing
• C. The auditor issues the audit report
• D. The auditor designs the audit plan

Answer: (B)

In the testing phase, the focus is on gathering evidence by performing specific tests to support the audit opinion. This involves three main activities: tests of controls to see if the internal controls operate as intended, tests of compliance to confirm adherence to laws and regulations, and substantive testing to verify the accuracy of account balances and transactions through detailed procedures or substantive analytical procedures. Together, these tests provide the evidence needed to assess whether financial statement assertions are fairly stated and to determine if any misstatements are material.

Gaining an understanding of the auditee and designing the audit plan occur earlier, during planning and risk assessment, while issuing the audit report happens after fieldwork is complete.