Spiral Design Model to Teach Steps in Conducting an Audit of Financial Statements

Five Layers of Iterations: Define, Design, Demonstrate, Develop, Deliver

 Background and description of scenario
New auditors often experience difficulty learning and understanding audit process goals and objectives.
Learning how different stages connect in the context of performing meaningful activity can help new
auditors to acquire content knowledge, collaboration and critical thinking skills in the complex audit process
(Nelson,1999), develop inquiry skills (Hannafin, Land & Oliver, 1999), and identify and use different ways of
knowing (Morrison & Collins, 1996).
Auditing involves the development of understanding of the nature of risks associated with a case or
engagement throughout the entire audit procedure. An auditor has to gather evidence that is appropriate and
sufficient to support any conclusions or decisions and opinions formed during the audit. Here we will look at a
scenario of teaching a junior auditor, who has just completed a first degree in accounting the major phases of
the audit process using the spiral model. Risks in the audit procedure exists at various levels. The spiral model
is used to ensure that the learning process is iterative in performing tests, and further risk tests. Instructional
goals include acquiring critical thinking skills, cognitive flexibility, reasoning, retention of knowledge,
understanding how to apply and use steps in the model to make the processes in an objective audit
meaningful in the learning and working environment (Driscoll, 2015). Cooperative learning will provide
guidance and feedback in conjunction with experiential learning where the auditor will confront situational
learning experiences. Coaching and scaffolding will enable the auditor to reach potential in, and beyond the
zone of proximal development in which prior knowledge will mature in the social learning milieu
(Vygotsky,1981). The information will be presented in sequenced chunks enabling insights and solutions to
arise synergistically (Brown et al., 1989). Learning will be seen to be a continuous life-long process done in
contextwhile acting in the situation.
Define
Review of engagement is the first step in learning the audit process. This involves a review of the client
corporate tax files to become familiar with the nature of the business. Here the auditor will check prior notes in
the file for any constraints such as exemption from taxes and to determine the audit scope and estimate time
required for audit completion.
Plan the audit this step involves developing the overall strategies that will be used during the conduct of the
audit. The auditor will learn how to identify strategies to be used that are situational to an audit engagement.
Design
Test details is done by interrogating internal databases in the Standard Integrated Government Tax
Administration System (SIGTAS). Here the junior auditor will learn to verify details presented. For example;
learn to navigate and look in Value Added Tax reported figures to check for accuracy of revenue figures
reported on the financial statements presented.
Investigate Internal Control in this step, the junior auditor will learn to look for relationships and trends
that can provide evidence that the organization is operating within compliance guidelines with laws,
regulations, policies, and are practicing reliable financial reporting.
Identify audit assertions to test in this step the junior auditor will learn that there are implicit or explicit
assumptions made by management in the presentation of the statements. For instance, the assertion that the
value of inventory is correct can be tested statistically for accuracy.
Determine audit objectives, here the auditor will learn to relate objectives to assertions, and develop
procedures to test specific financial information presented.
Demonstrate
Risk analysis/audit tests , here the auditor will learn to identify risks inherent in the audit procedures such as
sampling risk, and appreciate how these can be mitigated.
Evaluate test results, here the auditor will learn how to process the results of test conducted to conclude if
conclusions based on sampling is an appropriate representation of the population.
Accounts, analysis, and verification of controls is an iterative process that is ongoing throughout the course
of the procedures performed in the audit, and the auditor will learn with experience to identify trends that will
aid in evaluation.
Test of statutory requirements checks for compliance, the auditor will learn to identify breaches by being
directed to the various laws and regulations, and with practice will become proficient in memorizing details.
Test Validation, here the auditor learns to run different inquiries such as compliance for property taxes etc.,
and verify compliance or non compliance to refer taxpayer name to relevant sections for follow up.
Assess risk of misstatement here the auditor learns to use Excel to perform tax computations and analysis to
check for calculated accuracy of figures presented.
Develop/verify
Risk analysis/define further audit tests will teach the auditor to learn to identify situations in which
significant materiality errors exist, and to design further tests to validate and verify accuracy of figures
presented.
Test account balances will allow the auditor to learn to determine balance accuracies and is a further test that
is conducted when material errors are significant and pervasive.
Accounts analysis will allow the auditor to appreciate and learn the relationship between entries in asset,
expense, equity, liability and revenue accounts in the financial statements, and what to look for in an audit.
Assess control risks in this step the auditor will learn to gain a deeper appreciation for the relationship
between detection and prevention aspects of the internal control to determine how well it is functioning in
terms of identifying misstatements in a timely manner.
Perform test of controls this step will teach the auditor to observe what actually takes place in the
organization when working in the field to note any discrepancies while doing a walkthrough.
Substantive procedures integration and analysis testing will help the auditor to learn to discriminate
between the conclusions gathered from performing different procedures by analysis and integration of
assertion validation and test results for completeness, disclosure, existence and valuation of assets etc.
Risk analysis of transactions and disclosures will help the auditor to learn techniques to know may pose a
risk in future audits in terms of identifying the areas tested and the results gained to strengthen evaluative
skills.
Review management will help the auditor to develop insight in observation of management lifestyle patterns
to determine if inconsistencies exist in portrayal of business data presented
Evaluation of operations will help the auditor learn to look for evidence of related party or other transactions
that may not be above board. From the audit transactions that point to involvement in other business operations
or indicated are referred to investigations.
Deliver
Summation of audit notes is done to teach the auditor to learn how to properly compile findings into
correspondence, supporting schedules, working papers and tax lead information.
Detailed documentation is done to teach the auditor in learning proper documentation procedures for
preparing file information to be possibly shared with other sections in the department
Complete audit procedure will show how to finalize a case, the auditor will learn to review the audit
operation to examine the evidence obtained in coming to a conclusion about audit findings in the financial
statements.
Audit report preparation will teach the final stage in preparing findings from the audit process. The auditor
will learn how to write up assessments, reassessments, estimates, and other documents that will be sent to the
taxpayer and will be filed in the registry with the audit report for future reference.
Reflection of applying scenario to model
When I chose the spiral model, I had not thought of how I could find a learning problem to solve using it
because it was developed for software development. After much long and hard thought and consultation with a
member of my team, I decided I could only use it to solve a learning problem in my workplace. The more I
thought about the similarity in risk analysis in software development and in the audit process, the more I
wanted to try to map the process onto the spiral model. At first, I could not figure out how to edit the model,
but after much trial and error with Paint, I figured out how to map my scenario to the model.
I used this model actually by sheer chance, I picked the name at random from reading about it in my
research of instructional design models in the required reading by Gustafson & Branch (2002). Honestly, I do
not know how to justify using it, except that while I was working on my instructional design assignment which
was submitted last Friday, I thought that perhaps the model I created may not work linearly because of having
to gauge risk analysis in the audit process at different stages, but could perhaps work spirally. How I was
going to design that, I actually had no sense of an idea then. However, now, it seems that subconsciously,
cognitive processes have allowed me see how the actual tasks performed in my section could fit on to the
spiral model and kind of make some sense.
Lessons learned in trying to apply my scenario to the model would have to be that I did not know how to
do it when I started, but after many hours of thinking, pondering and wondering, the thing just happened! I
hope that I was able to somehow describe in some detail what the auditor will learn. I also learned that in
revisiting the procedure to teach a new auditor, I was forced to think deeply about the steps involved in the
audit process, and made new connections to already existing prior knowledge.
Brown, J.S., Collins, A., Duguid, P.(1989, January/February). Situated cognition and the culture of learning .
Educational Researcher,18 32-42

Driscoll, M.P. (2015). Psychology of learning for instruction. Pearson New International Edition. Print

Hannafin, M., Land,S., & Oliver, K. (1999) Open learning environments: Foundation, methods and models in
C.M. Reigeluth(Ed), Instructional design theories and models: Mahwah, NJ: Lawrence Erlbaum
Morrison, D., & Collins.,A. (1996). Epistemic fluency and constructivist learning environments. In B.G

Wilson (Ed.) Constructivist learning environments. Case studies in instructional design. Englewood.NJ.
Nelson, L.M.(1999). Collaborative problem solving . In C.M. Reigeluth (Ed.) Instructional design theories
and models. Mahwah. NJ. Erlbaum

Vygotsky, L.S. (1981). The genesis of higher mental functions. In J.V. Wertsch (Ed.),
The concept of activity in soviet psychology. Armonk, NY: Sharpe.