Final answer:
An auditor should follow a sequential decision-making process, starting with planning and risk assessment, followed by testing controls and carrying out substantive procedures, before concluding with an audit report. This structured approach ensures a clear understanding of cause and effect and results in a reliable audit.
Step-by-step explanation:
An auditor's decision-making process is critical in ensuring a thorough and accurate analysis of a company's financial statements. The sequence in which an auditor should make decisions is analogous to creating a timeline of events. Understanding the chronology helps identify what happens first, what happens next, and the relationship between cause and effect. This methodical approach is essential for maintaining an orderly progression of an audit and can result in more reliable findings. Factors such as risk assessment, materiality, and the nature of the company's operations will influence how the auditor proceeds.
Initially, an auditor will engage in planning and preliminary risk assessment, which involves gaining an understanding of the company and its environment, including internal controls. Following that, they perform test of controls and substantive procedures to gather evidence regarding the amounts and disclosures in the financial statements. Ultimately, auditors form an opinion on the financial statements and issue an audit report.
While each audit is unique and may require specific procedures, keeping the sequence correct ensures the auditor can provide an accurate and relevant analysis. The note that the method chosen depends on the information at hand indicates the flexibility required in auditing, alongside a structured framework.