AUDIT EVIDENCE

1
CHAPTER 6

• AUDIT EVIDENCE

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AUDIT EVIDENCE DECISIONS

• AUDIT PROCEDURES (NATURE)
• SAMPLE SIZE (EXTENT)
• ITEMS TO EXAMINE
• TIMING
• AUDIT PROGRAM

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PERSUASIVENESS OF EVIDENCE

• RELEVANCE
• RELATED TO ITEM BEING EXAMINED
• COMPETENCE
• INDEPENDENCE OF PROVIDER
• EFFECTIVENESS OF INTERNAL CONTROLS
• AUDITORS DIRECT KNOWLEDGE
• OBJECTIVITY OF EVIDENCE

4

• SUFFICIENCY
• QUANTITY OF EVIDENCE
• EXPECTATION OF MISSTATEMENTS
• EFFECTIVENESS OFINTERNAL CONTROLS
• REPRESENTATIVENESS OF ITEMS SELECTED
• RELATIONSHIP TO COMPETENCE
• MORE COMPETENT, LESS NEEDED
• TIMING
• INTERIM
• YEAR END

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TYPES OF EVIDENCE

• PHYSICAL EXAMINATION
• COUNTING CASH
• EXAMINING DOCUMENTS
• OBSERVING INVENTORY
• CONFIRMATION
• WRITTEN OR ORAL COMMUNICATION
• THREE TYPES
• POSITIVE - BLANK
• POSITIVE - INFORMATION PROVIDED
• NEGATIVE

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• DOCUMENTATION
• EXAMINATION OF DOCUMENTS SUPPORTING AUDIT
  OBJECTIVES
• EXTERNAL DOCUMENTS
• INTERNAL DOCUMENTS
• VOUCHING
• GOING FROM RECORD TO DOCUMENTS
• TESTS EXISTENCE
• TRACING
• GOING FROM DOCUMENTS TO RECORD
• TESTS COMPLETENESS

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• OBSERVATION
• AUDITOR LOOKING TO VERIFY EXISTENCE
• INQUIRIES OF CLIENT
• ORAL OR WRITTEN
• MUST BE SUPPORTED BY CORROBORATING EVIDENCE
• REPERFORMANCE
• AUDITOR RECALULATES
• ANALYTICAL PROCEDURES
• COMPARISONS AMONG AND BETWEEN DATA

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RELIABILITY OF EVIDENCE

• THREE PRESUMPTIONS
• AUDITOR KNOWLEDGE USUALLY HIGHEST
• OUTSIDE EVIDENCE USUSALLY HIGHER THAN INTERNAL
  EVIDENCE
• STRONG INTERNAL CONTROL BETTER THAN WEAK
• COST USUALLY VARIES DIRECTLY WITH RELIABILITY

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TERMS USED IN AUDIT PROCEDURES

• EXAMINE - DETAILED STUDY OF ITEM
• SCAN - OVERVIEW OF ITEM
• COMPUTE - AUDITOR CALCULATION
• RECOMPUTE - AUDITOR REDO CLIENT
• FOOT - ADD COLUMN
• TABLE 6-6, PAGE 190

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ANALYTICAL PROCEDURES

• PURPOSES OF ANALYTICAL PROCEDURES
• UNDERSTAND CLIENT BUSINESS
• ASSESS ABILITY TO CONTINUE IN BUSINESS
• ATTENTION DIRECTOR
• POSSIBLE MATERIAL MISSTATEMENTS
• REDUCTION OF DETAILED TESTS
• NO UNUSUAL FLUCTUATIONS
• ANALYTICAL PROCEDURES ARE USUALLY LOWER COST

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• TIMING OF ANALYTICAL PROCEDURES
• PLANNING PHASE
• REQUIRED
• UNDERSTAND
• ASSESS GOING CONCERN
• POSSIBLE MISSTATEMENTS
• REDUCE DETAILED TESTS
• TESTING PHASE
• NOT REQUIRED
• MISSTATEMENTS
• REDUCE TESTING
• COMPLETION PHASE
• REQUIRED
• ASSESS GOING CONCERN
• MISSTATEMENTS

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• TYPES OF ANALYTICAL PROCEDURES
• COMPARE CLIENT DATA WITH
• INDUSTRY DATA
• PRIOR PERIOD DATA
• CLIENT-DETERMINED RESULTS
• AUDITOR-DETERMINED RESULTS
• EXPECTED RESULTS