audit chapter 7 slides

7/23/2019 Audit Chapter 7 Slides

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Chapter 7

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Contrast audit evidence with evidenceused by other professions.

Identify the four audit evidence decisions

that are needed to create an auditprogram.

Specify the characteristics that determine

the persuasiveness of evidence.Identify and apply the eight types ofevidence used in auditing.


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Understand the purposes of auditdocumentation.

Prepare organized audit documentation.

Describe how technology affects auditevidence and audit documentation.


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Contrast audit evidence withevidence used by other

professions.

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Any information used by the auditor to

determine whether the information being

audited is stated in accordance withestablished criteria

The use of evidence is not unique to auditors

Evidence is also used by scientists, lawyers,

and historians


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Identify the four audit evidence decisions that areneeded to create an audit program.

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!" #hich audit $rocedures to use

%" #hat sam$le si&e to select

for a given $rocedure'" #hich items to select from

the $o$ulation

4" #hen to $erform the$rocedures (timing)


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+t includes a list of the audit $rocedures

the auditor considers necessary"

am$le si&es

+tems to select

Timing of the tests

any auditors use audit software

$ac.ages to generate audit $rograms"



Specify the characteristics that determine thepersuasiveness of evidence.

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Two determinants0

A$$ro$riateness ufficiency

The $ersuasiveness of evidence can be evaluated only after

considering the combination of a$$ro$riateness and sufficiency


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!" +nde$endence of $rovider

%" Effectiveness of client1s

internal controls'" Auditor1s direct .nowledge

4" 2ualification of individuals

$roviding the information

5" 3egree of obectivity6" Timeliness


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Audit Evidence Decisions

"udit procedures and ti#ing

$a#ple si%e and ite#s to select

Qualities Affecting Persuasiveness

of Evidence

"ppropriateness &ele'ance &eliability Independence o( pro'ider E)ecti'eness o( internal controls "uditor*s direct +noledge -ualications o( pro'ider /becti'ity o( e'idence i#eliness hen procedures are per(or#ed Portion o( period being audited

$u3ciency "deuate sa#ple si%e $election o( proper population ite#s


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+n ma.ing decisions about evidence

for a given audit, both $ersuasiveness

and cost must be considered"

The auditor1s goal is to obtain a

sufficient amount of a$$ro$riate

evidence at the lowest total cost"



Identify and apply the eight typesof evidence used in auditing.

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Physical

Examination

Audit

Evidence

Client Inquiries

Observation Confirmation

Reperformance Inspection

Recalculation Analytical

procedures



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+t is the ins$ection or count by the

auditor of a tangible asset"

This ty$e of evidence is most often

associated with inventory and cash"



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Auditing Standards

nited $tates

International

Requirements

"uditor #ust conr#accounts recei'able

"uditors control the #ailingand receipt o( replies

Electronic conr#ationsare per#itted

Conr#ations are notreuired



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+t is the auditor1s eamination of the

clients documents and records.

+nternal

documents

Eternal

documents



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nderstand the client1s industry and business

Assess the entity1s ability to continue as agoing concern

+ndicate the $resence of $ossible misstatements

in the financial statements

educe detailed audit tests


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+t is the obtaining of writtenor oral

information from the client in res$onse to

questions from the auditor"


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+nvolves rechec.ing a sam$le of calculations

made by the client"


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The auditor1s inde$endent tests of client

accounting $rocedures or controls that

were originally done as $art of the entity1s

accounting and internal control system"


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se one1s senses to assess

client activities" Tour $lant to obtain a general

im$ression of client1s facilities" 8bservation is rarely sufficient

by itself" 8ften need to corroborate

with another .ind of evidence"


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Terms

Examine

Scan

ReadCompute

Recompute

oot

!race

CompareCount

Observe

In"uire

#ouch

Type of Evidence

Inspection

Analytical procedures

InspectionAnalytical procedures

Recalculation

Recalculation

Inspection$Reperformance

InspectionPhysical examination

Observation

In"uiries of client

Inspection


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Understand the purposes of auditdocumentation.

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Audit documentation is the record of the

audit procedures performed, relevant

audit evidence, and conclusions theauditor reached"


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9ur$oses of audit documentation

8wnershi$ of audit files

:onfidentiality of audit files

equirements for etention ofaudit 3ocumentation


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The arbanes-8ley Act requires auditors of

$ublic com$anies to $re$are and maintain

audit wor.ing $a$ers for a $eriod of notless than seven years"


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Prepare organized audit documentation.

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These files are intended to contain

data of a historical or continuing

nature$ertinent to the current audit"


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Audit $rogram

;eneral information

#or.ing trial balance

Adusting and reclassification entries

u$$orting schedules


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Analysis

Trial balance or list

econciliation of amounts

Tests of reasonableness


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ummary of $rocedures

Eamination of su$$orting documents

+nformational

8utside documentation


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9ro$er identification of each file


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Audit evidence is increasingly in electronic form

Auditors must evaluate how electronic information

affects their ability to gather evidence

Auditors use com$uters to read and eamine

evidence

oftware $rograms are ty$ically #indows-based


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