PERT 6 - AUDIT EVIDENCE - Boynton

PERT 6 - AUDIT EVIDENCE - Boynton - AUDITING I Session 6...

Info icon This preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: AUDITING I Session 6 AUDIT EVIDENCE Auditors’ Responsibilities and Reports Audit Evidenc and Assertions Sufficient Competent Evidence Audit Procedures Four Decision about Audit Procedures Focus on Audit Knoledge and Audit Decision Documenting Audit Decision and Audiit Decisions Focus on Auditor Knowledge and Audit Decision Audit Evidence Audit Evidence is all information used by auditor in arriving at the conclusion on which the audit opinion is based. Audit Evidence includes • Accounting Records • Other Information Accounting Records Financial Statements Worksheets, spreadsheets, computtation and reconciliation worksheets Ledgers and Subledgers Journal entries and other adjustments entries All supporting documents such as Invoices, Cash Receipt and Disbursements, Purchase Orders, Sales Orders, Delivery Orders, etc Bank Statements, Bill of Loading, ets. Checks and Records of Electronic fund transferes. Contracts or Agreements All letters made and received by the company Other Information Minutes of meeting Confirmation from third parties Analysts’ reports Comparable data about competitors (benchmarking) Internal control manual Information obtained through audit procedures suc as inquiry, observation, documentation, confirmation, physical examination, reperformance (recomputation), analysitcal procedures Information developed by auditor that permits the auditor top reach a conclusion through valid logical reasoning. Audit Assertions Transaction Class Audit Objectives Account Balance Audit Objectives Disclosure Audit Objectives Transaction Class Audit Objectives Occurences Transactions that have been recorded are the transactions that actually accured during the period Completeness All transactions that have occured during the period have been recorded completely Accuracy All transactions have been recorded accurately Cut of All transactions recorded are the transactions occured in the correct accounting period Classification All transactions have been recorded in the proper accounts Account Balance Audit Objectives Existence The accounts reported in the Balance Sheet are actually existed at the balance sheet date. Completeness All related transactions have been included in the account Right and obligations All accounts reported in the Balance Sheet represent the legal rights or obligations Valuation and Allocation All accounts in the Balance sheet are recorded at its net reliazable value and their related accounts. Disclosure Audit Objectives Occurence and Rights and Obligation All additional information needed about the occurence and right and obligations have been disclosed properly Completeness All disclosures needed have been included in the Financial Statemnets’ disclosures Classification and Understandability All information needed to make an account understood clearer has been disclosed properly Accuracy and Valuation Financial and other information needed have been disclosed accurately and at appropriate amounts Sufficient Competent Evidence Sufficient of Audit Evidence The quantity of evidence measured primarily by the sample size that the auditor selects Competencey of audit Evidence Degree to which evidence can be considered believable or worthy of trust Sufficient of Audit Evidence Materiality the significance of transaction classes, account balances, and disclosures to financial statement users Risk of Material Misstatement the inherent risks that an assertion might be misstated and the control risk that internal control fill fail to prevent or detect a material misstatement in an assertion Size and Characteristics of the Population the number of items contained in the population. Relevant and Sufficient Audit Evidence 1. Which audit procedures to use 2. What sample size to select for a given procedure 3. Which items to select from the population 4. When to perform the procedures Audit Procedures vs Audit Program ? Relevant and Sufficient Audit Evidence 1. Audit Procedures Detailed instruction to collect audit evidences during the audit. 2. Sample Size Types and Numbers of evidences to be collected during the audit. 3. Items to Select Items in the population of sample size to be tested. 4. Timing The time that audit procedures will be proper to perform. Factors Determining The Sample Size 1. The auditor’s expectation of misstatements or information provided by management relating to the circumstances. 2. The Client’s Internal Control. The more efective the client’s IC the smaller the sample size is taken, vice versa. Item to select 1. Select a week and examine the first 50 evidences, or 2. Select the 50 evidences with the largest amounts, or 3. Select the checks randomly, or 4. Select the checks the auditor thinks are the most likely to be in error Timing Ex: Counting inventory at the time close to the BS date. Audit Procedures Inspection of Document and Records (Documentation) Inspection of Tangible Assets (Phiysical Examination) Observation Inquiry Confirmation Recalculation Reperformance Analytical Procedures Computer Assisted Audit Techniques (CAATs) Four Decision about Audit Procedure Staffing and Supervising the Audit Who will perform what audit procedures? Nature of Audit Procedures What audit procedures should be performed ? Timing of Audit Procedures When should audit procedures be performed ? Extent of Audit Procedures How much of a population should be audited ? (Boynton’s Figure 6 – 8) The Characteristics of Competence of Evidence 1. 2. 3. 4. 5. 6. 7. Relevance Independence of Provider Effectiveness of Client’s IC Auditor’s Direct Knowledge Qualification of Individual Providing the Information Degree of Objectivity Timeliness The Characteristics of Competence of Evidence 1. 2. 3. 4. 5. 6. 7. Relevance of Audit Evidence Independence of Source Internal Control over Internal Information Written Documents Original Documents Consistency of evidence from differing sources Professional Judgements (Boynton Figure 6 – 4) Documenting Audit Decision and Audit Decisions Audit Programs Working Papers Preparing Working Papers Working paper Files Audit Programs Audit program documents decision about the audit procedures that the auditor beleives are necessary to obtain reasonable assurance that the financial statements are presented fairly in all material respects (See Boynton’s figure 6 – 9) Audit Working Papers Audit working paper documents all audit works done by audit team, as the audt evidence supporting the audit conclusion Preparing Audit Working Papers Audit Working Paper Files Objective Questions Comprehensive Questions Professional Simulation ...
View Full Document

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern