10 -- Evidence—Objectives and Nature

10 -- Evidence—Objectives and Nature - CPA...

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CPA AUDITING - STUDY UNIT 10 Evidence Objectives and Nature: Core Concepts A. Nature and sufficiency. The third standard of field work declares, “The auditor must obtain sufficient appropriate audit evidence by performing audit procedures to afford a reasonable basis for an opinion regarding the financial statements under audit.” Audit evidence is all information used by the auditor in arriving at the conclusion on which the audit opinion is based. The auditor typically relies on persuasive, rather than convincing, evidence. 1. Management implicitly or explicitly makes assertions regarding the recognition, measurement, presentation, and disclosure of information in the financial statements. Most auditor work consists of obtaining and evaluating evidence about management’s assertions. 2. Sufficiency is the measure of the quantity of evidence. Appropriateness is the measure of the quality of evidence that relates to relevance and reliability. 3. Assessment procedures are used to assess the risk of material misstatement and include obtaining an understanding of the entity and internal control. Tests of controls are used to test the operating effectiveness of controls. Substantive tests are used to detect material
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10 -- Evidence—Objectives and Nature - CPA...

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