RSM 323 Lecture _5 Slides (6 per page)

RSM 323 Lecture _5 Slides (6 per page) - 04/10/2010 Audit...

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04/10/2010 1 Audit Evidence & Audit Planning 2 RSM323 Auditing I: Fal 2010 Agenda Recap of Lecture #4 Overview of the Audit Process Audit Evidence Audit Planning 3 RSM323 Auditing I: Fal 2010 Recap of Lecture #4 Quiz #3 Any questions before moving on? 4 RSM323 Auditing I: Fal 2010 Overview of the Audit Process RSM323 Auditing I: Fal 2010 5 Audit Process 1. Perform Client Acceptance Procedures 2. Obtain an Understanding of the Engagement 3. Plan the Audit 4. Perform the Audit Procedures 5. Form an Opinion 6. Issue the Appropriate Report 6 RSM323 Auditing I: Fal 2010 Audit Evidence RSM323 Auditing I: Fal 2010 7
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04/10/2010 2 Audit Evidence Audit evidence is information used by the auditor in arriving at the conclusions on which the auditor’s opinion is based Information contained in the accounting records Other information that corroborates the accounting records or financial statements Remember from Lecture #3 that the auditor is required to obtain sufficient and appropriate audit evidence 8 RSM323 Auditing I: Fal 2010 Sufficient Audit Evidence Sufficiency of evidence is the measure of the quantity of audit evidence Test of sufficiency is whether you can persuade someone else that you have collected enough evidence to support your conclusion However, there is no official standard to determine sufficiency The auditor must use professional judgment based on the risk of material misstatement and the quality of audit evidence 9 RSM323 Auditing I: Fal 2010 Appropriate Audit Evidence Appropriateness is the measure of the quality of audit evidence To be considered appropriate, evidence must be relevant and reliable in providing support for the conclusions on which the auditor’s opinion is based Relevant: audit evidence must relate to one of the management assertions Reliable: reliability of audit evidence depends on nature and source 10 RSM323 Auditing I: Fal 2010 Appropriate Audit Evidence Reliability Hierarchy 1. Auditor’s direct, personal knowledge Gained though observation and recalculation/ reperformance This is the most reliable evidence 2. Evidence from Independent External Sources Documentary evidence that is obtained directly from the independent sources Very reliable evidence 11 RSM323 Auditing I: Fal 2010 Appropriate Audit Evidence Reliability Hierarchy (continued) 3. Evidence from Internal-External Sources Documentary evidence that originates externally but that has been received and processed by the client This is usually reliable evidence 4. Evidence Internal Sources Evidence that is produced by the client Low reliability, but used extensively under satisfactory internal control conditions Plentiful and easy to obtain, less costly than other evidence 12 RSM323 Auditing I: Fal 2010 Appropriate Audit Evidence Reliability Hierarchy (continued) 5. Spoken and Written Representations Evidence that comes from the client’s officers, directors,
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This note was uploaded on 05/09/2011 for the course RSM 323 taught by Professor Lisaharvey during the Spring '11 term at University of Toronto- Toronto.

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RSM 323 Lecture _5 Slides (6 per page) - 04/10/2010 Audit...

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