Chap005-LN

Chap005-LN - Chapter 05: Audit Evidence and the Auditor's...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter 05: Audit Evidence and the Auditor's Responsibility for Fraud Detection CHAPTER 05 Audit Evidence and the Auditor's Responsibility for Fraud Detection Part I: Audit Evidence After studying Part 1 of this chapter, you should be able to: 1. Describe audit evidence and explain its role in the audit process. 2. Explain how the auditor uses management's assertions to organize audit evidence. 3. Understand how an auditor evaluates the sufficiency and appropriateness of audit evidence. 4. Describe changes to the nature, timing, and extent of evidence related to risk assessments. 5. Explain the documentation requirements for evidence. Part II: Fraud Detection After studying Part II of this chapter, you should be able to: 6. Describe the auditor's responsibility for fraud detection in a financial statement audit. 7. Understand the fraud triangle and how the auditor could use it to identify the risk of material misstatement because of fraud. 8. Explain how the auditor gathers evidence to assess the risk of material misstatement because of fraud. 9. Explain how the auditor gathers evidence to control the risk of material misstatement because of fraud. 10. Describe the reporting requirements for fraud. Chapter 5: Audit Evidence and the Auditor’s Responsibility for Fraud Detection Chapter Highlights The first part of this chapter provides coverage of audit evidence and the substantive audit procedures used to obtain audit evidence. The chapter presents a discussion of management’s assertions for the financial statements and presentation and disclosure to illustrate how the auditor gathers “sufficient and appropriate” evidence to determine whether these assertions are true. The chapter then discusses how the evidence affects the auditor’s assessment of risk and will help to determine the nature, timing and extent of future audit procedures. The section on evidence concludes with a discussion on the documentation requirements for audit evidence. The second part of this chapter covers fraud detection and following the definitions of errors and fraud, the chapter utilizes the Fraud Triangle (Exhibit 5-2) to explain the factors motivating management to commit fraud and to assist the auditor to detect fraud. The “Examples of Fraudulent Financial Reporting” provide a good analysis of the AOL/Time Warner fraud. The “Risk Factors Relating to Misstatements Arising from Fraudulent Financial Reporting” found in Exhibit 5-4, is also very pertinent. Chapter Outline 1. Audit Evidence and its Role in the Audit Process (Slide #1… see companion slides) Auditing Standards require the auditor to obtain sufficient appropriate evidence to reach a conclusion about whether the financial statements have been prepared in accordance with the applicable financial reporting framework Evidence is the basis for the audit opinion issued Auditor must be familiar with documentation requirements of the auditing standards The auditor gathers evidence related to fraud during the audit because the standards
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 6

Chap005-LN - Chapter 05: Audit Evidence and the Auditor's...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online