Chapters 3 and 5 address the types of procedures and

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Unformatted text preview: y costeffective form of audit evidence. To summarize, the auditor can collect evidence in each of three different stages in a client’s accounting system to help determine whether the financial statements are fairly stated: (1) the internal control put in place by the client to ensure proper handling of transactions (e.g., evaluate and test the controls); (2) the transactions that affect each account balance (e.g., examine a sample of the transactions that happened during the period); and (3) the ending account balances themselves (e.g., examine a sample of the items that make up an ending account balance at year-end). Evidence that relates directly to ending account balances is usually the highest quality, but also the costliest, evidence. Thus, an auditor will usually rely on a combination of evidence from all three stages in forming an audit opinion regarding the fairness of the financial statements. On which of these three areas it is best to focus depends on the circumstances, and this is generally left to the auditor’s discretion. Chapters 3 and 5 address the types of pro...
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This note was uploaded on 12/08/2012 for the course ACCT 564 at Washington University in St. Louis.

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