Audit documentation for public companies must be

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Audit documentation for public companies must be  retained for 7 years Planning documentation o Interviews with key executives (memos) o Analytical procedures o Materiality assessments o Overall audit approach Audit program can be standardized Copies of documents retained depends on importance Auditor memos document the reasoning process and support conclusions Characteristics of good documentation o heading  that includes the name of the audit client, an explanatory  title, and the balance sheet date o The initials or electronic signature  of the  auditor  performing the audit  test and  the date  the test was completed o The initials or electronic signature of the  manager  or partner who  reviewed the documentation and  the date  the review was completed o description of the tests performed and the findings  o Tick marks and legend  indicating the nature of the work performed by  the auditor  o An assessment of whether the tests indicate the possibility of material  misstatement in an account o An index to identify the location of papers o A cross-reference to related documentation, when applicable o Conclusion  Auditing estimates Evaluate management’s process used in making estimates If appraisers are used, auditor should determine the qualifications and  reputation of the appraiser Cash flow assumptions are analyzed for reasonableness
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Tools to gather audit evidence 15:19 Overview of approaches to gathering and evaluating evidence
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Tools to gather audit evidence 15:19 Sampling  o Auditors cannot examine 100% of the transactions o Objective is to estimate the amount of misstatement  o Sampling always contains some risk Overview of audit sampling Auditing sampling is defined as applying audit procedures to less than  100% of a population in order to estimate some characteristic about that  population Rarely cost effect to examine all transaction, therefore examine a  representative sample Implies gathering evidence to use as a basis for making valid inferences  about the characteristics of the population as a whole o Effectiveness of control procedures o Accuracy of transaction processing o Whether fraud is present o Accuracy of account balances Auditors use sampling for o Testing controls for the purpose of expressing an opinion on the client’s  internal controls o Test controls for the purpose of assessing control risk o Test for compliance with company policies, governmental regulations,  or other criteria o Testing individual items in account balances as a basis for determining  whether material misstatements exist in the account balance
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