Search and verification inspecting assets confirming receivables and observing

Search and verification: inspecting assets, confirming receivables, and observing the counting of inventory – Internal inquiries and comparisons: perform analytical procedure (ratio analysis) based upon the inquiries conducted with the internal personnel

A. Evidence - General • Examination • Reviews • Agreed-upon procedures • Compilation • Independent source > internal source • Direct > indirect • w/ effective internal control > w/o effective internal control

A. Evidence - General • Sufficient Appropriate Audit Evidence – Sufficiency: quantity of audit evidence that should be obtained – Appropriateness: relevance (assertion related) and reliability – Reliability • Obtained from knowledgeable independent source outside the client company rather than non-independent sources • Generated internally through a system of effective controls rather than ineffective controls • Obtained directly by the auditor rather than indirectly or by inference (e.g. observation of application of a control is more reliable than an inquiry to the client concerning the control) • Documentary in form (paper, electronic, or other) rather than an oral representation • Provided by original documents rather than copies or facsimiles

A. Evidence - General – Appropriate and sufficient evidences are hard to define for estimates since the nature of the estimates are subjective • Developed • Reasonable • Follow GAAP Methodology: • Review & test control for developing estimates • Develop one by yourself and compare that to the management’s estimation • Review subsequent event • Types of Audit Evidence – Risk assessment procedures – Test of controls – Substantive procedures – Testing Plan always changing (NET)

B. Evidence – Specific (Substantive Procedures) • Types of substantive procedures – Substantive analytical procedures (Financial/Nonfinancial NET) • Ratio • Comparison Approach: • Develop an expectation for the account balance • Determine the amount of difference from the expectation that can be accepted without investigation • Compare the company’s account balance / ratio with the expected account balance • Investigate significant differences from the expected account balance – Test of details of transactions, account balances, and disclosures • Substantive procedures • Near the end of the audit