Chapter 7 - Audit Evidence + Documentation

Recalculation ex lifo reserve examine the calculation

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Recalculation (ex. LIFO reserve) Examine the calculation of LIFO and FIFO and recalculate those as well as the difference between them.
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+ Evidence + Audit Documentation n Audit documentation is the principal record of auditing procedures applied, evidence obtained, and conclusions reached by the auditor in the engagement (AS 3). n Reperformance Standard n Also called working papers or audit file. n Two major reasons for documentation:
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+ Audit Documentation n Types of Audit Documents n Audit Plan (Planning Document) n Prepared during planning – outlines strategy for the audit n Understanding of the client, document risks, budget, resources n Audit Program n Procedures to be performed n Also can serve as checklist as procedures are performed n Workpapers n Working trial balance – list of general ledger accounts with their amounts n Adjusting and reclassification entries
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+ Audit Program n The overall development of the audit program should demonstrate appropriate “linkage” between: n Management assertions n Controls n Risks n Types of audit evidence desired and data gathering technique – procedures planned, sample size, items to select n Timing, extent and person performing the test * If the audit plan is the strategy, audit program lays out the tactics to performing the audit.
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+ A Few Things Are a Must n Per GAAS, it is presumed that an auditor will do the following: n Must have a good reason if you don’t
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+ Audit Documentation n Rules Related to Audit Documentation n Ownership – auditor owns the documents n Cannot show to outside parties without permission of the client (confidentiality rule) n Exception – subpoena by a court as legal evidence n Retention of Documents (AS 3) n Retain for minimum of 7 years (per SOX) from the date of the completion of the engagement (5 years for private companies) n Retain even documents inconsistent with the conclusion of the audit
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+ For Thursday, 3/8 n Case 6 n Prelim Discussion of Group Presentation n Review Exam 1
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