Chapter 7 - Audit Evidence + Documentation

Reperformance 7 recalculation search for anomalies 8

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Reperformance 7. Recalculation Search for Anomalies 8. Analytical Procedures 9. Scanning
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+ More on Inspection n Inspection of Tangible Assets (High Reliability) n Great for physical/tangible assets n Great for existence and valuation assertions n Really persuasive evidence n Examples – cash, inventory, fixed assets, securities n Inspection of Documents/Records (Moderate Reliability) n Good for most assertions (best for rights and obligations) n Internal vs. external documents n If internal, was the document processed under
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+ Directional Tests
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+ More on Inquiry n Inquiry (Low/Moderate Reliability) n Verbal communication with the client n NEVER SUFFICIENT EVIDENCE n Must have other corroborating evidence n Confirmation (Moderate/High Reliability) n Written communication with third parties outside the client n Great for existence, completeness, rights and obligations, valuation, and accuracy assertions n Persuasive n Involves outside independent party n AUDITOR MUST CONTROL
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+ More on Reperformance n Recalculation (High Reliability) n Checking computations n Recomputing ( e.g., allowance for bad debt, depreciation, income tax) n Footing / Cross Footing – adding items together (e.g. inventory items and compare to ending balance) n Agreeing – agreeing the checks with bank reconciliation n Great for accuracy assertion n Reperformance (High Reliability) n Checking procedures n Reperform aging of receivables or IC
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+ More on Search for Anomalies n Analytical Procedures (Low/Moderate Reliability) n Purpose - understand industry and business, assess ability to continue as a going concern, indicate presence of possible misstatements in financials, reduce detailed audit tests n Procedure - develop expectations, compare to actual, investigate material discrepancies, conclude n Great for existence, completeness, and valuation assertions n Scanning (Low/Moderate Reliability) n Scan through numbers n Assessing reasonableness
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Examples – A/P Evidence Evidence Type Assertion Tested Discuss with the client the criteria for now an account is classified as an account payable. Also review with the
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