A3 - Sufficient Appropriate Evidence

Question 1

what are the most reliable to least reliable evidences?

Answer 1

vowels AEIOU (A E I O U don’t forget)
A - Audit’s direct personal knowledge (obtained through observation, examination, inspection, or recalculation)
E - External evidence
I - Internal evidence produced by client
O - Oral evidence

Question 2

what is the conclusion on the sufficiency and appropriateness of audit evidence?

Answer 2

evidence -> evaluate management assertions -> detect material misstatement

Question 3

what are the examples of potential auditor biases?

Answer 3

• Availability Bias: the tendency to place more weight on events that are more recent, readily available, or top-of-mind
• Confirmation Bias: tendency to weight more weight on information that corroborates, rather than contradicts, initial conclusions
• Overconfidence Bias: tendency to overestimate one’s ability to make accurate judgement or assessments
• Anchoring Bias: tendency to use initial information as an anchor against which subsequent info is assessed
• Automation Bias: tendency to favor information generated from automated systems regardless of circumstances or contradictory info about reliability of such info

Question 4

what guidance PCAOB states that the relevant of audit evidence depends on?

Answer 4

• the design of audit procedures, in particular whether it is designed to test the assertion directly and whether it is designed to test for understatement or overstatement
• the timing of the audit procedure