Audit evidence

Question 1

Assertions relating to classes of transactions and events and related disclosures for the period:

Answer 1

Occurrence:
- Transactions and events that have occurred are disclosed and recorded, all events relating to the company

Completeness:
- All transactions and events that need to be disclosed and recorded are included in the FS

Accuracy:
- Amounts and other data from transactions and events have been accurately measured and described

Cut-off:
- The transaction and event have been accounted for in the correct period

Classification:
- The transaction and event have been accounted for in the correct account

Presentation:
- Transaction and event have been correctly aggregated or separated as well as all relevant information and requirements of the FS reporting have been met

Question 2

Assertions about account balances, and related disclosures at the period end:

Answer 2

Existence:
- Assets, liabilities equity interest exist

Rights and Obligations:
- The company holds/controls rights to assets and liabilities are the obligations of their own

Completeness:
- All assets, liabilities and equity interest that should have been recorded have been and all related disclosure have been disclosed

Accuracy, valuation and allocation:
- Assets, liabilities and equity interest are included in FS at appropriate amounts as well as measured and described correctly

Classification:
- Assets, liabilities and equity interest are recorded in the correct accounts

Presentation:
- Assets, liabilities and equity interest are aggregated or separated as well as all relevant information and requirements of the FS reporting have been met

Question 3

Obtain evidence

Answer 3

1. Risk assessment procedures
   - Knowledge of environment and internal controls
2. Tests of Internal Control “TOC”
   Purpose: to test working of controls
   - want to place reliance on controls based on preliminary assessment> collect evidence to substantiate
   - In cases where substantive procedures alone do not provide the required evidence.
3. Substantive Procedures
   - Purpose: to detect material misstatements.
   - Perform based on risk assessment of misstatement and results of TOC.
   - Types of substantive procedures:
   -Analytical procedures
   -Test details of transactions
   -Test details of balances
   -Disclosure

Question 4

Audit procedures by using the following techniques

Answer 4

Test of controls:
- Inspection
- Enquiry
- Re-performance
- Observation

Substantive procedures:
- Inspection
- Enquiry
- Re-performance
- Observation
- External confirmation
- Recalculating

Question 5

Level of audit evidence required is influenced by:

Answer 5

• Risk evaluation (IR & CR)
  
  • Materiality of an item
  • Previous experience
  • Results of other audit procedures
  • Reliability & source
  • Reliability Influenced by:
    -Source (Internal or external)
  • Nature
  • Written vs. Verbal / Original vs
    Photocopy
  • Cost vs benefit

Question 6

Types of audit evidence:

Answer 6

• Physical evidence vs Electronic evidence
• Cashbook, General Ledger
• Reconciliations
• Minutes of meetings
• Written declarations vs Oral evidence
• Confirmations from 3rd parties
• Reports of analysts

Question 7

Audit paper content and format

Answer 7

Contents and formats:
- Heading/ subject
- Date
- Clearly identify the information/
subject matter
- Prepared by
- Reviewed by
- Cross-reference