Audit Evidence

Question 1

Objective:

Answer 1

To design and perform audit procedures in such a way as to enable the practitioner to obtain sufficient appropriate audit evidence in order to draw reasonabl econclusions on which to base the practitioners opinion

Question 2

If unable to obtain sufficient appropriate evidence,

Answer 2

unable to issue an unqualified opinion

Question 3

What is sufficiency?

Answer 3

The meausre of the quantity of audit evidence.

• affected by the assessment of RMM
• the higher the risks, the more audit evidence is likely required to reduce audit risk to an acceptably low level.
• also affected by the quality of audit evidence gathered
  
  • higher the quality, lower the quantity.

Question 4

What is appropriateness?

Answer 4

The measure of the quality of audit evidence

• refers to the relevance and reliability of the gathered evidence
• the higher the R+R, the higher the quality of the results

Question 5

What is relevance?

Answer 5

refers to the connection between the audit procedure being performed and the assertion being tested.

• The procedure being performed must be relevant to the assertion being tested.

Question 6

What is reliability?

Answer 6

refers to whether the information to be used as audit evidence, can be relied on to provide accurate results when assessing the validity of mgmt’s assertions.

Question 7

Persuasive, rather than conclusive, audit evidence occurs because:

Answer 7

Audit sampling and the evidence gathered is not always 100% reliable.

Question 8

Three categories of sources of audit evidence:

Answer 8

• Internally generated
  
  • Ex: client’s inventory count results, aged ar listing, sales invoices, spreadsheets/calculations
  • less costly than other evidence
• Externally generated, but held by the client
  
  • Ex: supplier invoices, bank statements
• Externally generated - MOST RELIABLE
  
  • Ex: bank confirmation obtained directly from the bank.
• Auditors direct personal knowledge - reliable!
  
  • gained through observation and recalculation

Question 9

Vouching

Answer 9

Information is selected from an account or other summary of information and the auditor goes back through the control system to find hte source documentation

• Supports existence
• lead sheet to document.

Question 10

Tracing

Answer 10

Auditor selects source documents and proceeds forward through the control system to the final recording of the transaction

• supports completeness
• source document -> ledger.