Audit Evidence AUD 3 Flashcards
Third Standard of Fieldwork states
Auditor MUST obtain SUFFICIENT APPROPRIATE AUDIT EVIDENCE by performing audit procedures to afford a reasonable basis for an opinion regarding the F/S under audit
Relationship b/w Internal Control and Corroborative Evidence
Inverse
Reliance on IC higher
Less SUB Corroborative Evidence
Audit Evidence must be 2 things
Appropriate (Quality)
- Relevant: 13 Management Assertions U-PERCV
- Faithful Representation: 4 Different Sources
1) Auditor Developed
2) Obtain from outside source
3) Prepared by outsider but obtained by client
4) Prepared by Client
Sufficient (Quantity)
Greater RMM and Less DR Acceptable
then more SUB
Audit Evidence Includes 2 types
1) Accounting Records (from client) *not enough to rely on alone
2) Other Information (Corroborative Evidence) minutes, Confirmations, etc
Types of Audit Procedures
I-CORRIIA
Inquiry Confirmation Observation Recalculation Reperformance Inspection of Tangible Assets Inspection (Examination) *All above are TD, Test of Details
Analytical Procdures
*AP
Two ways auditor can reduce AR to acceptable low levels
1) Financial Statement Level
2) Relevant Assertion Level
Focus on Financial Statement Level
Increase Professional Skepticism Assign more experienced staff Increase Supervision Be more Unpredictable Adj Nature, Timing, and Extent of further audit procedures like shifting to YE SUB testing when Control Environment is weak
Focus on Relevant Assertion level
Design and preform further audit procedures whose Nature, Timing, and Extent are responsive to assessed RMM at the RELEVENT ASSERTION LEVEL
- Significance and probability that Material misstatement will occur
- Characteristics of the class of transactions, account balance, or disclosures involved
- Nature of Controls used (manual vs Automated)
- Whether auditor expects to test operating effectiveness of controls in preventing or detecting material misstatements
Nature of audit procedures
Most Important
Includes both Purpose (test of controls vs SUB testing) and its Type (I-CORRIIA)
**Higher RMM Assessment, more relevant & Valid audit evidence should be
Timing of Audit Tests
Refers to When procedures are preformed as well as period or date for which audit evidence is applicable. Tests may be at interim date or period end
***Higher auditor RMM assessment, closer to period end substantive procedures should be preformed
Extent of Audit Procedures
Refers to QUANTITY of a specific audit procedure preformed. Based on auditors judgment and auditor should consider tolerable misstatement, assessed RMM, and degree of assurance to obtain
***Higher auditors RMM, greater extent of audit procedures
When do you Disclose or Accrue Loss Contingency
Disclose Accrue
Remote (Slight) No No
Reasonably Possible Yes No
Probable & Estimable YES YES
Estimated Loss (I/S) xx
Estimated Liability (B/S) xx
Probable & Not Estimable YEs NoStockholder’s Equity Consists of
Common Stock Preferred Stock APIC Treasury Stock Warrants Options Rights Retained Earnings Comprehensive Income Dividends
Audit Program includes:
Obtain Schedule from client
Reperformance - Foot, Tie to PY and GL
I-CORRIIA
U-PERCV
Revenues&Expenses/Gains&Losses/Contra Accounts
Generic Tests
Cut-Off Tests
BOD Minutes
Perform Subsequent Events
Read F/S and Footnotes for errors
