CHAP 11:EVIDENCE AND SAMPLING

Question 1

1,How to đánh giá quality of evidence

Answer 1

1, evidence from external source is more reliable than entity sources
2,evidence obtained directly form assurance provider is more reliable than indirectly or inference
3,evidenced obtained from entity record sẽ more reliable nếu control system của entity effectively
4,evidence bằng document hay written thì đáng tin hơn bằng oral
5,original document đáng tin hơn photocopy, facsimiles(photo)

Question 2

8 procedure to obtain evidence, sắp xếp theo độ tin cậy từ cao xuống thấp

Answer 2

1, Inspection of tangible assets
5,External confirmation
6, Recalculation
7,Reperformance
8,Analytical procedure
2,Inspection of documentation
3,Observation
4,Inquiry
Thông thường các thủ tục sẽ được dùng kết hợp

Question 3

1, Inspection of tangible asset

Answer 3

 Definition Inspection of tangible assets is the inspection or count by the
auditor of a tangible assets.
* Ex: Inspection of tangible fixed assets, cash on hand, inventory,…
 Strengths and Weakness
* Confirm existence of assets but not confirm rights and obligation or valuation
* Confirmation that assets seen are recorded in accounting records gives evidences of completeness. ( điều tra trực tiếp rồi đối chiếu với các mục trên FS)
* High reliability of audit evidence ( vì do auditor trực tiếp làm)
* The weakness associated with inspection is that assets not used in daily production could be hidden from the assurance providers and not included in financial statements

Question 4

Inspection of documentation

Answer 4

 Definition: Inspection of documentation involves examining records or
documents.
* Ex: Looking at the sale contract or share certificate
 Inspection of documentation depends on the nature of document
=> Documents can be internal (prepared by the client’s organization) or external
(prepared or handled by someone outside the organization who is a party to the
transaction).
2 cách inspection documentation
* Tracing: từ source document đối chiếu với Ledger and journal xem các giao dịch xuất hiện đầy đủ chưa => test tính completeness
* Vouching: Từ ledger and journal đối chiếu với source document => test tính occurence
 Inspection provides evidence of valuation, rights and obligations, presentation and disclosure
 Strengths and weakness: Depending on what is being inspected to give evidence (Ex. Sources of documentation mà là purchase invoice( bên t3 cấp) sẽ tốt hơn là sale invoice(entity tự làm))

Question 5

Observation

Answer 5

 Definition: Observation involves watching a procedures being
performed * Ex1: the auditor observes the separation of duties such as separation of
custody of assets from accounting, separation of operation responsibilityfrom record-keeping responsibility. * Ex2: observe the condition of inventory whether it is obsolete or slowmoving
 Strengths and weakness: Relatively weak because the procedure is
being performed correctly when the assurance provider is watching
cái observation này chỉ mang tính thời điểm nên là độ tin cậy kém

Question 6

External confirmation

Answer 6

 Definition: External confirmation involves seeking confirmation from a third
party
* Ex: Confirmation from bank of bank balances, confirmation from customer of account receivables balances…
 Strengths and weaknesses
* Strong evidence (Strength)
* Third party is motivated to misrepresent (Weakness)
Ex: understated receivables balance might be confirmed because it favoured the
customer.

Question 7

Recalculation

Answer 7

 Definition: Checking mathematical accuracy of client’s records
* Ex: adding up ledger accounts.  Strengths and weaknesses: * Strong evidence => created by the assurance provider

Question 8

Reperformance

Answer 8

 Definition: Independently executing procedures or controls, either manually or
through the use of computer assisted techniques
* Ex: the auditor compare the price on an invoice to an approval price list or reperform( so sánh giá trên bảng giá niêm yết với giá trên hóa đơn)
the aging accounts receivable.  Strengths and Weakness
* Strong evidence => the assurance provider carries out the performance of a control himself makes it strong evidence.

Question 9

Analytical procedures

Answer 9

 Definition: Evaluating and comparing financial and/or non-financial datafor plausible relationships and investigating unexpected fluctuations.
 Strengths and weakness:
* Evidence is limited by the strength or weakness of underlying accounting system * Strong evidence if comparison do not reply on the same accounting or assurance
provider can corroborate outside the accounting system.( là strong procedure nếu sự so sánh k dựa vào cùng 1 hệ thống accounting
vd: bằng chứng sale k lấy ở bộ phận kế toán mà lấy ở bộ phận bán hàng)

Question 10

3 type of computer assisted audit techniques( CAATs)

Answer 10

1,Test of data
2,Audit software
3,Data analytics

Question 11

Test data

Answer 11

Test data
 Test data for test of control => Supervises the process of running data
through the client’s system.  The stages in the use of test data: * Note control in client’s system
* Decide upon test data including: dummy data, real data, dummy data against
a verified of the client’s system
* Run the test data
* Compare results with those expected * Conclude on whether controls are operating properly

Question 12

Audit software

Answer 12

 Audit software makes use of the assurance providers’ own specialized
software (include: off-the-self packages or a tailor-made system)
 Audit software works on the basis of interrogating the client’s system
and analyzing information.
 Carry out whole range of substantive procedures
 Example of what audit software can do:
* Extract a sample according to specified criteria:
– random
– over a certain amount
– below a certain amount
– at certain dates
* Calculate ratios and select those outside set criteria (eg, more than 5% different from
last year)
* Check calculations and casts performed by the system
* Prepare reports (eg, comparison of actual against budgeted figures)
* Follow items through a system and flag where they are posted
Note: If the test does not require judgement, then it can almost certainly be carried
out by audit software.

Question 13

Data analytic

Answer 13

 Within an audit context, known as Audit Data analytics (ADA) * DA can be seen as part of “big data”
* DAs are fundamentally a modern and developed form of CAATs
* DAs software came from the older audit software, but standardized and more
powerful * Standard DAs techniques can simply be applied to a client’s data => more
efficient process * Auditor can generate intuitive visualizations of very complex data => use
analysis to spot trends that might have been missed
 Some example of specific areas of ADA used
* Analyse all transactions in a population, stratify that population and identify outliers for further
examination
* Reperform calculations relevant to the financial statements
* Match transactions as they pass through a processing cycle
* Assist in segregation of duties testing
* Compare entity data to externally obtained data
* Manipulate data to assess the impact of different assumptions. * Analyses of revenue trends split by product or region
* Matches of orders to cash and purchases to payments
* Three-way matches between purchase/sales orders, goods received/despatched documentation
and invoices
* ‘Can do, did do testing’ of user codes to test whether segregation of duties is appropriate, and
whether any inappropriate combinations of users have been involved in processing transactions

Question 14

Tại sao data analytics lại ra đời?

Answer 14

Tại vì technology của audit software k đủ mạnh để làm tailor CAATs cho mỗi client, nó sẽ rất tốn tiền, nên nta đã phát triển từ older audit software lên complex testing perfomed on data mà k cần tạo tailor-made software, cái stndard data analytic này có thể apply vào client data, hiệu quả hơn những cái cũ

Question 15

3 loại analytical procedure

Answer 15

1,Preliminary Analytical procedures in
planning (compulsory) (ISA 315)
2,Substantive Analytical procedures as
substantive procedures (optional)
3,Review Analytical procedures at the overall
review stage (compulsory) of an audit

Question 16

4 factors auditor phải cân nhắc khi sử dụng analytical procedure as substantive procedure

Answer 16

1, Suitability
- AP nên dùng với một lượng lớn transaction dễ đoán vd như payroll
- mục đích của test vd như 1 số ap cung cấp persuasive evidence , 1 số khác chỉ cung cấp corroboration bổ trợ cho các test khác
- 1 số test khác đã hướng tới assertion này r
- xem xét liệu AP có phù hợp đưa ra nature of assertion và assessment of risk related with it không
2, Reliability of data
- Source of infor used ( internal hay external)
- tính comparability của infor( ví dụ industry standard ngành khác sẽ k hữu ích cho công ty k thuộc ngành đó)
- Nature and relevance of infor
- Liệu rằng control trong quá trình sản xuất thông tin có đảm bảo tính completeness,accuracy,validity
3, Precision
- tính accuracy của kết quả dự đoán của ktv nhưng phải là đối với những item có thể dự đoán dk. vd như ktv có thể đự doán lương nvien dựa vào số lượng nvien và mức lương bình quân nhưng k dự đoán dk chi phí markerting nên k thể sử dụng AP để dự đoán phí marketing
- extent of infor có thể bị chia nhỏ( disaggregate) vd như doanh thu có thể chia nhỏ dk thành doanh thu theo quý , theo tháng
- tính avaiability của infor được yêu cầu)
4, Acceptable difference
- bị ảnh hưởng bởi materiality và level of assurance

Question 17

1 số lưu ý khi sử dụng AP

Answer 17

 Analytical procedures should be used at the risk assessment stage.
 AP identified significant fluctuations or relationships that are inconsistent
with other relevant information or unexpected results => investigated
further => shall make inquiries of management.  If management response can not be corroborated or are unavailable, the
auditor shall perform other audit procedures
 The auditor may consider testing the operating effectiveness of controls, if any, over the preparation of information used in applying analytical procedures

Question 18

Sources of information to perform AP in risk assessment stage:

Answer 18

• Interim financial information
• Budgets
• Management accounts
• Non-financial information
• Bank and cash records
• Sales tax returns
• Board minutes
• Discussions or correspondence with the client at the year end.
• Industry information

Question 19

2 problem thường xảy ra kh test 1 items nào đó trên FS?

Answer 19

1, overstated
2,understated
=> phải thực hiện test để phát hiện 2 lỗi này, test này gọi là directional test

Question 20

How to test for overstated( existence/occurence)

Answer 20

Figure in the account
->Intermedia
documentation -> Supporting
evidence
- The auditor should start with the figure given, and follow the audit trail until
coming the supporting document
- Note: Traditionally, all debit entries (expenses and assets) are tested for overstatement

Question 21

How to test for understated ( completeness)

Answer 21

Reciprocal population ->Supporting
evidence ->Intermediate
documentation ->Figure in the account
- The auditor will have to select from population (reciprocal population) which will give the chance of selecting omitted items in account
- Note: Traditionally, all credit entries (revenue, liabilities, equity and reserves) are tested
for understatement

Question 22

Reciporal population là j?

Answer 22

reciprocal population: tương hỗ cho cái mình đang ktra
vd: muốn ktra payable có bị understate k thì mình chọn 1 nghiệp vụ mua hàng trong năm kế toán và trả tiền sau khi kết thúc năm kế toán, test xem khi kết thúc năm thì doanh no có ghi nhận nợ cho cái hàng ý k , muốn test dk thì mình phải so sánh vs grn, thì cái hoạt động chọn mẫu để test này gọi là tương hỗ

Question 23

Khi test understatement tk payable, các reciprocal population có thể lấy từ các population nào

Answer 23

1, subsequent disbursement( giải ngân sau đó)
2,unpaid invoice
3,supplier statement
4,unmatch receiving report

Question 24

Ví dụ về accounting estimate. Tại sao phải audit accounting estimate

Answer 24

warranties,depreciation, allowance. Bởi vì nó là ước tính nên sẽ có thể xảy ra bias vd như cố tình kéo dài useful life của tsan để giảm depreciation nên auditor phải sử dụng professional judgement để xem xét

Question 25

Các method khi identify risk of material statement due to accounting estimate

Answer 25

• Test the process that management used to estimate the figure and the data on which it is based : kiểm tra quá trình management thực hiện ước tính và xem xét xem liệu có j có thể làm thay đổi cách ước tính năm nay k
• Use a point estimate: auditor có thể dựa vào 1 avaiable/proprietary model hoặc nhờ specialist develop 1 model và so sánh model đó vs ước tính của mangement
• Review events occurring up to the date of the auditor’s report: vd như cuối năm 31/12 management ước tính khoản nợ khó đòi và lập dự phòng cho nó là 70% nhưng trong quá trình auditor thực hiện kiểm toán thì khách hàng của company bị phá sản, vậy thì auditor phải đề nghị management chuyển khoản dự phòng cho năm đó là 100%
• Test the operating effectiveness of controls over how management
  made the accounting estimate, with associated substantive procedures

Question 26

remote auditing xuất hiện từ bh

Answer 26

post-pandemics, ICAEW has issued a guide on remote auditing
- Vì remote auditing nên electronic signature ra đời, để kí các engagement letter và auditor report
- Nhược điểm của remote auditing là nó khá tốn tgian, dẫn đến audit fee cao, và những thay đổi trên auditor report k được nhanh chóng trao đổi so với việc face to face

Question 27

Các vấn đề khi thực hiện remote team working

Answer 27

• IT security, giải pháp là sử dụng VPNs hoặc thuê bên t3 bảo vệ
  -Obtaining evidence: giải pháp là có thể sử dụng drone hoặc video calp

Question 28

objective của auditor khi sử dụng sampling là j

Answer 28

ISA (UK) 530, Audit Sampling states that ‘the objective of the auditor, when using audit sampling, is to provide a reasonable basis for the auditor to draw
conclusions about the population from which the sample is selected’.

Question 29

1 số loại test k sử dụng sampling

Answer 29

• testing all items in a population (100% examination) vd như thủ tục góp vốn trong năm, vì nó diễn ra ít lần nên test hết
• testing all items with a certain characteristic, as selection is not representative ( vd như test các transactions với ddkien >50 tr)
   Test of control is unlikely performed to test 100% of items, but 100%
  test of items may be appropriate for certain substantive test

Question 30

2 loại sampling

Answer 30

• Statistical sampling: An approach to sampling that has the following
  characteristics:
  (a) Random selection of the sample items; and
  (b) The use of probability theory to evaluate sample results, including
  measurement of sampling risk
• Non-statistical sampling: A sampling approach that does not have
  characteristics (a) and (b) is considered non-statistical sampling
• Note: The results of items selected in this way cannot be projected onto the whole population
  but may be used in conjunction with other audit evidence
• May select items because of specific characteristics of items
  possess:
• High value or key items. The auditor may select high value items or
  items that are suspicious, unusual or prone to error. * All items over a certain amount. Selecting items this way may mean
  a large proportion of the population can be verified by testing a few
  items.
• Items to obtain information about the client’s business, the nature of
  transactions, or the client’s accounting and control systems.

Question 31

Auditor cần consider j khi design sample

Answer 31

1, purpose of audit procedure
2, characteristic of population mà sample được lấy ra
3, sampling and selection method

Question 32

Auditor cần consider j khi design audit sample

Answer 32

1, specific purpose to be achieved and the combination of audit procedure that is likely to best achieve that purpose
2, nature and characteristic của audit evidence sought and possible deviation or misstatement conditions

Question 33

Định nghĩa misstatement

Answer 33

• Misstatement: A difference between the amount, classification,
  presentation, or disclosure of a reported financial statement item and the
  amount, classification, presentation, or disclosure that is required for the item
  to be in accordance with the applicable financial reporting framework.
  => Misstatements can arise from error or fraud.
• Error: An unintentional misstatement in financial statements, including the
  omission of an amount or a disclosure.

Question 34

Sampling unit

Answer 34

 Auditors must define the sampling unit in order to obtain an efficient and
effective sample to achieve particular audit objectives
 Definition of Sampling units: The individual items constituting a population
Ex: * Cheques listed on deposit slips * Credit entries on bank statements * Sales invoices
* Receivables balances * A monetary unit

Question 35

Risk on sampling

Answer 35

• Sampling risk: The risk that the auditor’s conclusion based on a sample
  may be different from the conclusion if the entire population were
  subjected to the same audit procedure.
• Non-sampling risk: The risk that the auditor reaches an erroneous
  conclusion for any reason not related to sampling risk.

Question 36

Các factor ảnh hưởng đến sample size

Answer 36

WB page 233

Question 37

Phân biệt tolerable misstatement và tolerable rate of deviation

Answer 37

• Tolerable misstatement( app cho test of detail) is a monetary amount set by the auditor in
  respect of which the auditor seeks to obtain an appropriate level of
  assurance that the monetary amount set by the auditor is not exceeded
  by the actual misstatement in the population.
• Tolerable rate of deviation( app cho test of control) is a rate of deviation from prescribed
  internal control procedures set by the auditor in respect of which the
  auditor seeks to obtain an appropriate level of assurance that the rate of
  deviation set by the auditor is not exceeded by the actual rate of
  deviation in the population.
• Tolerable misstatement is considered during the planning stage and, for
  substantive procedures.
• The smaller the tolerable misstatement, the greater the sample size will need to
  be.
  a. For tests of controls, the auditor makes an assessment of the expected rate of
  deviation. If the expected rate of deviation is unacceptably high, the auditor will normally decide not to perform tests of controls.
  b. For tests of details, the auditor makes an assessment of the expected misstatement in the population, If the expected misstatement is high, 100% examination or use of a large sample size may be appropriate when performing tests of details.

Question 38

5 cách chọn mẫu

Answer 38

 Random selection ensures that all items in the population have an equal
chance of selection eg, by use of random number tables or computerized
generator.
 Systematic selection involves selecting items using a constant interval
between selections, the first interval having a random start.
 Haphazard selection may be an alternative to random selection
provided assurance providers are satisfied that the sample is representative
of the entire population.
 Sequence or block selection: Sequence sampling may be used to check whether
certain items have particular characteristics. * EX: an auditor may use a sample of 50 consecutive cheques to check whether cheques are signed by authorized signatories rather than picking 50 single cheques throughout the year => not representative of the population as a whole.
 Monetary Unit Sampling (MUS): This ensures that every £1 in a population has an equal chance of being selected for testing.
* Advantages: it is easy when computers are used, and that every material item will
automatically be sampled. * Disadvantages: if computers are not used, it can be time consuming to pick the sample, and that MUS does not cope well with errors of understatement or negative balances.

Question 39

The purpose of sampling a set of items

Answer 39

The purpose of sampling a set of items was to enable the auditors to
project the conclusion to the whole population.

Question 40

Các cân nhắc trước khi auditor đưa ra conclusion

Answer 40

 Consider xem cái items ý có phải là true misstatement( thực sự sai) như họ nghĩ k, nếu k thì auditor phải thực hiện các procedure on replacement items
 Auditors must consider the quantitative and qualitative misstatement
(nature and cause of the misstatement)
 Auditors must also consider any possible effects the misstatement might have on other parts of the audit including the general effect on the
financial statements and on the auditors’ assessment of the accounting
and internal control systems.

Question 41

Anomaly là j

Answer 41

 Definition of Anomaly: A misstatement or deviation that is demonstrably not
representative of misstatements or deviations in a population.
 To be consider as anomaly, auditor phải chắc chắn rằng misstatement đó k đại diện cho population
 Extra work will be required to prove that a misstatement is an anomaly.
 If the projected misstatement exceeds tolerable misstatement then sampling risk must be re-assessed and further audit procedures must be considered.

Question 42

Các yêu cầu đối với auditor trong việc evaluation misstatement

Answer 42

• Auditor phải đánh giá cả các material misstatement lẫn uncorrected misstatement trên FS
• Sau đó auditor phải cộng dồn các non-trivial (uncorrect) misstatement xem nó có ảnh hưởng đến audit plan và audit procedure không
• Nếu có,The auditor is required to communicate all misstatements on a timely basis to the
  appropriate level of management and request that management corrects the misstatements.
• If management have corrected material misstatements, then doing this may help them
  to fulfil their governance responsibilities, including reviewing the effectiveness of
  internal control. Nhưng nếu họ k sửa thì auditor phải
• Obtain an understanding of management’s reasons for not making the corrections* Determine whether uncorrected misstatements are material individually or in
  aggregate
• Communicate individual uncorrected misstatements to those charged with
  governance and request that these be corrected, mentioning any effect on the opinionin the auditor’s report
• Request a written representation from management (and if appropriate those charged
  with governance) => that they believe the effects of the uncorrected misstatements are
  immaterial, individually and in aggregate, to the FS as a whole

Question 43

Cách auditor quyết định 1 misstatement có phải là material hay k

Answer 43

 In determining whether uncorrected misstatements are material, the auditor must
consider the size and nature of the misstatements, along with the particular
circumstances of their occurrence.

Question 44

1 số circumstances đặc biệt cause to evaluate misstatement as material even if misstatements are lower than materiality for FS as a whole

Answer 44

• affects compliance with regulatory requirements
• affects compliance with debt covenants or other regulatory requirements
• masks a change in earnings or other trends
• affects ratios used to evaluate the entity’s financial position, results of operations or
  cash flows
• increases management’s compensation