Concepts and Standards - Nature of Audit Evidence Flashcards
What type of audit evidence is least persuasive? (Meaning what type of audit evidence is the most reliable and trustworthy)
Prenumbered purchase order forms.
Why?
evidence secured solely from within the entity, here prenumbered purchase order forms, is considered less persuasive than evidence obtained from independent sources
When management prepares financial statements in conformity with generally accepted accounting principles, assertions are made about
Account balances and
Classes of transactions
Disclosures
What are some assertion relating to account balances?
Completeness.
Existence.
Rights and obligations.
Valuation and allocation.
Note:
Understandability is not apart of assertion of account balances.
What is the most reliable audit evidence?
Inspection of bank statements obtained directly from the client’s financial institution.
Why?
audit evidence obtained from independent sources outside the entity (such as bank statements received directly from a financial institution) provide greater assurance of reliability than that secured solely within the entity.
What are some statement that are reliability of audit evidence?
The more effective the internal control, the more assurance it provides about the reliability of the accounting data and financial statements.
What are some assertion relating to classes of transactions?
- Accuracy.
- Cutoff.
- Occurrence.
Types of audit evidence is the most persuasive (convincing)?
Bank statement represents evidence prepared outside of the entity and is considered an audit evidence source which provides the auditor with a high level of assurance.
Audit evidence generally is the most reliable?
Confirmation of account information.
Note:
Evidence obtained from external parties and received directly by the auditor is generally considered most reliable.
Appropriate evidence will generally be persuasive, not conclusive.
Cost of obtaining evidence is an important consideration in deciding what evidence should be obtained as auditors attempt to obtain sufficient competent audit evidence in a cost-effective manner.
A client’s accounting data cannot be considered sufficient audit evidence to support the financial statements.
- auditors must obtain evidence beyond the accounting data.
Procedures would be most effective in reducing attestation risk?
Examination of evidence.
Why?
Basic to the attest engagement is the examination of evidence to form an opinion on the information.
What are some least persuasive type of audit evidence?
Copies of sales invoices inspected by the auditor.
Why?
internally generated evidence, which is considered less reliable than externally generated evidence received directly by the auditor.
What type of evidence would provide the highest level of assurance in an attestation engagement?
Evidence obtained from independent sources.
Why?
Attestation standards indicate that evidence from independent sources, from the attester’s direct personal knowledge, and obtained under effective controls provide the highest level of assurance.
Audit evidence obtained from knowledgeable independent sources outside the client company is more reliable than audit evidence obtained from nonindependent sources.
What would yield the most reliable evidence?
A recalculation of bad debt expense.
