Obtaining Audit Evidence

Question 1

What is the purpose of obtaining audit evidence?

Answer 1

The auditor needs to obtain sufficient & appropriate audit evidence to reduce the audit risk to an acceptably low level & thereby enable the auditor to express an audit opinion

Question 2

What are the requirements for audit evidence?

Answer 2

•Sufficient audit evidence
•Appropriate audit evidence

Question 3

What are the different types of audit procedures that will be performed to obtain audit evidence?

Answer 3

•Risk of assessment procedures
•Test of controls
•Substantive testing

Question 4

What are the test of controls methods?

Answer 4

•Enquire
•Observe
•Inspect
•Re-perform

Question 5

What are the methods of substantive procedures?

Answer 5

•Observe
•Inquire
•External confirmation
•Reperformance
•Analytical procedures
•Inspection

Question 6

Why are test of controls procedures performed?

Answer 6

To obtain audit evidence about the operating effectiveness of controls(prevent, detect & correct MM)

Question 7

What are substantive procedures?

Answer 7

These are the audit procedures to detect MM at the assertion level

Question 8

What are the assertions applicable to classes of transactions?

Answer 8

Occurrence
Completeness
Accuracy
Cuts-off
Classification

Question 9

What are the assertions applicable to account balances?

Answer 9

•Existence
•Rights & obligation
• Completeness
•valuation & allocation

Question 10

What is the purpose of working papers?

Answer 10

•Provides: a sufficient & appropriate record of the basis of the auditor’s report
: Evidence that the audit was performed in accordance with ISA

Question 11

What is the use of audit documentation?

Answer 11

•Assists the audit team in the planning & preparation of the audit
•Serve as proof of work done
•Enable the conduct of both internal & external quality review
•Assists in the supervision of audit work

Question 12

What needs to be on a working document?

Answer 12

•Heading
•Date
•Compiler
•Reviewer
•Applicable info
•Cross referenced
•Conclusion

Question 13

What are the purpose of test of controls?

Answer 13

1. The auditor assessment of risk of MM at the assertions level includes an expectation that controls are functioning effectively
2. Substantive procedures alone cannot provide sufficient appropriate audit evidence at assertion level

Question 14

What is the difference between significant deficiency & other deficiencies in internal controls?

Answer 14

•Deficiencies- A control is unable to prevent/detect & correct MM
Significant deficiencies - A deficiency in internal control that, in the auditors professional judgement is of sufficient importance to merit the attention of management

Question 15

Describe the communication of significant deficiencies in internal control

Answer 15

•Should be in writing
•Could be preceded by some of oral communication
•should take place on a timely basis
•Should include a description of the deficiencies & an explanation of their potential effects
•Should include sufficient information to enable management to understand the context of communication

Question 16

Other deficiencies in internal control

Answer 16

•May be oral
•The appropriate level of management to report to is the the one that has the responsibility & authority to evaluate the deficiencies in internal controls to take the necessary remedial action

Question 17

Name the aspects that will affect the nature, timing, & extent of substantive procedures

Answer 17

•Risk of MM at assertion level for specific class of transactions/account balances
•Specific F/S assertions examined
•Applicability & reliability of audit evidence
•Materiality of account balances