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Sufficient Appropriate Audit Evidence
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Transcript
Sufficient Appropriate Audit Evidence
The auditor's judgment as to what is sufficient appropriate audit evidence is influence by such factors:
- Auditor's assessment of the nature and the level of inherent risk at the both FS level and the account balance or class of transactions level.
- Nature of accounting and internal control systems and the assessment of control risk.
- Design
- Operation
- Materiality of the item being examined.
- Experience gained during previous audits.
- Results of audit procedures, including fraud or error which may have been found.
- Source and reliability of information available.
Assessing the reliability of audit evidence:
- Obtained from independent sources outside the entity.
- Audit evidence that is generated internally is more reliable when the related controls imposed by the entity are effective.
- Obtained directly by the auditor than audit evidence obtained indirectly or by inference.
- Exists in documentary form, whether paper , electronic or other medium.
- Provided by original documents than audit evidence provided by photocopies or facsimiles.
Competence or Appropriateness of Evidence
1. Relevance of the evidence particular to assertion being tested.
2. Objectivity of the evidence
- Objective
- Subjective
3. Qualifications of the provider of the evidence
4. Timeliness of the evidence
Hierarchy of Evidential Matter
1. Auditor's direct, personal knowledge, obtained through physical observation and his/her own mathematical computations.
2. External Evidence
3. External-internal Evidence
4. Internal Evidence
5. Verbal and written representations
Sufficiency of Audit Evidence
1. Materiality
2. Relative Risk of the Item
Since the competency of evidence depends upon the financial statement assertion under consideration, the auditor should attempt to gather sufficient quantity of competent evidence at a minimum cost.
Thank You Ü
Ruazol, Edralyn P.
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