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Audit Evidence

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Fraser Orr-Brown

on 3 October 2012

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Transcript of Audit Evidence

Audit Evidence Claassens, Mezibroski, Rozek, Odunuga, Orr-Brown, & Wadman The evidence required to draw your conclusions. Audit
Opinion Management
Assertions Audit
Evidence Audit
Program Financial Statements
5 Cycles Audit Procedures
Audit Objectives Schedule Nature of Evidence
Audit Evidence Decisions
Methods of Collection
Internal vs. External Documentation
Choosing Evidence
Analytical Procedures Test management Assertions by developing audit programs to determine how much and what evidence to gather. Macro Objective: PERSUASIVENESS Sufficiency Appropriateness Relevance Reliability Timeliness The quantity of evidence Sample vs. Population
Sample Size
Specific Items Selected The quality of evidence The Higher the quality, the less
evidence required Refers to the application of the evidence against specific audit objectives Affected by circumstances, source and nature of evidence Higher Reliability when obtained from: Auditor's Direct knowledge
An Independent Provider
Qualified Provider
Client with Effective Internal Controls
Objective Sources
Consistent or Multiple Sources Higher Reliability based on nature and form: Reliability High Low Physical Documentary External External/Internal Internal Client Representations Type Example Inventory Inspection Bank Statement Purchase Invoice Sales Invoice Management Letter Must be COMPLETE, ACCURATE, & PRECISE The effect of time on evidence Evidence can refer to a certain time (YE)
or to a period covered All three factors: Sufficiency, Appropriateness, & Timeliness
when evaluated by the auditor determine the persuasiveness Recalculation Observation Inquiry Analytical Procedures Eg. Questions to client about internal controls Eg. Calculation of Amortization expense e.g. Observe whether equipment is rusty - obsolescence Eg. Compare previous year adjusted Trial Balance to current year Trial Balance Physical Inspection
/Examination Eg. Physical count of inventory Confirmation Eg. Bank confirmation of cash balance Methods of
Collection Reperformance Eg. Aged A/R Trial Balance - mechanical and controls testing Nature of
Audit Evidence Documentation: Internal vs. External Choosing Evidence Reliability & Appropriateness Mandatory Cost Analytical Procedures Purpose Preplanning
Substantive Testing
Final Review Inherent Steps Independent Expectation
Define a Significant Threshold
Compute the difference
Investigate differences Types of Procedures Trend Analysis
Ratio Analysis
Reasonableness Testing This is a big mountain Iceberg Evidence Information that is collected and
used to provide a factual basis for
developing observations and
concluding against objectives Provides persuasive support for a fact or a point in question Audit Evidence Decision Tool as it guides the auditor in determining opinion

Evidence is gathered from initial risk assessment to the auditor's report Internal External (cc) image by anemoneprojectors on Flickr Documentation: Business records used by the client in order to run the organization Widely Available
Relatively Low Cost Prepared and used by client
Retained inside organization
Poor evidence
Poorer evidence under weak internal controls Been in outside party's hands
Currently in hands' of the client or is readily available
Good evidence - "Both agree" Vouching: Using documentation to support recorded transactions Questions about
Full transcript