Escolar Documentos
Profissional Documentos
Cultura Documentos
Chapter 7
Sufficient competent evidential matter is to be obtained through inspection, observation, inquiries, and confirmations to afford a reasonable basis for an opinion regarding the financial statements under audit.
1. Which audit procedures to use 2. What sample size to select for a given procedure 3. Which items to select from the population
Audit Program
It includes a list of the audit procedures the auditor considers necessary.
Persuasiveness of Evidence
Competence and sufficiency are determinants of the persuasiveness of evidence. Factors affecting competence include:
Relevance to audit objective Independence of provider Effectiveness of internal controls Auditors direct knowledge Qualifications of providers Degree of objectivity Timeliness
1. 2. 3. 4. 5. 6. 7.
Physical examination (tangible assets) Confirmation (positive and negative) Documentation Analytical procedures Inquiries of the client Reperformance Observation
Information
Assets Cash in bank (example) Accounts receivable Notes receivable Owned inventory out on consignment Inventory held in public warehouses Cash surrender value of life insurance
Source
Bank Customer Maker Consignee Warehouse Insurance co.
Source
Creditor Lender Customer Mortgagor Bondholder
Source
Registrar and transfer agent
Insurance co. Bank, lender, and clients legal counsel Bondholder Creditor
Analytical procedures are used for: Assessing going concern Finding possible misstatements in the financials Reducing detailed audit tests
Inquiries of the client written or oral Reperformance verifying calculations or information processing
Observation
Audit Documentation
Audit documentation is the principal record of auditing procedures applied, evidence obtained, and conclusions reached by the auditor in the engagement.
Audit Documentation
Purposes of audit documentation primary means to support that the audit was conducted in accordance with GAAS. Ownership of audit files
Sarbanes-Oxley Act
The Sarbanes-Oxley Act requires auditors of public companies to prepare and maintain audit working papers for a period of no less than seven years.
Permanent Files
These files are intended to contain data of a historical or continuing nature pertinent to the current audit. Examples include: Articles of incorporation Loan agreements Documents related to understanding I/C Leases
Current Files
Audit program General information
Supporting schedules
WORKING TRIAL BALANCE Prelim. AJEs Final Cash 212 (90) 122 LEAD SCHEDULE CASH Per G/L Petty Cash A-2 5 Cash in Bank: General A-3 186 Payroll A-4 21 212
90
A-1 Final 5
96 21 122
A-1 Final 5
96 21 122
A-3/1 Confirmation
A-4/1 Confirmation
Documentation should be indexed and cross-referenced. Completed documentation must clearly indicate the audit work performed.
It should include sufficient information. It should plainly state the conclusions reached.
Effect of E-commerce
Audit evidence is increasingly in electronic form. Auditors must evaluate how electronic information affects their ability to gather evidence. Auditors use computers to read and examine evidence.