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Chap 5 Lecture Slides
Chap 5 Lecture Slides
Chapter 5
Evidence and
Documentation
Copyright 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
3.
Relationship of Audit
Evidence to the Audit Report
Financial
statements
Management assertions
about components of
financial statements
Audit
procedures
LO# 1
Audit
report
Auditor reaches
a conclusion based
on the evidence
Provide evidence on the
fairness of the
financial statements
5-3
LO# 2
Management Assertions
Completeness
Classification
Occurrence
Assertions about
classes of transactions
and events for the
period under audit
Accuracy
Cutoff
Authorization
5-4
LO# 2
Management Assertions
Existence
Completeness
Assertions about
account balances
at the period end
Rights and
Obligations
Valuation
and allocation
5-5
LO# 2
Management Assertions
Classification and
understandability
Accuracy and
valuation
Assertions
about presentation
and disclosure
Completeness
Occurrence and
rights and obligations
5-6
LO# 2
Management Assertions
5-7
LO# 3
Audit Evidence
All the information, from
whatever source, used
by the auditor in arriving at
the conclusions on which the
audit opinion is based.
5-8
LO# 3
5-9
LO# 3
Invoices
Adjustments
to financial
statements
General
and subsidiary
ledgers
Worksheets
Spreadsheets
supporting cost
allocations
Contracts
Other
computations,
reconciliations, and
disclosures
5-10
LO# 3
Sufficiency of
Audit Evidence
Sufficiency is the measure of
the quantity of audit evidence.
Greater risk of
misstatement requires
a higher quantity
of audit evidence.
Higher quality
audit evidence results
in a lower quantity
of audit evidence.
5-11
Appropriateness of
Audit Evidence
Relevance
Reliability
LO# 3
Appropriateness is a measure
of the quality of audit evidence.
Independent source outside the entity
Effectiveness of internal control
Auditors direct personal knowledge
Documentary evidence
Original documents
5-12
Evaluation of
Audit Evidence
LO# 3
LO# 4
Audit Procedures
Specific acts
performed by the auditor
to gather evidence about
whether specific assertions
are being met.
Risk assessment
procedures
Test of
controls
Substantive
procedures
5-14
LO# 4
Audit Procedures
A
Existence
Completeness
Valuation or allocation
LO# 4
Vouching
(Occurrence)
Source
Documents
Tracing
(Completeness)
Journal
or
Ledger
5-16
Observation
LO# 4
Physical examination of a
tangible asset.
5-17
LO# 4
Inquiry
Confirmation
LO# 4
5-19
Reperformance
LO# 4
Determining the
mathematical accuracy of
documents or records.
The auditors independent
execution of procedures or
controls that were originally
performed by company
personnel.
5-20
Scanning
LO# 4
Evaluations of financial
information made by a
study of plausible
relationships among both
financial and nonfinancial
data.
Review of accounting
data to identify
significant or unusual
items.
5-21
LO# 9
Substantive
Analytical
Procedures
Final
Analytical
Procedures
Reliability of Types
of Evidence
LO# 5
5-23
LO# 6
5-24
LO# 6
5-25
Definition
The written record of the basis for the auditors
conclusions that provides the support for the auditor's
representations, whether those representations are
contained in the auditor's report or otherwise.
Objectives
Improve audit quality
Enhance public confidence
Contents
Planning and performance of the work
Procedures performed
Evidence obtained
Conclusions reached by the auditor
McGraw-Hill/Irwin
LO# 7
Audit Documentation
The auditors record of the
audit procedures performed, evidence
obtained, and conclusions reached.
Audit documentation (working papers) has three functions:
1 To provide support for the audit report.
2 To aid in the planning, performance, and supervision of
the audit.
3 To provide basis for quality reviews; to provide evidence
supporting the auditors significant conclusions.
5-27
Content of Audit
Documentation
LO# 8
Content of Audit
Documentation
LO# 8
Current
McGraw-Hill/Irwin
LO# 8
Entity name
Title of the working paper
Entitys year-end date
Indexing and
cross-referencing
Tick marks
Insert Exhibit
4.7
McGraw-Hill/Irwin
Information on Workpaper
Name, date, purpose,
page number
Procedures performed
and conclusions
reached by the auditor
Evidence that
auditor followed
general standards
and standards of
field work
Tick Mark Legend
Reviewers initials
McGraw-Hill/Irwin
Ownership
Auditors maintain ownership, even after
auditor-client relationship is over.
Confidentiality
Only can be made public with permission,
or if subpoenaed, or as part of a peer
review of firm practices, or as part of an
ethics investigation of firm personnel.
McGraw-Hill/Irwin
End of Chapter 5
5-36