Modern Auditing:

Assurance Services and the Integrity

of Financial Reporting, 8th Edition

William C. Boynton
California Polytechnic State
University at San Luis Obispo
Raymond N. Johnson
Portland State University

Chapter 6 – Audit Evidence

Chapter 6 Overview
 Audit Evidence Defined
• Audit Evidence
– Accounting records
– Corroborating information

• Accounting Records

• Other Information
 Assertions and Specific Audit
Objectives
• Five Management Assertions (GAAS)
– Existence and Occurrence

– Completeness

– Rights and Obligations

– Valuation or Allocation

– Presentation and Disclosure

 Assertions and Specific Audit
Objectives
• Transaction Class Audit Objectives
– Occurrence

– Completeness

– Accuracy

– Cutoff

– Classification
 Assertions and Specific Audit
Objectives
• Account Balance Audit Objectives
– Existence

– Completeness

– Rights and Obligations

– Valuation and Allocation

 Assertions and Specific Audit
Objectives
• Disclosure Audit Objectives
– Occurrence and Rights and Obligations

– Completeness

– Understandability

– Accuracy and Valuation

Sufficiency of Audit Evidence
• Materiality

• Risk of Material Misstatement

• Size of Population

• Characteristics of Population
Sufficiency of Audit Evidence
 Competency of Evidence
• Relevance of Audit Evidence

• Reliability of Audit Evidence

• Professional Judgment
Reliability of Audit Evidence
Reliability of Documentary
Evidence
 Objectives of Audit Procedures

• Obtain an understanding of the

entity and its environment

• Test operating effectiveness of

controls

• Support assertion or detect material

misstatements
 Types of Audit Procedures
• Inspection of Documents or Records
– Vouching
– Tracing
 Types of Audit Procedures
• Inspection of Tangible Assets

• Observation

• Inquiry

• Confirmation
 Types of Audit Procedures
• Recalculation

• Reperformance

• Analytical Procedures

• Computer-Assisted Audit Techniques

 Four Decisions About Audit
Procedures
• Staffing and Supervising the Audit

• Nature of Audit Procedures

• Timing of Audit Procedures

• Extent of Audit Procedures

 Documenting Audit Decisions
and Audit Evidence
• Audit Program
– Recommended by GAAS
– Documents decisions

• Working Papers
– Documents audit decisions
– Documents audit evidence obtained
 Types of Working Papers
• Working Trial Balance

• Schedules and Analyses

• Audit Memoranda and Corroborating

Information

• Adjusting and Reclassifying Entries

 Preparing Working Papers
• Heading

• Index Number

• Cross-Referencing

• Tick Marks

• Signatures and Dates

Working Paper Example
 Reviewing Working Papers
• Scope of Work Performed

• Evidence and Findings Obtained

• Audit Judgment Exercised

• Conclusions Reached by the Auditor

 Working Paper Files
• Permanent File

• Current File

• Ownership and Custody