AUDIT EVIDENCE

SUMMARY
Arranged in order to comply assignment of Auditing 1 course

Arranged by
Andi Priatama Ramadhan (041811333058)

ACCOUNTING MAJOR
ECONOMIC AND BUSINESS FACULTY
ACADEMIC YEAR 2019/2020
1. Nature of Evidence
Evidence was defined as any information used by the auditor to determine whether
the information being audited is stated in accordance with established criteria.

2. Audit Evidence Decisions

A major decision facing every auditor is determining the appropriate types and
amounts of evidence needed to be satisfied that the client’s financial statement are
fairly stated.
Audit Procedure is detailed instruction that explains the audit evidence to be
obtained during the audit. Auditors can vary the sample size from one to all items in
the population being tested. After determing sample size, the auditor must decide
which items in the populations being tested. In timing decision, time is affected by the
client needs the audit to be completed.
The list of audit procedures for an audit area or an entire audit is called an audit
program

3. Persuasiveness of Evidence
By combining all evidence from entire audit, the auditor is able to decide when he or
she is persuaded to issue an audit report. The 2 determinants of the persuasiveness of
evidence :
 Appropriateness of evidence is measure of the quality of evidence, meaning
its relevance and realiability in meeting audit objectives for classes of
transactions, account balances, and related disclosures.
o Relevance of Evidence, evidence must pertain to or be relevant to the
audit objective that the auditor is testing before it can be appropriate.
o Reliability of Evidence, refers to degree to which evidence can be
believable or worthy of trust. There are 6 characteristics pf reliable
evidence, independence of provider, effectiveness of client’s internal
controls, auditor’s direct knowledge, qualifications of individuals
providing the information, degree of objectivity, timeliness.
 Sufficiency of evidence is measured primarily by the sample size the auditor
select. Several factors determine the appropriate sample size audit, there are
auditor’s expectation of misstatement and the effectiveness of the client’s
internal control.
4. Types of Audit Evidence
Every audit procedure obtains one or more of the following types of evidence :
Physical examination : Is the inspection or count by the auditor of a tangible
assets
Confirmation : Describes the receipt of a direct written response from third
party verifying the accuracy of the information that was requested by the
auditors.
Inspection : is the auditor’s examination of the client’s documents and records
to substantiate the information that is included in the financial statement.
 Analytical procedures : evaluations of financial information through analysis
of plausible relationships among financial and nonfinancial data
Inquiries of the clients : is obtaining of written or oral information from the
client in response question from the auditor
Recalculations : Involves rechecking sample of calculations made by client
Reperformance : is the auditor’s independent tests of client’s accounting
procedures that were originally done as part of the entity’s accounting and
internal control system.
Observation : consist of looking at a process or procedure being performed by
other
5. Analytical Procedures
There are 3 phase of analytical procedures :
a. Planning Phase: as part of risk assesment procedures to understand the
client’s nusiness and industry and to assist in determining the nature, extent,
and timing of audit procedures
b. Testing Phase : as substantive test in supprot of account balances
c. Completion Phase : test serve as final review for material misstatements or
financial problems and help the auditor take a final “objective look” at the
audited financial statements.
Auditors typically compares the client’s balances of analytical procedures. Auditor
compare client data with :
o Industry Data
o Similar Prior-period data
o Client-determined expected result
o Auditor-determined expected result
6. Common Financial Ratio
Auditors’ analytical procedures often include the use of general financial ratios during
planning and final review of the audited financial statements.
o Short-Term-Debt-Paying ability
o Liquidity Activity Ratio
o Ability to meet Long-Term-Debt Obligations
o Profitability Ratios
7. Audit Documentation
Audit Documentation is the record of the audit procedures performed, relevant audit
evidence, and conclusions the auditor reached. The objective of audit documentation
is to aid the auditor in providing reasonable assurance that an adequate audit was
conducted in accordance with auditing standard. Audit documentation provides :
o A basis for planning the audit
o A record of the evidence accumulated and the result of the tests
o Data for determining the proper type of audit report
o A basis for review by supervisors and partners
Audit Standard require that records for audits of private companies be retained for a
minimum of five years.
Permananet Files contains data of a historical pertinent to the current audit. The
permanent files typically include the following:
o Copies of such company documents of continuing importance as the articles of
incorporation, laws, bond indentures, and contracts
o Analysies from previous years of account that have continuing importance to
the auditor
o Information related to understanding internal control and assesing control risk.
o The result of analytical procedures from previous year’s audits.
Current Files include all audit documentation applicable to the year under audit. The
following are types of information often included in the current files :
o Audit Program
o Working Trial Balance
o Adjusting Entries
o Supporting Schedules (Analysis, Trial Balance or list, Reconciliation of
amounts)