ACCO 30043 Assignment Number 5

Answer the following questions briefly and concisely.

1. What are the factors that affect sufficiency and appropriateness of audit evidence?

Risk of misstatement, and the quality of such audit evidence are what affects the
sufficiency of audit evidence. Meanwhile, independence and qualifications of the source,
internal control, nature, and form of evidence are the factors that affect the
appropriateness of audit evidence.

As a whole, risk of material misstatement, prior experience, source and reliability

of evidence and materiality are the factors that affect the sufficiency and appropriateness
of audit evidence.

2. An auditor typically works within economic limits. Explain this statement.

The auditor's opinion must be made in a fair amount of time and at a reasonable
cost to be economically useful. Again, the auditor must use professional judgment to
determine if the evidence available to him or her within the constraints of time and
expense is adequate to justify the expression of an opinion.

3. What are the generalizations on reliability of audit evidence?

• When audit evidence is provided from competent independent sources outside
the institution, it is more reliable.
• Internal audit evidence is more reliable when the entity's associated controls are
effective.
• Direct audit evidence acquired by the auditor is more reliable than indirect or
inferred audit evidence.
• When audit evidence is in documentary form, whether on paper, electronic
media, or another medium, it is more reliable.
 • Original documents give more reliable audit evidence than photocopies or
facsimiles.

4. Enumerate, and explain, each audit procedure classified according to purpose and
according to nature.
1. Analytical review: This is not the method for obtaining audit evidence.
Nonetheless, the technique is used to examine anomalous transactions or
occurrences and as a foundation for further procedures.
a. Analytical procedures are financial information assessments based on a
study of possible relationships between financial and nonfinancial
variables.
2. Inquiry: Auditors question about an accountant and related management to
obtain data and explain the problem discovered by auditors. One of the most
essential audit methods is the inquiry, which may be employed at various levels.
Auditors frequently inquire about the business process, including how financial
transactions are recorded and the primary control over company activities.
a. Confirmation, a specific type of inquiry is the process of receiving a
representation of information or of an actual state from a third party.
3. Observation: It is one of the audit processes used by auditors to comprehend and
obtain audit evidence relating to the genuine process or how customers have
carried out a certain business activity. Also, this type of audit procedure primarily
confirms the process that the customer described, either by physical confirmation
or by devoting time to obtaining audit evidence to create their own projection,
which will be compared to the client's figure.
4. Inspection (of records or documents and tangible assets): The term "inspection"
refers to the process of verifying or vouching for documents. This is one of the
most critical, with document examination accounting for 60% of audit work.
Examining records or papers, whether internal or external, in paper,
electronic, or other medium, is what inspection entails. Meanwhile, physical
 assessment of tangible assets is being carried out in the inspection of tangible
assets.
5. Recalculation & Reperformance: Recalculation is a sort of audit procedure that
involves re-performing the client's work to see if there are any discrepancies
between the audit and the client's work. This is a technique for verifying the
correctness of a calculation-based transaction. On the other hand, reperformance
refers to an auditor's independent execution of processes or controls that were
previously done as part of the entity's internal control.