Modern

Modern Auditing:
Auditing:
Assurance
Assurance Services
Services and
and the
the Integrity
Integrity
of
of Financial Reporting, 8th Edition
Financial Reporting, 8 th
Edition

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

Chapter 6 – Audit Evidence

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

• Accounting Records

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

– Completeness

– Rights and Obligations

– Valuation or Allocation

– Presentation and Disclosure

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

– Completeness

– Accuracy

– Cutoff

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

– Completeness

– Rights and Obligations

– Valuation and Allocation

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

– Completeness

– Understandability

– Accuracy and Valuation

Sufficiency
Sufficiency of
of Audit
Audit Evidence
Evidence
• Materiality

• Risk of Material Misstatement

• Size of Population

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

• Reliability of Audit Evidence

• Professional Judgment
Reliability
Reliability of
of Audit
Audit Evidence
Evidence
Reliability
Reliability of
of Documentary
Documentary
Evidence
Evidence
 Study
Study Break
Break
1. Which of the following is not a
transaction class audit objective?
A. Existence
B. Occurrence
C. Accuracy
D. Cutoff

A. Existence
 Study
Study Break
Break
2. Which of the following is not an
account balance audit objective?
A. Existence
B. Completeness
C. Classification
D. Rights and Obligations

C. Classification
 Study
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3. All of the following affect the sufficiency
of audit evidence except:
A. Materiality
B. Risk of Material Misstatement
C. Relevance of Audit Evidence
D. Size and Characteristics of the
Population

C. Relevance of Audit Evidence

 Objectives
Objectives of
of Audit
Audit Procedures
Procedures

• Obtain an understanding of the

entity and its environment

• Test operating effectiveness of

controls

• Support assertion or detect material

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

• Observation

• Inquiry

• Confirmation
 Types
Types of
of Audit
Audit Procedures
Procedures
• Recalculation

• Reperformance

• Analytical Procedures

• Computer-Assisted Audit Techniques

 Four
Four Decisions
Decisions About
About Audit
Audit
Procedures
Procedures
• Staffing and Supervising the Audit

• Nature of Audit Procedures

• Timing of Audit Procedures

• Extent of Audit Procedures

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

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

• Schedules and Analyses

• Audit Memoranda and Corroborating

Information

• Adjusting and Reclassifying Entries

 Preparing
Preparing Working
Working Papers
Papers
• Heading

• Index Number

• Cross-Referencing

• Tick Marks

• Signatures and Dates

Working
Working Paper
Paper Example
Example
 Reviewing
Reviewing Working
Working Papers
Papers
• Scope of Work Performed

• Evidence and Findings Obtained

• Audit Judgment Exercised

• Conclusions Reached by the Auditor

 Working
Working Paper
Paper Files
Files
• Permanent File

• Current File

• Ownership and Custody

 Study
Study Break
Break
4. ________ involves selecting entries in the
accounting records and inspecting the
documentation that served as the basis
for the entries.
A. Vouching
B. Tracing
C. Observation
D. Inquiry

A. Vouching
 Study
Study Break
Break
5. These decisions involve determining
whether the procedures will be
performed at an interim date or at
fiscal year-end.
A. Staffing and Supervision
B. Nature of Audit Tests
C. Timing of Audit Tests
D. Extent of Audit Tests

C. Timing of Audit Tests

 Study
Study Break
Break
6. This working paper file contains data
that are expected to be useful to the
auditor in future engagements with the
client.
A. Permanent file
B. Current file
C. Daily file
D. Annual file

A. Permanent file