Chapter 7 Audit Evidence

Which of the following is the lease persuasive evidence? 1. Vendor's invoice 2. bank statement obtained from client 3. computations made by auditor 4. prenumbered sales invoices

4. prenumbered sales invoices

purpose of analytical procedures

-understand the client's industry and business -assess the entity's ability to continue as a going concern -indicate the presence of possible misstatements in the F.S. from unusual fluctuations -reduce detailed audit tests

Compare

A comparison of information in two different locations. The instruction should state which information is being compared in as much detail as practical. Type: inspection

Scan

A less-detailed examination of a document or record to determine whether there is something unusual warranting further investigation. Type of evidence: Analytical procedure

Foot

Addition of a column of numbers to determine whether the total is the same as the client's. Type: Recalculation

Trace

An instruction normally associated with inspection or reperformance. The instruction should state what the auditor is tracing and where it is being traced from and to. Will often include second instruction, such as compare or recalculate. Types: Inspection and Reperformance.

Audit evidence? Review A/R with credit manager

Inquiry

Tracing establishes (.....) while vouching establishes (.......)

Tracing=completeness Vouching=Existence

Compute

a calculation done by the auditor independent of the client. Type: analytical procedure

Read

an examination of written information to determine facts pertinent to the audit. Type: Inspection

Audit evidence? obtain attorney letter

confirmation

analytical procedures

evaluations of financial info through analysis of plausible relationships among financial & non-financial date.

level to reliability of evidence

internal documentation good controls observation analytical procedures

observation

looking at a process of procedure by others.

Audit evidence? watch employees count inventory

observation

Audit evidence? COunt inventory

physical examination

level one of most reliable evidence

physical examination confirmation external documentation recalculation/reperformance

analytical procedures are required in what phases

planning phase and completion phase

Examine

reasonable detailed study of a document or record to determine specific facts about it. Type of evidence: Inspection

Audit evidence? recalculate inventory

recalculation

inspection

the auditor's examination of the client's documents and records to substantiate the information that is or should be included

reperformance

the auditor's independent tests of client accounting procedures or controls that were originally done as part of the entity's accounting & internal control system.

physical examination

the auditors inspection or count of a tangible asset. Direct means of verifying that an asset exists (existence) and whether existing assets are recorded (completeness).

confirmation

the auditors receipt of a direct written or electronic response from a 3rd party verifying the accuracy of information requested.

inquiry

the obtaining of written or oral information from the client in response to specific questions during the audit

recalculation

the rechecking of a sample of the computations made by the client, including mathematical accuracy of individual transactions & amounts & the adding of journals & subsidiary records

tracing

the use of documentation to determine if transactions or amounts are included in the accounting records.

vouching

the use of documentation to support recorded transactions or amounts.