Ch 7 Audit Evidence
Count
A determination of assets on hand at a given time.
Observe
The act of observation should only be associated with the type of evidence defined as observation.
Compute
A calculation done by the auditor independent of the client.
Recompute
A calculation done to determine whether a client's calculation is correct.
Compare
A comparison of information in two different locations.
Scan
A less-detailed examination of a document or record to determine whether there is something unusual warranting further investigation.
Examine
A reasonably detailed study of a document or record to determine specific facts about it.
Foot
Addition of a column of numbers to determine whether the total is the same as the client's.
Current files
All audit documentation applicable to the year under audit.
Read
An examination of written information to determine facts pertinent to the audit.
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.
Reperformance
Auditor's independent tests of client accounting and internal control system.
Analytical procedures
Compute inventory turnover ratios and compare with those of previous years as a test of inventory obsolescence. Type of evidence?
Physical examination
Count a sample of 100 inventory items and compare quantity and description to client's count. Type of evidence?
Permanent files
Data of a historical or continuing nature pertinent to the current audit.
Physical examination, confirmation, inspection, analytical procedures, inquiries of the client, recalculation, reperformance, and observation.
Eight types of audit evidence.
Analytical procedures
Evaluations of financial information through analysis of plausible relationships among financial and nonfinancial data.
Relevance
Evidence must pertain to or be relevant to the audit objective that the auditor is testing before it can be appropriate.
Inspection
Examination of client's documents and records to substantiate the information that is, or should be, in the financial statements.
Inspection
Examine a sample of vendors' invoices to determine whether the goods or services receives are reasonable and of the type normally used by the client's business. Type of evidence?
Recalculation
Foot the sales journal for a 1-month period and compare all totals with the general ledger. Type of evidence?
Inquiry of client
Inquire of management whether there is any obsolete inventory on hand at the balance sheet date. Type of evidence?
Physical examination
Inspection or count of tangible assets.
Observation
Looking at a process or procedure being performed by others.
Appropriateness
Measure of the quality of evidence.
Observation
Observe whether the two inventory count teams independently count and record inventory counts. Type of evidence?
Inquiries of the client
Obtaining written or oral information from the client in response to questions from the auditor.
Sufficiency
Quantity of evidence obtained. Measured primarily by sample size.
Inspection
Read the minutes of a board of directors meeting and summarize all information that is pertinent to the financial statements in an audit file. Type of evidence?
Confirmation
Receipt of a direct written response from a third party verifying the accuracy of the information that was requested by the auditor.
Recalculation
Rechecking a sample of calculations made by the client.
Recalculation
Recompute the unit sales price times the number of units for a sample of duplicate sales invoices and compare the totals with calculations. Type of evidence?
Analytical procedures
Scan the sales journal, looking for large and unusual transactions. Type of evidence?
Inspection
Select a sample of sales invoices and compare the unit selling price as stated on the invoice to the list of unit selling prices authorized by management. Type of evidence?
Independence of provider, effectiveness of client's internal controls, auditor's direct knowledge, qualifications of individuals providing the information, degree of objectivity, and timeliness.
Six characteristics of reliable evidence.
Inquire
The act of inquiry should only be associated with the type of evidence defined as inquiry.
Reliability
The degree to which evidence can be believable or worthy of trust.
Vouch
The use of documents to verify recorded transactions or amounts.
Inspection
Trace a sample of sales transactions from sales invoices to the sales journal, and compare customer name, date, and the total dollar value of the sale. Type of evidence?
Reperformance
Trace postings from the sales journal to the general ledger accounts. Type of evidence?
Relevance and reliability
Two characteristics of appropriateness of evidence.
Appropriateness and sufficiency
Two determinants of persuasiveness of evidence.
Inspection
Vouch a sample of recorded acquisition transactions to vendors' invoices and receiving reports. Type of evidence?