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?