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.
