ch06 Audit Evidence

Modern Auditing:
Assurance Services and the Integrity
of Financial Reporting, 8th Edition
William C. Boynton
California Polytechnic State
University at San Luis Obispo
Raymond N. Johnson
Portland State University
Chapter 6 – Audit Evidence
Chapter 6 Overview
Audit Evidence Defined
• Audit Evidence
– Accounting records
– Corroborating information
• Accounting Records
• Other Information
Assertions and Specific Audit
Objectives
• Five Management Assertions (GAAS)
– Existence and Occurrence
– Completeness
– Rights and Obligations
– Valuation or Allocation
– Presentation and Disclosure
Assertions and Specific Audit
Objectives
• Transaction Class Audit Objectives
– Occurrence
– Completeness
– Accuracy
– Cutoff
– Classification
Assertions and Specific Audit
Objectives
• Account Balance Audit Objectives
– Existence
– Completeness
– Rights and Obligations
– Valuation and Allocation
Assertions and Specific Audit
Objectives
• Disclosure Audit Objectives
– Occurrence and Rights and Obligations
– Completeness
– Understandability
– Accuracy and Valuation
Sufficiency of Audit Evidence
• Materiality
• Risk of Material Misstatement
• Size of Population
• Characteristics of Population
Sufficiency of Audit Evidence
Competency of Evidence
• Relevance of Audit Evidence
• Reliability of Audit Evidence
• Professional Judgment
Reliability of Audit Evidence
Reliability of Documentary
Evidence
Study Break
1. Which of the following is not a
transaction class audit objective?
A. Existence
B. Occurrence
C. Accuracy
D. Cutoff
A. Existence
Study 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 Break
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 of Audit Procedures
• Obtain an understanding of the
entity and its environment
• Test operating effectiveness of
controls
• Support assertion or detect material
misstatements
Types of Audit Procedures
• Inspection of Documents or Records
– Vouching
– Tracing
Types of Audit Procedures
• Inspection of Tangible Assets
• Observation
• Inquiry
• Confirmation
Types of Audit Procedures
• Recalculation
• Reperformance
• Analytical Procedures
• Computer-Assisted Audit Techniques
Four Decisions About Audit
Procedures
• Staffing and Supervising the Audit
• Nature of Audit Procedures
• Timing of Audit Procedures
• Extent of Audit Procedures
Documenting Audit Decisions
and Audit Evidence
• Audit Program
– Recommended by GAAS
– Documents decisions
• Working Papers
– Documents audit decisions
– Documents audit evidence obtained
Types of Working Papers
• Working Trial Balance
• Schedules and Analyses
• Audit Memoranda and Corroborating
Information
• Adjusting and Reclassifying Entries
Preparing Working Papers
• Heading
• Index Number
• Cross-Referencing
• Tick Marks
• Signatures and Dates
Working Paper Example
Reviewing Working Papers
• Scope of Work Performed
• Evidence and Findings Obtained
• Audit Judgment Exercised
• Conclusions Reached by the Auditor
Working Paper Files
• Permanent File
• Current File
• Ownership and Custody
Study 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 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 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