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
