audit chapter 7 slides
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Copyright 2014 Pearson Education, Inc. Publishing as
Chapter 7
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Contrast audit evidence with evidenceused by other professions.
Identify the four audit evidence decisions
that are needed to create an auditprogram.
Specify the characteristics that determine
the persuasiveness of evidence.Identify and apply the eight types ofevidence used in auditing.
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Copyright 2014 Pearson Education, Inc. Publishing as7!
Understand the purposes of auditdocumentation.
Prepare organized audit documentation.
Describe how technology affects auditevidence and audit documentation.
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Contrast audit evidence withevidence used by other
professions.
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Any information used by the auditor to
determine whether the information being
audited is stated in accordance withestablished criteria
The use of evidence is not unique to auditors
Evidence is also used by scientists, lawyers,
and historians
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Identify the four audit evidence decisions that areneeded to create an audit program.
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!" #hich audit $rocedures to use
%" #hat sam$le si&e to select
for a given $rocedure'" #hich items to select from
the $o$ulation
4" #hen to $erform the$rocedures (timing)
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+t includes a list of the audit $rocedures
the auditor considers necessary"
am$le si&es
+tems to select
Timing of the tests
any auditors use audit software
$ac.ages to generate audit $rograms"
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Specify the characteristics that determine thepersuasiveness of evidence.
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Two determinants0
A$$ro$riateness ufficiency
The $ersuasiveness of evidence can be evaluated only after
considering the combination of a$$ro$riateness and sufficiency
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!" +nde$endence of $rovider
%" Effectiveness of client1s
internal controls'" Auditor1s direct .nowledge
4" 2ualification of individuals
$roviding the information
5" 3egree of obectivity6" Timeliness
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Audit Evidence Decisions
"udit procedures and ti#ing
$a#ple si%e and ite#s to select
Qualities Affecting Persuasiveness
of Evidence
"ppropriateness &ele'ance &eliability Independence o( pro'ider E)ecti'eness o( internal controls "uditor*s direct +noledge -ualications o( pro'ider /becti'ity o( e'idence i#eliness hen procedures are per(or#ed Portion o( period being audited
$u3ciency "deuate sa#ple si%e $election o( proper population ite#s
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+n ma.ing decisions about evidence
for a given audit, both $ersuasiveness
and cost must be considered"
The auditor1s goal is to obtain a
sufficient amount of a$$ro$riate
evidence at the lowest total cost"
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Identify and apply the eight typesof evidence used in auditing.
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Physical
Examination
Audit
Evidence
Client Inquiries
Observation Confirmation
Reperformance Inspection
Recalculation Analytical
procedures
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+t is the ins$ection or count by the
auditor of a tangible asset"
This ty$e of evidence is most often
associated with inventory and cash"
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Auditing Standards
nited $tates
International
Requirements
"uditor #ust conr#accounts recei'able
"uditors control the #ailingand receipt o( replies
Electronic conr#ationsare per#itted
Conr#ations are notreuired
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+t is the auditor1s eamination of the
clients documents and records.
+nternal
documents
Eternal
documents
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nderstand the client1s industry and business
Assess the entity1s ability to continue as agoing concern
+ndicate the $resence of $ossible misstatements
in the financial statements
educe detailed audit tests
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+t is the obtaining of writtenor oral
information from the client in res$onse to
questions from the auditor"
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+nvolves rechec.ing a sam$le of calculations
made by the client"
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The auditor1s inde$endent tests of client
accounting $rocedures or controls that
were originally done as $art of the entity1s
accounting and internal control system"
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Copyright 2014 Pearson Education, Inc. Publishing as729
se one1s senses to assess
client activities" Tour $lant to obtain a general
im$ression of client1s facilities" 8bservation is rarely sufficient
by itself" 8ften need to corroborate
with another .ind of evidence"
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Terms
Examine
Scan
ReadCompute
Recompute
oot
!race
CompareCount
Observe
In"uire
#ouch
Type of Evidence
Inspection
Analytical procedures
InspectionAnalytical procedures
Recalculation
Recalculation
Inspection$Reperformance
InspectionPhysical examination
Observation
In"uiries of client
Inspection
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Understand the purposes of auditdocumentation.
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Audit documentation is the record of the
audit procedures performed, relevant
audit evidence, and conclusions theauditor reached"
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9ur$oses of audit documentation
8wnershi$ of audit files
:onfidentiality of audit files
equirements for etention ofaudit 3ocumentation
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The arbanes-8ley Act requires auditors of
$ublic com$anies to $re$are and maintain
audit wor.ing $a$ers for a $eriod of notless than seven years"
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Prepare organized audit documentation.
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These files are intended to contain
data of a historical or continuing
nature$ertinent to the current audit"
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Audit $rogram
;eneral information
#or.ing trial balance
Adusting and reclassification entries
u$$orting schedules
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Analysis
Trial balance or list
econciliation of amounts
Tests of reasonableness
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ummary of $rocedures
Eamination of su$$orting documents
+nformational
8utside documentation
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9ro$er identification of each file
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Audit evidence is increasingly in electronic form
Auditors must evaluate how electronic information
affects their ability to gather evidence
Auditors use com$uters to read and eamine
evidence
oftware $rograms are ty$ically #indows-based
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:o$yright
All rights reserved. No part of this publication may
be reproduced, stored in a retrieval system, ortransmitted, in any form or by any means, electronic,mechanical, photocopying, recording, or otherwise,without the prior written permission of thepublisher. Printed in the United States of America.
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