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Audit Evidence

13 important questions on Audit Evidence

Sufficiency of audit evidence

The measure of the quantity of audit evidence. The quantity of audit evidence needed is affected by the auditor's assessment of the risks of material misstatement and also by the quality of such audit evidence

What does the auditor considers when determining the sample sizes for substantive tests?

When determining sample sizes for substantive test of details, such as confirmations, the auditor considers client factors such as the risk of material misstatement and the assurance obtained from other substantive procedures performed by the auditors

Appropriateness of audit evidence

Appropriateness of audit evidence is a measure of evidence quality, including the relevance of the evidence.

Audit procedures fall into three categories:

1. Risk assessment procedures
2. Tests of controls
3. Substantive procedures

When do auditors use risk assessment procedures?

Auditors use risk assessment procedures during audit planning to identify the risks of material misstatement.

When do auditors use tests of controls?

Tests of controls are relevant when the auditor want to evaluate the operating effectiveness of controls in preventing, or detecting and correcting, material misstatements.

When do auditors use substantive procedures?

Substantive procedures are relevant when the auditor whant to obtain direct evidence about material misstatements in the financial statements.

Reliability of audit evidence

The reliability of audit evidence refers to its ability to provide convincing evidence related to the audit objective being evaluated. Factors affecting evidence reliability inlcude its soruce, nature, and the circumstances under which the auditor obtains the evidence.

Examples of more reliable evidence

- Directly obtained evidence (observation)
- Evidence derived from a well-controlled information system
- Evidence from independent outside sources
- Evidence that exists in documentary form
- Evidence from original documents

Examples of less reliable evidence

- Indirectly obtained evidence (inquiry)
- Evidence derived from a poorly controlled system or ealisy overridden information system
- Evidence from within the client's organization
- Evidence obtained through inquiry
- Evidence obtained from photocopies or facsimiles, or digitized data

A management's specialist

An individual or organization possessing expertise in a field other than accounting or auditing, whose work in that field is used by the enity to assist the entity in preparing the financial statements.

Inspection of tangible assets

Inspect a client's assets, including inventory and long-lived assets. It provides reliable evidence with respect to the existence of the assets, but not necessarily about the client's rights or completeness of the assets.

What's the greatest risk of the cutoff period?

The greatest risk is that transactions are being recorded in the wrong period.

The question on the page originate from the summary of the following study material:

Auditing: A Risk Based-Approach | 9781337619455 | Karla M Johnstone, et al

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Audit Evidence

13 important questions on Audit Evidence

Sufficiency of audit evidence

What does the auditor considers when determining the sample sizes for substantive tests?

Appropriateness of audit evidence

Audit procedures fall into three categories:

When do auditors use risk assessment procedures?

When do auditors use tests of controls?

When do auditors use substantive procedures?

Reliability of audit evidence

Examples of more reliable evidence

Examples of less reliable evidence

A management's specialist

Inspection of tangible assets

What's the greatest risk of the cutoff period?

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