Auditing and Assurance Services Ch 7

8/3/2019 Auditing and Assurance Services Ch 7

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AUDITING AND ASSURANCE SERVICES

Dr.Khaled Ameen abdullah

Student Name: Rana-Abdullah-Thaher

Chapter Seven ( 7 )

Nature And Type of

audit evidence


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(Nature Of Evidence)

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Defined EVIDENCE : any information used by the auditor to determine whether the informationbeing audited is stated in accordance with established criteria.

Evidence used also by other such as : : y:

y Scientific :researchers obtain evidence to test hypothesesy: ) (

y Lawyer: enforced by the judge for protection of the innocenty

y Historians

)AUDIT EVIDENCE DECISIONS(

:A major decision facing every auditor:

- .- Appropriate types and amounts of evidence needed to be satisfied that clients financial

statements are fairly stated. :

The four decision about evidence gather and how muchit to accumulatettoocreate an audit program:1. )(Audit Procedures2. (Sample size)3. )Items to select(4. )()Timing(

1. Which audit procedures use.

2. What samplesize to select for given procedure.3. Whichitem to select from the population4. When to perform the procedures.(timing)

: -Audit procedures

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The detailed instruction that explain the audit evidence to be obtained during the audit ( theycan followtheseinstruction during the audit ) iscommon to spell out these proceduresin sufficientlyspecific termsso an auditor may follow theseinstructions during the audit.

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Auditorcan vary thesamplesize from one to all the items population tested. The decision ofhow manyitems to test must be made by the auditor for each audit procedure. The sample size for any given

procedureis likely to vary from audit to audit.

: - .Sample size

: )(-


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.After determine the sample size the auditor must decide which items in population to test .

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An audit of financial statements usually covers a period such as a year. Normally an audit is notcompleted until several weeks or months after theend of the period. The timing of audit procedurescanthereforevary from earlyin the accounting period to long afterit hasended. timing is also influenced bywhen the auditor believes the audit evidence will be most effective and when audit staffis available. Forexample, auditors often prefer to do counts ofinventory asclose to the balancesheet date as possible.

:-Audit program :

It includes a list of the audit procedures the auditor considers necessary. Sample sizes )(Items to selectTiming of the tests

Most auditors use computers to facilitate the preparation of audit programs

)()Persuasiveness of evidence(

: )Appropriateness of evidence(. )Sufficient evidence(.

:- )Appropriateness of evidence(:-

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Measure quality of evidence , relevance and reliability in meeting audit objective of transactionaccount balance and related disclosure it can improved only by selecting audit procedure that morerelevant or provide morereliable evidence.

y :-

-)()Relevance of evidence(: .

Evidence must pertain to or be relevant to the audit objective the auditoris testing beforeit can appropriate.-)()evidenceReliability of(:

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Reliability ofevidence refers to the degree to whichevidencecan be believable or worthy of trust itis a great help in persuading the auditor that financial statements are fairlystated.

: Reliability, and therefore appropriateness, depends on the following six characteristics of reliable

evidence:1.)Independence of provider: (-

Items to select

:-Timing


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.2. )Effectiveness ofclientsinternalcontrols: (-

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.3. )Auditorsdirect knowledge: (-

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4. )Qualification ofindividualsproviding theinformation:(

.5.)Degree ofobjectivity: (

.6.)Timeliness: (

6.

: )Sufficient evidence( : :

Sufficiency : determines with the quantity ofevidence and measured primarily by thesamplesize andthe Factors determine the appropriate ofsamplesizein audit

1. Auditors expectation of misstatement)(2. )Theeffectiveness of theclientsinternal controls(

)Persuasiveness and Cost: ( .

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Types of audit evidence

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1. )Physical Examination(

2.)Confirmation( 3.)Documentation(4. )Analytical Procedures(5. )Inquiries ofclient(6. )Recalculating(7. )()Reperformance(8.)Observation(

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Appropriateness of Types of Evidence :

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)Costof typesof evidence(


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) .(

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- -)Audit documentation-(working paper

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- )Purposes of audit documentation: ( .

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. -Ownership of Audit Files:

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.- -Confidentiality of Audit Files:

301 :" "

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- -Requirements forRetention ofAudit Documentation: .Sarbanes-Oxly

Act

.- -.Prepare organized audit documentation:

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Permanent Files: : )

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. Current Files:

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:yAnalysis

.y Trial balance or list .y Reconciliation of amounts

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y -Tests of reasonableness.

.y Summary of procedures

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y Examination of supporting documents .

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yInformational .

y Outside documentation .

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ACL (IDEA)

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Documents

Auditing and Assurance Services Ch 7