4510 - 7

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yhliuaa
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4510 - 7
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2015-10-19 01:25:30
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4510 - 7
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  1. Audit evidence includes both …and …
    accounting records non-accounting documents
  2. Auditors should conclude …to reduce audit risk to an acceptably low level, to be able to draw reasonable conclusions on which to base the audit opinion; Audit evidence is …, which is determined by its…, rather than…
    whether sufficient appropriate audit evidence has been obtained; persuasive; sufficiency and appropriateness; conclusive
  3. Sufficiency mainly concerns about … The auditor’s judgment on the sufficiency of audit evidence is influenced by the following factors (4)
    the adequacy of sample size;

    RMM

    Quality of the audit evidence (reliability)

    Experience from previous audit (if the client is new, gather more evidence)

    Sampling method selected (if random sampling is not used, you may need to gather more evidence)
  4. Quality is measured in terms of the audit evidence’s …in providing support for the conclusions on which the auditor’s opinion is based

    relevance and reliability

  5. The reliability of information to be used as audit evidence is influenced by(4)

    • Source of audit evidence (where does it come from – inside [e.g. client generated document] or outside of the company [e.g. bank statement, more reliable])
    • Nature of audit evidence (written vs. oral evidence) (original vs. photocopies)
    • Effectiveness of client’s internal controls
    • Qualification of information provider (who provided the information – is it objective, does he have the knowledge)

  6. Relevance deals with the logical connection with the(2); The relevance of information to be used as audit evidence may be affected by(3)
    purpose of the audit procedure and the assertion under consideration

    The assertions under consideration (See next slide)

    The purpose of the audit procedures(testing details or testing internal control)

    The timing of collecting evidence (for account balance, gather evidence in year-end)
  7. backward from journal to invoice->…usually for…

    vouching; existence

  8. forward from invoice to journal->…usually for…–

    completeness; tracing

  9. Positive confirmation: Negative confirmation

    • always ask third party to send a reply whether correct or incorrect;
    • if the amount is incorrect, let us know (less reliable)

  10. Re-performance means

    auditors’ independent execution of procedures that were originally performed by others, eg test count the inventory

  11. Procedures of Obtaining Evidence (7)

    • Inspection (examining or checking documents, accounting records or assets)
    • Observation (looking at procedures performed by others)
    • External confirmation, direct response to auditor from a third party
    • Recalculation
    • Re-performance
    • Inquiry
    • Analytical procedures

  12. Analytical procedures are useful to the auditor at different stages of the audit (3) + elab

    • Risk assessment and planning- Identify unusual areas to focus on
    • Testing of transactions and account balances- Not all the accounts are tested using test of details due to Time concern
    • Overall review of financial statements and audit completion- Identify anything unusual after all adjustments and all remaining unusual area are explained

  13. Analytical procedures include the consideration of:

    • Comparisons of the entity’s financial information with prior periods, anticipated results or industry averages
    • Relationship among or between elements of financial statements (ratio analysis) or between financial and non-financial information

  14. Evaluating the IA Function - The external auditor needs to evaluate (3)

    • Organisational status and objectivity of the internal audit function
    • Competence of the internal audit function
    • Approach of planning and performing the internal audit assignment

  15. Evaluating the IA Function - The external auditor needs to evaluate - Organisational status and objectivity of the internal audit function: elab (4)

    • Who do they report to
    • Bias or undue influence
    • Constraints imposed on their work?
    • do they carry out advisory role or managerial function

  16. Evaluating the IA Function - The external auditor needs to evaluate - Competence of the internal audit function (3)

    • enough resources relative to the size of the company
    • possess required knowledge and experience
    • members of professional bodies

  17. Evaluating the IA Function - The external auditor needs to evaluate – Approach of planning and performing the internal audit assignment (2)

    • Do they follow a systematic and disciplined approach
    • appropriate quality control procedures and policies

  18. Audit documentation is the … The auditor should document information such that it…; documentation should include…(3)

    • record of audit procedures performed, the relevant evidence obtained and conclusions the auditor reached
    • enable an experienced auditor, having no previous connection with the audit, to understand;
    • The nature, timing and extent of the audit procedures performed
    • The results of the audit procedures performed
    • The conclusions reached

  19. Working papers are the ..property as he created them in an independent capacity and for his or her own use;; Auditing standards:…; Company Law:…

    • auditor’s
    • Minimum of 5 years ;Accounting records are kept for 7 years

  20. Permanent file – contains data of continuing nature but is relevant to both the current and future audits; examples *5
    • Articles of Association
    • business environment
    • history and organizational chart of the client
    • copies of important document (debentures, long term contracts and title deeds
    • information related to internal control structure
  21. Current file – contains all information applicable to the current year audit only, examples *4
    Current period financial statements, audit planning document for this year, evaluation about internal controls [effectiveness may change year to year], information and results about audit tests

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