Arens-audit Chapter07

8/18/2019 Arens-audit Chapter07

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©2010 Prentice Hall Business Publishing,©2010 Prentice Hall Business Publishing, Auditing 13/e, Auditing 13/e, Arens/Elder/Beasley Arens/Elder/Beasley 7 - 1

Audit Evidence Audit Evidence

Chater 7Chater 7


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!earning "b#ective 1!earning "b#ective 1

C$ntrast audit evidence %ithC$ntrast audit evidence %ith

evidence used by $ther evidence used by $ther

r$&essi$ns'r$&essi$ns'


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©2010 Prentice Hall Business Publishing,©2010 Prentice Hall Business Publishing, Auditing 13/e, Auditing 13/e, Arens//Elder/Beasley Arens//Elder/Beasley 7 -7 - ((

)ature $& Evidence)ature $& Evidence

*he use $& evidence is n$t uni+ue t$ audit$rs

Evidence is als$ used by scientists, la%yers,and hist$rians


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denti&y the &$ur audit evidencedenti&y the &$ur audit evidence

decisi$ns that are needed t$decisi$ns that are needed t$

create an audit r$gra.'create an audit r$gra.'


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©2010 Prentice Hall Business Publishing,©2010 Prentice Hall Business Publishing, Auditing 13/e, Auditing 13/e, Arens//Elder/Beasley Arens//Elder/Beasley 7 -7 -

Audit Evidence ecisi$ns Audit Evidence ecisi$ns

1' hich audit r$cedures t$ use

2' hat sa.le sie t$ select &$r a given r$cedure

(' hich ite.s t$ select &r$. the $ulati$n

' hen t$ er&$r. the r$cedures 3ti.ing4


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Audit Pr$gra. Audit Pr$gra.

t includes a list $& the audit r$cedures

the audit$r c$nsiders necessary'

6$st audit$rs use c$.uters t$ &acilitate

the rearati$n $& audit r$gra.s'

a.le sies

te.s t$ select

*i.ing $& the tests


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!earning "b#ective (!earning "b#ective (

eci&y the characteristics thateci&y the characteristics that

deter.ine the ersuasivenessdeter.ine the ersuasiveness

$& evidence'$& evidence'


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Persuasiveness $& EvidencePersuasiveness $& Evidence

Ar$riateness

u&&iciency

*%$ deter.inants9


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Persuasiveness and C$stPersuasiveness and C$st

n .a>ing decisi$ns ab$ut evidence

&$r a given audit, b$th ersuasiveness

and c$st .ust be c$nsidered'

*he audit$r=s g$al is t$ $btain a

su&&icient a.$unt $& ar$riate

evidence at the l$%est t$tal c$st'


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!earning "b#ective !earning "b#ective

denti&y and aly the eight tyesdenti&y and aly the eight tyes

$& evidence used in auditing'$& evidence used in auditing'


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*yes $& Audit Evidence*yes $& Audit Evidence

1' Physical e;a.inati$n

2' C$n&ir.ati$n

(' $cu.entati$n' Analytical r$cedures

' n+uiries $& the client

5'


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Physical E;a.inati$nPhysical E;a.inati$n

t is the insecti$n $r c$unt by thet is the insecti$n $r c$unt by the

audit$r $& aaudit$r $& a tangible asset tangible asset ''

*his tye $& evidence is .$st $&ten*his tye $& evidence is .$st $&ten

ass$ciated %ith invent$ry and cash'ass$ciated %ith invent$ry and cash'


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C$n&ir.ati$nC$n&ir.ati$n

Information $ource

AssetsAssets

(as# in bank0arketable securitiesAccounts receivable/otes receivableOwned inventory out on consignment

Inventory #eld in public ware#ouses(as# surrender value of life insurance

)ank(ustomer 0aker (onsigneePublic ware#ouse

Insurance companyInvestment custodian


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Information $ource

1iabilities1iabilities

Accounts payable/otes payableAdvances from customers0ortgages payable)onds payable

(reditor 1ender (ustomer 0ortgagor )ond#older


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Information $ource

Owners+ E&uityOwners+ E&uity

$#ares outstanding Registrar andtransfer agent

Ot#er InformationOt#er Information

Insurance coverage(ontingent liabilities

)ond indenture agreements(ollateral #eld by creditors

Insurance company)ank* lender* and client+s legal counsel)ond #older (reditor


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$cu.entati$n$cu.entati$n

t is the audit$r=s insecti$n $& the

client’s documents and records.

nternal

d$cu.ents

E;ternal

d$cu.ents


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Analytical Pr$cedures Analytical Pr$cedures

@nderstand the client=s industry and business

Assess the entity=s ability t$ c$ntinue as a

g$ing c$ncern

ndicate the resence $& $ssible .isstate.ents

in the &inancial state.ents


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n+uiries $& the Clientn+uiries $& the Client

t is the $btaining $& written $r oral in&$r.ati$n

&r$. the client in res$nse t$ +uesti$ns

&r$. the audit$r'


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"bservati$n"bservati$n

t is the use $& the senses t$ assess client activities'

*he audit$r .ay t$ur the lant t$ $btain a generali.ressi$n $& the client=s &acilities'


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Ar$riateness $& *yes $& Ar$riateness $& *yes $&

EvidenceEvidence

*ye $& evidence

ndeendence $& r$vider

E&&ectiveness $& client=s internal c$ntr$ls Audit$r=s direct >n$%ledge

?uali&icati$ns $& r$vider

"b#ectivity $& evidence


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*yes $& Evidence and $ur Evidence ecisi$ns &$r

a Balance-


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*er.s and *yes $& Evidence*er.s and *yes $& Evidence

!erms !ype of Evidence

Examine

Scan

Read Compute

Recompute

Foot

Trace

CompareCount

Observe

Inquire

ouc!

DocumentationAnalytical procedures

DocumentationAnalytical proceduresRecalculationRecalculationDocumentation2Reperformance

DocumentationP#ysical eaminationObservationIn&uiries of clientDocumentation


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!earning "b#ective !earning "b#ective

@nderstand the ur$ses $& @nderstand the ur$ses $&

audit d$cu.entati$n'audit d$cu.entati$n'


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Audit $cu.entati$n Audit $cu.entati$n

Pur$ses $& audit d$cu.entati$n

"%nershi $& audit &iles

C$n&identiality $& audit &iles


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arbanes-";ley Actarbanes-";ley Act

*he arbanes-";ley Act re+uires audit$rs $&

ublic c$.anies t$ reare and .aintain

audit %$r>ing aers &$r a eri$d $& n$

less than seven years'


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Preare $rganied auditPreare $rganied audit

d$cu.entati$n'd$cu.entati$n'


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©2010 Prentice Hall Business Publishing,©2010 Prentice Hall Business Publishing, Auditing 13/e, Auditing 13/e, Arens//Elder/Beasley Arens//Elder/Beasley 7 -7 - ((((

Audit ile C$ntents and "rganiati$n Audit ile C$ntents and "rganiati$n

Robinson AssociatesRobinson Associates

!rial )alance!rial )alance3425326734253267

(as#(as# 839:*45;839:*45;

Accounts ReceivableAccounts Receivable 4;:*6:6 4;:*6:6

Prepaid InsurancePrepaid Insurance 5;*;7: 5;*;7:Interest ReceivableInterest Receivable 46*


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Per.anent ilesPer.anent iles

*hese &iles are intended t$ c$ntain

data $& a !istorical or continuing

nature ertinent t$ the current audit'


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Current ilesCurrent iles

Audit r$gra.

eneral in&$r.ati$n

$r>ing trial balance

Ad#usting and reclassi&icati$n entries

u$rting schedules


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*yes $& u$rting chedules*yes $& u$rting chedules

Analysis

*rial balance $r list


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*yes $& u$rting chedules*yes $& u$rting chedules

u..ary $& r$cedures

E;a.inati$n $& su$rting d$cu.ents

n&$r.ati$nal

"utside d$cu.entati$n


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Prearati$n $& AuditPrearati$n $& Audit

$cu.entati$n$cu.entati$n

Each audit &ile sh$uld be r$erly identi&ied

$cu.entati$n sh$uld be inde;ed and

cr$ss-re&erenced

C$.leted d$cu.entati$n .ust clearly

indicate the audit %$r> er&$r.ed

t sh$uld include su&&icient in&$r.ati$n

t sh$uld lainly state the c$nclusi$ns reached


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escribe h$% techn$l$gy a&&ects auditescribe h$% techn$l$gy a&&ects audit

evidence and audit d$cu.entati$n'evidence and audit d$cu.entati$n'


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E&&ect $& *echn$l$gyE&&ect $& *echn$l$gy

Audit evidence is increasingly in electr$nic &$r.

Audit$rs .ust evaluate h$% electr$nic in&$r.ati$n

a&&ects their ability t$ gather evidence

Audit$rs use c$.uters t$ read and e;a.ine

evidence

$&t%are r$gra.s are tyically ind$%s-based


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End $& Chater 7End $& Chater 7

Arens-audit Chapter07

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