Audit evidence and procedures for collecting r naudit evidence in the performance of r nfinancial statements at grant thornton vietnam co , ltd

UNIVERSITY OF ECONOMICS AND LAW FACULTY OF ACCOUNTING AND AUDITING GRADUATION THESIS Topic: AUDIT EVIDENCE AND PROCEDURES FOR COLLECTING AUDIT EVIDENCE IN THE PERFORMANCE OF FINANCIAL

UNIVERSITY OF ECONOMICS AND LAW FACULTY OF ACCOUNTING AND AUDITING

GRADUATION THESIS

Topic:

AUDIT EVIDENCE AND PROCEDURES FOR COLLECTING

AUDIT EVIDENCE IN THE PERFORMANCE OF FINANCIAL STATEMENTS AT GRANT THORNTON VIETNAM CO., LTD

Lecturer: Ms Tran Thanh Thuy Ngoc

Ho Chi Minh City, May 2022

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TABLE OF CONTENTS

OVERVIEW CHAPTER 1

1 Research reason 1

2 Research objectives 1

3 Research methodologies 2

4 Object and scope of research 2

CHAPTER 1: INTRODUCTION ABOUT GRANT THORNTON (VIETNAM) LIMITED 3

1.1 General information about Grant Thornton (Vietnam) Limited 3

1.2 History and development about Grant Thornton (Vietnam) Limited 4

1.3 Organizational structure of Grant Thornton (Vietnam) Limited 5

1.4 Horizon methodology and some technological applications at Grant Thornton (Vietnam) Limited in the audit procedures 7

CHAPTER 2: THEORETICAL BASIS ON AUDIT EVIDENCE AND PROCEDURES FOR COLLECTING AUDIT EVIDENCE 9

2.1 Some basis of audit evidence 9

2.2 Method of selecting test elements 14

CHAPTER 3: AUDIT EVIDENCE AND METHODS OF COLLECTING EVIDENCE APPLIED AT THE AUDITING FIRM GRANT THORNTON VIETNAM 17

3.1 Audit evidence and methods of collecting evidence from the perspective of Grant Thornton 17

3.2 Sampling method at Grant Thornton Vietnam 31

3.3 Compare VSA 500 and ISA 500 33

CHAPTER 4: PUTTING EVIDENCE - GATHERING METHODS INTO PRACTICE AT GRANT THORNTON 34

4.1 Introduction about ABC company 34

4.2 Setting up PM, TE and Deminimus for D company 37

4.3 Procedures for collecting evidence at ABC One Member Company 37

CHAPTER 5: COMMENTS AND RECOMMENDATIONS ON THE APPLICATION

OF EVIDENCE COLLECTION METHODS IN PRACTICE AT GRANT

THORNTON AUDIT COMPANY 49

5.1 Remarks on practical evidence collection methods at Grant Thornton Vietnam 49

5.2 Suggestions 50

REFERENCES 52

LIST OF THE TABLES AND FIGURES Tables:

Table 1: Depreciation period of company A's fixed assets 19

Table 3: Illustration for collecting audit evidence for cash 42 Table 4: Illustration for collecting audit evidence for selling expense 47

Figures:

Figure 2: Organizational structure of Grant Thornton (Vietnam) Limited 6 Figure 3: Organizational structure of Audit and Assurance Internee 7 Figure 4: The types of information to send confirmation letters and where the

confirmation is suitable for those types of information

27

Figure 5: Steps in the interview - investigation procedure 29

Figure 10: Reconcile balance per confirmation and per book 41

Figure 12: Short-term and long-term prepaid expense 43 Figure 13: Electricity, phone and internet cost 45

OVERVIEW CHAPTER

1 Research reason

The audit activity in our country has evolved and is fast increasing in order to respond

to the requirements of a changing economy based on market mechanisms and international integration Those interested in the financial condition and how it is reflected in accounting records might have faith in auditing It may be argued that building this trust

is the most important element in the creation and growth of auditing as a separate activity Because the relevance of the audit report is based largely on the evidence gathered by the auditor and on which to build a judgment, the audit process is essentially about gathering and assessing audit evidence Audit sampling is a common way of selecting test items for obtaining evidence during an audit; each organization has its own methods, strategies, benefits, and restrictions in the process of implementation However, gathering audit evidence in general, and audit sampling in particular, is a cross-cutting task that has

an impact on the audit's overall quality and efficacy

The collecting of adequate and relevant audit evidence to allow independent auditors

of financial statements to make an accurate evaluation has resulted in high quality and success in auditing practice

Because of the significance of the issue, the writer has chosen the topic "Methods to collect audit evidence" as my graduation thesis to aid the writer and readers in gaining a thorough grasp of the subject

4 Object and scope of research

Due to the limited research period, the writer has only been exposed to a few parts of the practice, so the topic cannot cover practically all the tricks that need attention for all the parts Therefore, the writer only presents to the extent of his knowledge the issues related to the methods of collecting audit evidence on the theory and the application of these methods at Grant Thornton

CHAPTER 1: INTRODUCTION ABOUT GRANT THORNTON (VIETNAM)

LIMITED 1.1 General information about Grant Thornton (Vietnam) Limited

Figure 1: Logo Grant Thornton (Vietnam) Source: https://www.grantthornton.com.vn/

 The Company’s name was accepted: Grant Thornton (Vietnam) Limited

 Representative office in Vietnam

 Type of business: Limited Liability Company with two members or more

 Email: Grant.Thornton@vn.gt.com

 Website: https://www.grantthornton.com.vn/

 Head office of Grant Thornton (Vietnam) Limited

 Address: 18th floor, Hoa Binh International Tower, 106 Hoang Quoc Viet, Nghia Ward Do, Cau Giay District, Hanoi City

 Legal representative: Mr Nguyen Chi Trung - General Director

Ms Nguyen Thi Vinh Ha - Deputy General Director

 Phone: (+84) 4 3850 1686

 Tax code: 0101476557

 Fax: (+84) 4 3850 1688

 Branch office of Grant Thornton (Vietnam) Limited

 Address: 14th floor, Pearl Plaza Building, 561A Dien Bien Phu, Ward 25, District Binh Thanh, Ho Chi Minh City

 Legal representative: Mr Nguy Quoc Tuan - Deputy General Director

 Phone: (+84) 8 3910 9100

 Tax code: 0101476557-001

 Fax: (+84) 8 3914 374

1.2 History and development about Grant Thornton (Vietnam) Limited

 Grant Thornton Vietnam was founded in 1993 as an independent member business of Grant Thornton International It started as a joint venture with Concetti Grant Thornton Vietnam became a 100 percent foreign-invested company in 1997, and a branch was formed in Ho Chi Minh City

 Grant Thornton International accepted Grant Thornton Vietnam as a full member in

1998 In 1999, the firm changed its name to Grant Thornton (Vietnam) Limited

 In 2007, Grant Thornton Vietnam was recognized as an independent auditing firm for listed enterprises

 Another year has come to an end, and 2014 has been a watershed moment Grant Thornton Vietnam Ltd and Nexia ACPA Auditing & Consulting Co Ltd ("ACPA") officially merged on July 1, 2014

 Services of Grant Thornton (Vietnam) Limited

- Audit and Assurance Services: statutory audit, IFRS services, review of financial

statements and financial information, reporting accountant, a compilation of financial information, Cross-border audit, US GAAP audit, agreed-upon procedures

- Tax Services: licensing services, international tax planning, expatriate tax planning,

tax advisory, tax compliance services, tax health check, transfer pricing, tax due diligence, customs and international trade, M&A transaction, industrial zones – picking a location for your business, tax audit support

- Advisory Services: business risk services, transaction advisory services, valuation,

business consulting services

- Business Process Solutions: accounting services, taxes compliance within

outsourcing, secondments/loan staff services, compilation of the financial and financial information, accounting systems review and improvement, initial setting-up for accounting and taxes systems, management accounting and analysis

non DigiTech Innovation: technology consulting and solutions, digital advisory

- International Corporate Structuring Services: offshore company establishment

service and private trust advisory

 Core Values and Culture

Grant Thornton (Vietnam) Limited developed six basic principles, known as CLEAR values, in addition to a distinct worldwide culture

- Core values

 Collaboration: ask for help, give help – we work well together

 Leadership: have courage and inspire others – we challenge each other to be the best

we can be

 Excellence: find a better way every time – we never get complacent

 Agility: think broadly, act quickly – we thrive in change

 Respect: listen and understand, be forthright – we create honest relationships

 Responsibility: use influence wisely – we own our actions

- Culture

 Diversity: diversity allows Grant Thornton (Vietnam) Limited to adapt to the needs of

a rapidly changing world The company never discriminates based on ethnicity, race, religion or belief (or lack thereof), gender, sexual orientation, gender reassignment, pregnancy, maternity, marital status, age, or disability

 Growing Together in the community: Growing Together in the community is Grant

Thornton's commitment to community engagement, which is based on six guiding principles It promotes the positive impact that each individual can have by becoming actively involved in their community Many inspiring individuals from Grant Thornton work and live in communities around the world that provide innovative, generous, and resourceful services

1.3 Organizational structure of Grant Thornton (Vietnam) Limited

The primary office of Grant Thornton Vietnam is in Hanoi, with a branch in Ho Chi Minh City The departments perform independent duties and activities while providing close assistance to one another during the operation Overall, the apparatus is structured compactly, by the Company's management criteria, resulting in a professional and

effective working environment:

 Share Owner: Mr Kenneth Atkinson

 Branch Director: the person who is responsible for the entire operation of the branches The director of the Hanoi branch is Mr Nguyen Chi Trung, and Mr Nguyen Quoc Tuan is the deputy director of the branch in Ho Chi Minh City

 Departments: audit and assurance, tax advisory, outsourcing, Digitech, and management (including supporting and IT)

Figure 2: Organizational structure of Grant Thornton (Vietnam) Limited

1.4 Horizon methodology and some technological applications at Grant Thornton (Vietnam) Limited in the audit procedures

 Horizon methodology

A breakthrough method of the company to gain a better understanding of the organization, how it operates, and risks it poses to customers The method is based on Windows operating system with the basic component being GT Explorer software product and audit care - a tool for recording, evaluating, and checking internal control systems This technique is managed directly by the Chief Auditor with the participation

of auditors at all stages of the audit process Horizon applies equally to all audit sizes and processes; however, the audit procedures selected and the extent of work performed will differ from client to client This method complies with corporate policy and professional standards, including those established by the International Federation

of Accountants (IFAC)

 Technological applications

Partner/DirectorSenior ManagerManagerAssistant ManagerSeniorAssociateIntern

Figure 3: Organizational structure of Audit and Assurance Internee

- Voyager: this software allows to perform the entire audit procedures on the computer and connect all the auditors At the same time, it performs audits according to the characteristics of each type of customer and certain risks

- TBEAM: assists auditors in automatically creating digital balance sheets arising from customer's data, creating a steering chart, making audit adjustments, and creating a unified working paper, connected with Voyager software

- IDEA: is a popular data query software licensed by Grant Thornton It helps auditors save time, perform more comprehensive analysis and focus more on important items, reduce the customer's reliance on IT specialists, and increase the stability of procedures The jobs that IDEA can perform include data extraction, table of contents, sorting, data aggregation, file comparison, field statistics, sampling, calculation, information output of other programs, selecting the account to check, and storing information

CHAPTER 2: THEORETICAL BASIS ON AUDIT EVIDENCE AND

PROCEDURES FOR COLLECTING AUDIT EVIDENCE 2.1 Some basis of audit evidence

2.1.1 The concept of audit evidence

According to Vietnamese Auditing Standards VSA 500, “Audit evidence is all documents and information collected by the auditor in connection with the audit and based on the documents and information With this information, the auditors draw conclusions and thereby form an opinion Audit evidence includes documents and information contained in accounting documents and books, including financial statements and other documents and information

As a result, audit evidence is the foundation for confirming the audit report, and the process

of gathering audit evidence is the heart of the audit implementation stage

2.1.2 Classification of audit evidence

Different types of evidence have different reliability Reliability can depend on origin, form, and case-by-case The following methods of classification can be used:

2.1.2.1 Classification based on the audit evidence source

Evidence created by a third party, which was retained and supplied to the auditor upon the audit's request Letters of confirmation of receivables from consumers, letters of confirmation of bank deposit balances, letters of confirmation of obligations to sellers, and other information that requires third-party confirmation (such as a court of law) Because it is conducted directly by the auditor, this is the most dependable sort of proof

The outside prepares the audit evidence, which is then kept at the audit unit For instance, minutes of the handover of fixed assets, supplier bills, and so forth

Evidence gathered by the client unit, disseminated to the public, and stored by a third party An example of a client unit's sales invoice

The client unit prepared evidence that was shared within the unit For example, time sheets, salary payment books, detail books, summary books, and so on This type of evidence

of origin is quite popular since it is quick and inexpensive

2.1.2.2 Classification based on the type of audit evidence

Physical evidence (inventory or seeing an inventory, as well as the auditor's direct

knowledge of the client entity, such as stocktaking or viewing the operating system of internal control

Accounting documents, books, vouchers, auditor's computations, and other papers that the client unit delivers to the auditor in order to fulfill the audit The efficacy of internal control determines the dependability of this form of evidence

Evidence gathered through interviews For example, the information obtained from the employee interview questionnaire of the client unit Evidence of this type is less reliable than evidence of the above because the accuracy depends on the sincerity of the answer and the level of knowledge of the interviewees

2.1.3 Requirements of audit evidence

As previously stated, audit evidence will be used by the auditor to provide a judgment on the financial statements' reasonableness once it has been assessed As a result, audit evidence

is critical to the quality of the audit report "The auditor must develop and implement audit methods suited to the conditions in order to collect sufficient audit evidence," according to VSA 500, section (6), "Audit Evidence" (2012) Based on this description, it is clear that an audit report must meet two essential requirements: completeness and appropriateness, which correspond to the audit report's quantity and quality standards These two needs are not mutually exclusive, but are always interrelated

2.1.3.1 Accuracy

This is the quantity of audit evidence that must be acquired during an audit in order for the auditor to make an opinion Sufficient adequacy refers to the size of the sample and the timing of the audit processes to acquire evidence Furthermore, the auditor's professional opinion on the adequacy of audit evidence is based on some of the following factors:

 Materiality: The higher the materiality of the things, the more audit evidence is required; conversely, the lower the materiality of the items, the more audit evidence is required

 Levels of inherent and control risk: To manage risk, the quantity of audit evidence must be enhanced in areas of inherent or control risk to minimize detection risk to a minimum Reduce audit risk to an acceptable level (using the AR=IR x CR x DR calculation)

If the existing evidence is untrustworthy or conflicting, the auditor must gather more evidence

to reinforce or augment the evidence before proceeding It's vital to remember that, due to the audit's possible limits, the auditor can only acquire audit evidence that is compelling, not absolute

2.1.3.2 Sufficiency

The relevance of audit evidence is primarily related to the reliability of the evidence obtained by the auditor The auditor evaluates the reliability of audit evidence based on the following factors:

 The more dependable the audit evidence is from the client entity, the less likely

it is to be falsified The more independent the audit evidence is from the client entity, the less likely it is to be falsified

 Physical evidence and those immediately accessed by the auditor, according to the auditor, have the highest dependability, followed by documentary evidence and documentary evidence

 Internal control system: If the internal control system is well-designed and run, the evidence gathered from it will be more reliable

When there is a lot of information from many different sources, in many formats, all verifying the same fact, the audit evidence is more reliable Furthermore, the appropriateness

of audit evidence necessitates the evidence's concordance with the statement under consideration by the auditor Because evidence that is very trustworthy but contradicts the assertion under examination will not always be helpful to the audit

2.1.4 Methods of collecting audit evidence

Auditors can collect audit evidence in a variety of ways Each approach will produce distinct sorts of evidence with varying degrees of dependability, as well as its own set of benefits and drawbacks As a result, the auditor will pick strategies to collect audit evidence

in each instance based on his professional opinion

2.1.4.1 Test

The process of examining and comparing recorded papers and tangible assets with one another, between books and reality, between rules and implementation, and so on, and

includes two types:

2.1.4.1.1 Material inspection

The client unit's inventory or participation in the inventory of some assets (goods, fixed assets, inventory, cash at the fund, ) The auditor will gather tangible evidence using this approach, which is the most reliable sort of proof However, there are certain drawbacks

to this method:

 An inventory of a fixed asset simply proves that the asset exists; it does not establish "rights and obligations": the asset may be leased to the customer or has already been mortgaged

 Similarly, an inventory of a fixed asset serves solely as proof of the item's existence, not as a foundation for "appraisal" or "rights and duties."

Due to the constraints mentioned above, physical inspection should be used in conjunction with other procedures to acquire sufficient acceptable evidence for the audit, particularly proof of asset ownership or worth

 The checking process begins with the books and ends with the original papers This examination will substantiate the originating claim by demonstrating that the transactions documented in the books took place

2.1.4.2 Observation

The monitoring of a phenomenon, cycle, or procedure performed by someone else For

example: observing physical inventory, observing control procedures conducted by the client unit,

This approach is simple to apply, but it is difficult to offer comprehensive proof, thus

it must be used in conjunction with other methods Observation only provides evidence of how the work is done at the essential moment It is possible that it will be done at different times, but this is not guaranteed

2.1.4.3 Confirmation

According to VSA 505 "External confirmations": Confirmation is the process of obtaining and evaluating audit evidence through direct contact with third parties to obtain their responses to the information, specifically affect the assertions prepared by management and presented in the financial statements of the entity

Factors that affect the reliability of external confirmation include: the auditor's control over the confirmation procedure and response, and the nature and limitations of the response

2.1.4.4 Investigation

Writing, interviewing, or contacting with the investigator to get information from competent persons inside or outside the client business, which will supply the auditor with information that is not currently accessible Yes, or further proof to back up what's already there However, the auditor should keep in mind that the accuracy of the data acquired is contingent on the respondents' impartiality and comprehension

2.1.4.5 Calculation

Is responsible for verifying the numerical accuracy of data on vouchers, accounting books, financial statements, and other documents Audit evidence is also gathered by auditors doing their own independent computations for depreciation, provision for bad debts, and so on Then, in order to find and explore the reasons of material variances, compare the calculation results with the data from the client unit (if any)

volatility tendencies discovered by "analysis." As a result, if this strategy is successfully implemented in practice, auditors will save a significant amount of time

The following analytical procedures are used in the study:

 Analyze trends: can compare the balance, or arising of the account between periods to detect accounts with unusual fluctuations

 Analysis of proportions: can compare ratios between periods to detect misleading accounts

2.2 Method of selecting test elements

The process through which auditors conduct audit processes in order to collect sufficient acceptable evidence on which to establish a conclusion on financial statements is known as auditing However, the auditor cannot undertake similar processes on all transactions or all components of an item's balance since it would take a significant amount of time and effort

on the auditor's part, and it would be useless in certain cases Moreover the auditor may not perform such procedures only on a small number of transactions or on a small number of balance elements, as this creates the risk of not being able to obtain all of the appropriate evidence As a result, before beginning the operation, the auditor must first identify the transactions and items that must be examined This step is considered a strategy for acquiring audit evidence and is significant in determining whether the auditor has gathered sufficient acceptable evidence during the audit process These components can be chosen in one of three ways:

 Select the entire group (100 percent test)

 The selection of unique elements

 Collect audit samples

In each scenario, the auditor can use one of the three procedures listed above or a combination of all three The risk assessment and the audit's efficacy are used to choose which approach to apply

2.2.1 Select the entire group

The auditor may elect to analyze all of the parts that make up an account balance or a transaction in some situations Under particular, in the following situations:

 The overall contains few elements, but each piece has a high value

 Inherent risk and control risk are significant, and other approaches cannot give adequate acceptable proof

 As the calculation processes are performed by the computerized system making the 100% inspection still cost effective

 The client unit has signs of litigation or dispute

 Customers' requests; In some circumstances, the customer may request that the auditor review all items in the population to confirm that a specified goal is met For example, a parent firm that wants to verify the performance of a subsidiary frequently requests that the auditor do a complete audit in order to provide a more accurate picture of the subsidiary's performance

2.2.2 Selection of unique elements

Auditors can also use their knowledge of the customer's company position, as well as an initial evaluation of inherent and control risks, to determine which unique aspects need to be audited The following are examples of special elements: Elements having big or significant values are at a higher chance of containing mistakes

The auditor can review a big percentage of the overall value of a balance or a transaction

by analyzing these parts, which have a value of a specific amount or more

The elements are appropriate for the purpose of collecting information; the auditor will pick the relevant elements based on the purpose of collecting information For instance, the company circumstances, transaction content, and internal control system

The auditor's judgment is totally relied upon when selecting items As a result, the findings reached using this approach cannot be utilized to predict the population Because the auditor will be wrong if the remaining items include serious misstatements To avoid errors, the auditor must conduct extra audit processes for the remaining members of the population In reality, auditors divide the population into two groups: one group will evaluate all things with

a big value or equivalent to the materiality level, while the other group will sample a few items to test The entire item's conclusion will be based on the findings gathered from both groups

2.2.3 Collect audit samples

"Audit sampling is the use of audit processes on a number of elements fewer than 100 percent of the total number of elements in an account balance or a class of transactions, so that every element has a chance to be picked," according to VSA 530 "Audit Sampling." In order to establish conclusions about the population, the auditor will use sampling to gather and assess data concerning the characteristics of selected items As a result, in order to make inferences about which components in the sample can reflect the character of the population

as a whole, the auditor must pick sample that are likely to represent the population in the sample There are two types of sampling:

* Statistical sampling is a sampling technique that must meet two criterias:

 The elements in the sample are chosen at random

 To analyze sample results, including the calculation of sampling risk, use statistical theory

* Non-statistical sampling is a sampling technique that does not meet one or both of the statistical sampling method's requirements

CHAPTER 3: AUDIT EVIDENCE AND METHODS OF COLLECTING

EVIDENCE APPLIED AT THE AUDITING FIRM GRANT THORNTON

VIETNAM 3.1 Audit evidence and methods of collecting evidence from the perspective of Grant Thornton

3.1.1 Audit evidence

The process of acquiring and analyzing evidence concerning financial statement claims in order to determine and report the link between those assertions and predefined criteria is known as auditing The audit team's overall goal is to gather enough relevant and trustworthy audit information to form a credible foundation for an opinion on the audited company's financial statements

The steps in the audit process are as follows:

 To determine the assertion for business cycles and items, use risk assessment techniques

 Determine and carry out processes to gather enough suitable audit evidence to substantiate the aforementioned allegations

 Examine the evidence for its adequacy and relevance

 Determine if the evidence gathered is extremely trustworthy

 Make a determination as to whether the evidence gathered supports the allegation All information utilized by the engagement team to establish its view is referred to as "audit evidence." It contains evidence gathered during the audit preparation and performance stages,

as well as during the client's quality control assessment procedures

To acquire audit evidence, the audit teams employ one or more types of audit techniques These methods are classified as follows in the GT Vietnam manual:

 Calculate

These audit processes, or any combination of them, can be used to assess risk, test controls,

or conduct substantive audits "Audit Evidence Collection Procedures" is the name given to these procedures

Assess the audit evidence for relevance, completeness, and appropriateness:

The audit evidence's relevance and reliability (or validity) are referred to as "relevant." It must contribute to the achievement of the audit objectives in order to be relevant, and it must

be credible in order to be credible

The term "adequate" refers to the amount of audit evidence acquired; the engagement team should gather enough relevant material to gain reasonable certainty regarding an accurate and fair judgment on the financial statements As a result, the engagement team is not obliged to gather any further evidence beyond what is required to gain reasonable certainty

"Relevance" is a measure of evaluating the quality of audit evidence (i.e., its relevance and reliability in supporting the assertions of the financial statements and detecting misstatement)

3.1.2 Professional skepticism

When analyzing the appropriateness, completeness, and relevance of audit evidence, the engagement team must retain a professional skeptical attitude Accordingly, when applying audit procedures to the books and audit procedures to the client's books and supporting data, the engagement team should avoid accepting documents and interpretations that are not sure The engagement team should ask themselves the following questions when completing audit procedures:

- Do you need any supporting papers (invoices, contracts, etc.) to check the balance and transactions?

- Do you need any additional persuasive and relevant audit evidence?

- Are the resulting transactions appropriate for the client unit's business line?

- Are the conditions of the transaction reasonable?

3.1.3 Reliability of the evidence

The reliability of audit evidence depends on the circumstances in which it was obtained

Table 1: Correlational assumptions regarding the reliability of audit evidence

Evidence is collected directly through

procedures such as investigation,

examination

Evidence is collected indirectly through interviews

Collected from outside, sources

independent of the client unit

Collected only from management

Obtained from investigation of

original documents

Collected from investigation of copy tables and taxes

Documents are collected in an

effective control environment

Document was collected in a poorly controlled environment

3.1.4 Collect audit evidence

Due to the existence of the difficulties outlined above and the unique circumstances, the auditor should consider specific audit goals while gathering audit evidence The engagement team should consider the following factors while applying the overall audit methodology and selecting individual audit procedures to perform:

 Risks of substantial misrepresentation in financial statements, including risk assessment methods; projected productivity and audit effectiveness

 The nature and materiality of the item is examined as to the source and reliability of the available evidence

 The goal of the audit must be achieved

As a result, identifying the exact nature, timing, and degree of those to be implemented in

an entity is based on the engagement team's professional judgment and is done on a case basis

case-by-3.1.5 Conclusions derived from audit evidence

Conclusions drawn from a variety of sources should be consistent When audit evidence collected from one source appears to conflict with evidence obtained from other sources or with other evidence, the auditor must conduct further work to resolve the conflict since each

source's trustworthiness is still in question As a result, evidence gathered from various audit sources as well as related documents must be consistent

The reliability of evidence obtained from corporate management should be considered because it is influenced by management's motivations, purposes and knowledge Aside from the risk of intentional falsification, management has a tendency to safeguard the statistics provided by its accounting systems As a result, documentation from the management (or the microorganism's employees) must frequently be backed up by additional proof

The auditor must assess the audit evidence in order to establish if sufficient relevant, reliable, and adequate audit evidence has been acquired to offer a reasonable foundation for the conclusion It's more important to be convincing than to be believable For example, when examining a customer's accounts receivable balance at the end of the year, compare invoices with purchase orders and shipping documents to provide more convincing evidence

If there is a material doubt about audit evidence, the engagement team should not express

an opinion on the financial statements until relevant, reliable, and appropriate audit evidence has been obtained to eliminate doubts, or the client unit has been requested to amend the report accordingly, or the engagement team should express an opinion of disapproval, as required by professional standards

3.1.6 Techniques for gathering audit evidence

There are four sorts of processes that are often used to gather audit evidence in Horizon:

 Risk assessment methods, which are used to detect substantial risks that might cause the financial statements to be materially misrepresented

 Walkthroughs, which are meant to show that internal controls are in place

 Controls must be tested to ensure that the system's internal control functions as intended

 Substantive testing, which establishes the legality and accuracy of financial statement balances and related transactions

The processes for obtaining audit evidence are discussed in this section Rarely will the engagement team employ all processes to gather audit proof to back up any assertion Instead,

methods should be chosen based on the quality of evidence they are offered and their cost in comparison to other audit evidence-gathering techniques available to the engagement team The procedures described below serve as the basis for the audit procedures used in Voyager software The following is a general classification of the many audit procedures:

3.1.6.1 Test

Tests are when the auditor executes control processes or procedures that were formerly part of the client entity's internal control system on their own Horizon does "testing" on a regular basis as a check of the internal control system

The customer unit's cash item is deemed inconsequential or risk-free (customer units typically do not maintain excessive cash reserves, only enough to cover cash payment demands)

Time difference between when a cash inventory can be made and when it can't:

On the balance sheet date, a client entity usually performs a cash inventory However, the audit team is typically preoccupied with other, more vital tasks during this period (stock control, risk assessment, document review )

Inventories cycle

A "physical check" of a client's inventory at the year end date is described as a technique by which the engagement team takes inventory or takes direct inventory of the client's inventory to give evidence of "presence" at the year end date The audit team should plan the inventory before checking it to ensure that all processes are followed while executing

a physical inventory check During the inventory process, the audit team must execute the following steps in particular:

Request that the customer supply a list of the inventory that needs to be

inventoried This catalog contains information on the amount of inventory in stock at the balance sheet date, as well as information on the inventory's worth

The audit team can better track the inventory process with this directory

- The audit team compares the actual quantity of each category of inventory on the list to the inventory list If there is a disparity, the audit team should approach the individuals

in charge of inventory (typically the storekeeper) for an explanation and collect relevant papers that explain the difference

- Choose a direct inventory sample: the audit team conducts direct inventory using random sampling of a variety of inventory types When testing and auditing, the auditing team should focus on executing both tests:

• Experiment provides proof of inventory “Existence”: select several types of inventory from the inventory list and do a physical count Usually, the audit team will select high-value inventories to count to cover the value of inventory

• Test to provide evidence of “Adequacy” recognition of inventory: The audit team selects a sample of several types of inventory in stock, checks the actual quantity, and compares it with the amount recorded on inventory books

Tangible fixed asset cycle

The audit team should conduct a tangible fixed asset inventory, similar to inventories,

to provide evidence of "presence" at the balance sheet date The audit team, on the other hand, only executes this method when there are exceptional fluctuations in the balance of tangible fixed assets during the audit year that pose a risk The procedures that the audit team must follow during the inventory of tangible fixed assets are identical to the procedures that the audit team must perform during the inventory process outlined above

3.1.6.2 Document check

A document check is a detailed examination, review, traceability or verification of accounting documents, other documents, processes, terms or transactions The analysis of documentation adds to the proof of the assertions under audit Examining an attorney's letter, for example, will reveal evidence of a contract's "existing" claim Documentary exams may provide proof of asset or liability balances, as well as some evidence of financial statement

information, such as agreements and minutes The following steps are included in document testing:

• Check the documents provided by the customer (in seconds, electrical - or other formats)

• Compare all information contained in the document with other information recognized in the document or known to the engagement team from other sources

• If there are any differences, look into them

• The discussion has come to a close

In most cases, document checking techniques are applied in multiple cycles:

 Money cycle

Here are some of the documents that the engagement team will need to gather and review for appropriateness and reasonableness in order to offer evidence of the audit's cash balance being accurately recorded:

 Money accounts detailed ledger and general ledger (including cash accounts and bank deposits): the audit team compares the data in these documents to the figures in the financial statements to ensure accuracy

 Minutes spent during the inventory process dealing with any emergent differences (if any) between the actual and the books The audit team checked the consistency

of the customer's recording with some original revenue and spending documents

 Original receipts and invoices for significant and unusual income and expense transactions

 Original documents of revenue and expenditure transactions arising before and after the lock date for a certain number of days,

 Check and match the amount on these vouchers, as well as the transaction date, with the date recorded in the books to ensure that the Customer's cash account accounting period is correct

 For bank deposit accounts, the audit team also needs to collect the spare number

of each bank's account (Bank Statement) Based on the number of back up note, the audit