Audit Evidence Chapter http://www.authorstream.com/shengvn/ ©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley -7 5- Learning Objective Contrast audit evidence with evidence used by other professions ©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley 7-2 Nature of Evidence Any information used by the auditor to determine whether the information being audited is stated in accordance with established criteria The use of evidence is not unique to auditors Evidence is also used by scientists, lawyers, and historians ©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley 7-3 Nature of Evidence ©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley 7-4 Learning Objective Identify the four audit evidence decisions that are needed to create an audit program ©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley 7-5 Audit Evidence Decisions Which audit procedures to use What sample size to select for a given procedure Which items to select from the population When to perform the procedures (timing) ©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley 7-6 Audit Program It includes a list of the audit procedures the auditor considers necessary Sample sizes Items to select Timing of the tests Most auditors use audit software packages to generate audit programs ©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley 7-7 Learning Objective Specify the characteristics that determine the persuasiveness of evidence ©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley 7-8 Persuasiveness of Evidence Two determinants: Appropriateness Sufficiency The persuasiveness of evidence can be evaluated only after considering the combination of appropriateness and sufficiency ©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley 7-9 Six Characteristics of Reliable Evidence Independence of provider Effectiveness of client’s internal controls Auditor’s direct knowledge Qualification of individuals providing the information Degree of objectivity Timeliness ©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley - 10 Audit Documentation Audit documentation is the principal record of auditing procedures applied, evidence obtained, and conclusions reached by the auditor in the engagement ©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley - 29 Audit Documentation Purposes of audit documentation Ownership of audit files Confidentiality of audit files ©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley - 30 Sarbanes-Oxley Act The Sarbanes-Oxley Act requires auditors of public companies to prepare and maintain audit working papers for a period of no less than seven years ©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley - 31 Learning Objective Prepare organized audit documentation ©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley - 32 Audit File Contents and Organization ©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley - 33 Permanent Files These files are intended to contain data of a historical or continuing nature pertinent to the current audit ©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley - 34 Current Files Audit program General information Working trial balance Adjusting and reclassification entries Supporting schedules ©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley - 35 Relationship of Audit Documentation to Financial Statements ©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley - 36 Types of Supporting Schedules Analysis Trial balance or list Reconciliation of amounts Tests of reasonableness ©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley - 37 Types of Supporting Schedules Summary of procedures Examination of supporting documents Informational Outside documentation ©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley - 38 Preparation of Audit Documentation Proper identification of each file Files indexed and cross-referenced Clear indication of work performed Include sufficient information State conclusions reached ©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley - 39 Preparation of Audit Documentation ©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley - 40 Learning Objective Describe how technology affects audit evidence and audit documentation ©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley - 41 Effect of Technology Audit evidence is increasingly in electronic form Auditors must evaluate how electronic information affects their ability to gather evidence Auditors use computers to read and examine evidence Software programs are typically Windows-based ©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley - 42 End of Chapter ©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley 57- -543 ... Publishing, Auditing 14/e, Arens/ Elder/Beasley - 12 Learning Objective Identify and apply the eight types of evidence used in auditing ©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/ Elder/Beasley... Business Publishing, Auditing 14/e, Arens/ Elder/Beasley - 10 Relationships Among Audit Evidence and Persuasiveness Audit Evidence Decisions Audit procedures and timing Sample size and items to select... also used by scientists, lawyers, and historians ©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/ Elder/Beasley 7-3 Nature of Evidence ©2012 Prentice Hall Business Publishing, Auditing