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1、7-1Audit EvidenceChapter 77-2Audit Evidence Decisions1.Which audit procedures to use2.What sample size to select for a given procedure3.Which items to select from the population4.When to perform the procedures7-3Audit Program7-4Persuasiveness of EvidenceCompetenceSufficiencyCombined effectPersuasive
2、ness and cost7-5CompetenceRelevanceIndependence of providerEffectiveness of internal controlsAuditors direct knowledgeQualifications of individualsDegree of objectivityTimeliness7-6Competence of Evidence Hierarchy nDirect knowledge of auditor-highest source of evidencenExternal evidence nObtained di
3、rectly from outside the client nArms length transactions nDocuments never go to the client.nExternal-internal is material that originated outside the client but is supplied by the client.nInternal evidence is documentation from the client-produced,stored and circulated.nVerbal and written representa
4、tion of client.Should be corroborated by other evidence.7-7General audit procedures for gathering evidencenR-RecalculationnO-ObservationnC-ConfirmationnV-Verbal inquirynE-Examination of documentsnS-ScanningnA-Analytical Procedures7-8Recalculationn re-performs the calculation of an audit assertion su
5、ch as depreciation,pension liability,actuarial reserves,bad debts and product liabilities.n Helps to prove the existence and valuation assertions.7-9Physical observationnProvides evidence of existence.nHas to be a tangible asset such as plant,property,inventories,stock certificates,bonds,debt agreem
6、ents.7-10ConfirmationsnFrom outside sources by direct correspondence.nEvidence for the existence and ownership and valuation.nSuch as:Bank account balances,accounts receivable balances,notes payable,lessors for lease terms etc.nPositive/negative confirmation requests.7-11Sending ConfirmationsnBe sen
7、t on client letterhead and signed by a client officernCareful of client addresses for authenticitynRequest information the recipient can providenMailed by the audit firm to maintain controlnResponses should be mailed directly to the auditor.7-12Verbal InquiriesnOf client can be used as evidence but
8、it is not persuasive alone.nOther evidence corroborating the inquiry must be obtained as well.7-13Examination of Documents nExamples:bank statements,canceled checks,contracts,vendor invoices,titles and others nCan provide evidence for all five assertions.nDocuments produced internally are not consid
9、ered very reliable nsales summary reports,budget reports,shipping documents,and transaction logs.nThe quality of internal control will decide how useful or reliable these may be.7-14Types of Document Examinations nVouching works from the financial statements to a source document.nTracing works from
10、a source document to the financial statements.nScanning reviews the financial statements for unusual items and then uses vouching to look at the source documents.7-15ScanningnLooking for unusual items such as debit balances or transactions in a revenue.nThis audit procedure is to direct attention to
11、 areas that may need additional audit procedures.7-16Analytical ProceduresnStudying relationships between financial and non financial data for possible irregularities.nIt is a required procedure during the planning of an audit and during the final review of an audit before a report is issued.nOption
12、ally can be used as evidence.7-17RelationshipsTypes ofevidenceSamplesizeTimingof testsAuditproceduresItems toselectSpecificinstructions7-18InformationOften ConfirmedInformationSourceAssetsCash in bankBankAccounts receivableCustomerNotes receivableMakerOwned inventory out on consignment ConsigneeInve
13、ntory held in public warehousesWarehouseCash surrender value of life insurance Insurance co.7-19InformationOften ConfirmedInformationSourceLiabilitiesAccounts payableCreditorNotes payableLenderAdvances from customersCustomerMortgages payableMortgagorBonds payableBondholder7-20InformationOften Confir
14、medInformationSourceOwners EquityShares outstandingRegistrar andtransfer agent7-21InformationOften ConfirmedInformationSourceOther InformationInsurance coverageInsurance companyContingent liabilitiesBank,lender,andclients counselBond indenture agreementsBondholderCollateral held by creditorsCreditor
15、7-22Criteria to DetermineCompetenceType ofevidenceIndependenceof providerEffectiveness ofclientsinternal controlsAuditorsdirectknowledgeQualificationsof providerObjectivityof evidence7-23Terms and Types of EvidenceTermsTypes of EvidenceExamineDocumentationScanAnalytical proceduresReadAnalytical proc
16、eduresDocumentationComputeRecomputeReperformanceFootReperformance7-24Terms and Types of EvidenceTermsTypes of EvidenceTraceDocumentationCompareDocumentationCountObservationPhysical examinationObserveInquireInquiries of clientVouchDocumentation7-25Audit Documentation7-26Working PapersnThe auditors re
17、cord of compliance with GAAS.nDivided into permanent and currant working papers.nShows the assertions that were audited,the evidence gathered about them,and the final decisions and conclusions of the auditor.7-27 Permanent Filen Part of the working papersn Includes all papers that would be applicabl
18、e to more than one auditn Examples-long term contracts,corporate charters,lease contracts,history of the company.7-28Current FilesAudit programGeneral informationWorking trial balanceAdjusting and reclassification entriesSupporting schedules7-29Current working papers:-Engagement letter-Staff assignm
19、ents-Client organization chart-Memos of meetings with client-Analytical review notes-Initial risk assessment notes-Initial materiality assessment-Planning memo-Time budget-Internal control questionnaires and control analysis-Flowcharts of internal controls-Audit program7-30Types of Supporting Schedu
20、lesAnalysisTrial balanceReconciliation of amountsTests of reasonablenessSummary of proceduresExamination of supporting documentsInformationalOutside documentation7-31SAS 41-Working Paper RequirementsnThe clients records agree or reconcile to the financial statements.nThe work was adequately planned
21、and supervised.nA sufficient understanding of the internal control structure was obtained.nSufficient competent evidence was obtained as a reasonable basis for an opinion7-32Audit File Contentsand OrganizationDerrickson AssociatesTrial Balance12/31/2003Cash$165,237Accounts Receivable 275,050Prepaid
22、Insurance 37,795Interest Receivable 20,493FinancialStatements andAudit ReportWorkingTrial BalanceAdjustingJournal EntriesContingentLiabilitiesOperationsLiabilities and EquityAssetsAnalyticalProceduresTest of Controls&SubstantiveTOTInternalControlGeneralInformationAuditProgramsPermanentFiles7-33Effect of E-commerce7-34End of Chapter 77-35演讲完毕，谢谢观看！