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CPA 2012 AUD-3: Audit Evidence

Terms in this set (65)

The 3rd standard of fieldwork states:
"The auditor must obtain Sufficient Appropriate Audit Evidence by performing audit procedures to afford a reasonable basis for an opinion regarding the financial statements under audit." (Corroborative Evidence)
Audit Procedures for substantive testing
[ICORRIIA]
Inquiry
Confirmation
Observation
Recalculation
Reperformance
Inspection of tangible assets
Inspection (examination) of records or documents
Analytical procedures
What kind of audit evidence is needed? (how strong?)
Sufficient and appropriate evidence. Evidence that is persuasive rather than conclusive. Based on the cost/benefit principal.
What does "appropriate" evidence relate to?
the quality of the evidence.
1. Relevance
2. Validity (reliability). Persuasiveness of evidence is based on the source.
Reliability of audit evidence sources (most reliable to least reliable)
1. directly obtained by auditor
2. obtained from outsider
3. prepared by outsider but obtained from client
4. prepared by client
define "audit evidence"
SAS 106 (AU 326) defines audit evidence as all the information used by the auditor in arriving at the conclusions on which the audit opinion is based, including the information contained in the accounting records underlying the financial statements and other information (minutes, confirmations, etc)
On what levels should an auditor reduce audit risk to an acceptably low level?
SAS 110 (AU 318)
2 levels: Financial statement level, relevant assertion level
how does a higher risk assessment affect the nature, timing and extent of audit procedures?
Nature - evidence needs to be more relevant & reliable
Timing - procedures should be performed closer to period end
Extent - greater extent of procedures
Substative procedures should test management's assertions with regard to:
[UPERCV] - 13 assertions
Understandability & Classification
Presentation & Disclosure
Existence or Occurrence
Rights & Obligations
Completeness & Cutoff
Valuation, Allocation & Accuracy
Understandability & Classification
Management asserts that information is presented and described Clearly and transactions and events have been recorded in the proper accounts
Presentation & Disclosure
Management asserts that all accounts are presented in the proper sections of the financial statements and that all necessary informative disclosures have been made
Existence or Occurrence
Management asserts that all assets, liabilities and equity interests listed on the balance sheet exist, and disclosed transactions and events that have been recorded have occurred, and pertain to the entity
Rights & Obligations
Management asserts that it is the legal owner of all assets listed on the financial statements, and that the liabilities represent legal obligations of the entity. Also that all disclosed events pertain to the entity
Completeness & Cutoff
Management asserts that ALL assets, liabilities, equity interests, transactions and events have been recorded and ALL disclosures that should h ave been included have been included. Transactions and events have been recorded in the correct accounting period (CUTOFF)
Valuation, Allocation & Accuracy
Management asserts that amounts are valued using a method in accordance with generally accepted accounting principles, and that revenues and expenses are allocated to the proper periods. Recorded transactions and disclosures have been recorded appropriately
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