Auditing

Chapter 7 Audit Evidence Key objectives: 2. Identify the four evidence decisions made by auditors in creating an audit program. 3. Specify the characteristics that determine the persuasiveness of evidence. 4. Know the eight types of evidence used by the auditor, including the quality of each type of evidence. 5. Understand the purposes of audit documentation. The focus in chapter 7 is on the evidence accumulation process, which falls under the third standard of field work. We will be especially interested in the types of evidence, and the characteristics that make that evidence competent or reliable. The auditor must gather sufficient appropriate audit evidence to support the audit opinion. 1. Four Evidence Decisions 1. Which audit procedures to use. 2. What sample size to select for a given procedure. 3. Which items to select from the population. 4. When to perform the procedures. These are planning decisions. The most important decision is reaching an audit conclusion for each procedure based on the evidence. 1. Audit procedures are designed to meet the general audit objectives discussed in Chapter 6, and are laid out in the audit program. 2. Sample Size - Sampling is discussed in

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detail in chapters 15 and 17. The sample size should be sufficient to reach a conclusion about the population. Sample size may be set by statistical formula, firm policy, or auditor judgment. 3. Sample Selection - Sample selection is a function of the objective of the test, and is also discussed in Chapters 15 and 17. It is important that the population is properly defined, and appropriate items selected. 4. When or the timing of the audit procedures. Before year-end (interim work) - Primarily useful for tests of transactions (tests not geared to the year-end balance in an account).

a.

To spread the workload and deliver the audit report on a timely basis, audit firms perform as much work as possible at an interim date, including tests of balances. Such tests are less...