Ch. 5, 6, 7 Assignments Modern Auditing, Boynton & Johnson

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1. Valuation or allocation 7. Completeness

2. Existence or occurrence 8. Rights and obligation

3. Completeness 9. Valuation or allocation

4. Presentation and disclosure 10. Valuation or allocation

5. Rights and obligation 11. Presentation and disclosure

6. Presentation and disclosure

6-21 (a.) Some factors that the auditor should consider begin with the auditor's direct personal knowledge. Information he obtains himself from observation, examination, inspection, or recalculation provides more persuasive evidence than that which he obtains indirectly. AS No. 15 (8) states, in reference to reliability:

The reliability of evidence depends on the nature and source of the evidence and the circumstances under which it is obtained. For example, in general: Evidence obtained from a knowledgeable source that is independent of the company is more reliable than evidence obtained only from internal company sources.

Evidence obtained from independent external sources is more reliable than internally generated evidence. Documentary evidence is more reliable than oral evidence. Consistency among evidence provides a greater degree of assurance, and the accuracy and completeness of information produced by the client should be evaluated. The auditor should consider the qualifications and motivations of the one providing the evidence.

Reference: PCAOB Standards. Auditing Standard No. 15 — Audit Evidence.

Oral evidence is not regarded as highly reliable or valid and usually requires corroborating evidence. Corroborating evidence obtained from a source independent of the entity may increase the assurance the auditor obtains from a management representation. The primary value is in redirecting the auditor to other sources of evidence.

(b.) Ratios are calculated on the basis of accounting information, so reliability is linked with accounting data. Accounting itself has certain limitations like historical cost, so these...