Arens14e_ch07_ppt

7/25/2019 Arens14e_ch07_ppt

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5 - 52012 Prentice Hall Business Publishing,2012 Prentice Hall Business Publishing,Auditing 14/e,Auditing 14/e,Arens/Elder/BeasleyArens/Elder/Beasley 7 -7 - 11

Audit EvidenceAudit Evidence

Chapter 7Chapter 7


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2012 Prentice Hall Business Publishing,2012 Prentice Hall Business Publishing,Auditing 14/e,Auditing 14/e,Arens/Elder/BeasleyArens/Elder/Beasley 7 -7 - 22

Learning Objective 1Learning Objective 1

Contrast audit evidence with evidenceContrast audit evidence with evidence

used by other professions.used by other professions.


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Nature of EvidenceNature of Evidence

Any information used by the auditor todetermine whether the information being

audited is stated in accordance withestabished criteria

!he use of evidence is not uni"ue to auditor

Evidence is aso used by scientists# awyers#and historians


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Nature of EvidenceNature of Evidence


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Learning Objective $Learning Objective $

%dentify the four audit evidence%dentify the four audit evidence

decisions that are needed to createdecisions that are needed to create

an audit program.an audit program.


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2012 Prentice Hall Business Publishing,2012 Prentice Hall Business Publishing,Auditing 14/e,Auditing 14/e,Arens/Elder/BeasleyArens/Elder/Beasley 7 -7 - !!

Audit Evidence &ecisionsAudit Evidence &ecisions

1. 'hich audit procedures to use

$. 'hat sampe si(e to seect

for a given procedure). 'hich items to seect from

the popuation

*. 'hen to perform theprocedures +timing,


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Audit -rogramAudit -rogram

%t incudes a ist of the audit proceduresthe auditor considers necessary.

ost auditors use audit softwarepac/ages to generate audit programs.

0ampe si(es

%tems to seect

!iming of the tests


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2012 Prentice Hall Business Publishing,2012 Prentice Hall Business Publishing,Auditing 14/e,Auditing 14/e,Arens/Elder/BeasleyArens/Elder/Beasley 7 -7 - ""

Learning Objective )Learning Objective )

0pecify the characteristics that0pecify the characteristics that

determine the persuasiveness ofdetermine the persuasiveness of

evidence.evidence.


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2012 Prentice Hall Business Publishing,2012 Prentice Hall Business Publishing,Auditing 14/e,Auditing 14/e,Arens/Elder/BeasleyArens/Elder/Beasley 7 -7 - ##

-ersuasiveness of Evidence-ersuasiveness of Evidence

!wo determinants

Appropriateness 0u2ciency

!he persuasiveness of evidence can be evauated ony afterconsidering the combination of appropriateness and su2ciency


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0i3 Characteristics of0i3 Characteristics of

4eiabe Evidence4eiabe Evidence

1. %ndependence of provider$. E5ectiveness of cient6s

interna contros). Auditor6s direct /nowedge*. uai8cation of individuas

providing the information

9. &egree of objectivity:. !imeiness

4 t A A tt t


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4e at ons ps Among Au te at ons ps mong u tEvidence andEvidence and

-ersuasiveness-ersuasivenessAudit Evidence Decisions

Qualities Afecting Persuasivenesso Evidence

Audit procedures and timing Appropriateness 4eevance 4eiabiity %ndependence of provider E5ectiveness of interna contros Auditor;s direct /nowedge uai8cations of provider Objectivity of evidence !imeiness 'hen procedures are performed -ortion of period being audited

0ampe si(e and items to seect 0u2ciency Ade"uate sampe si(e 0eection of proper popuation items


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-ersuasiveness and Cost-ersuasiveness and Cost

%n ma/ing decisions about evidencefor a given audit# both persuasivenessand cost must be considered.

!he auditor6s goa is to obtain asu2cient amount of appropriate

evidence at the owest tota cost.


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Learning Objective *Learning Objective *

%dentify and appy the eight types of%dentify and appy the eight types of

evidence used in auditing.evidence used in auditing.


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!ypes of Audit Evidence!ypes of Audit Evidence

Documentation

Analyticalprocedures

Conrmation

PhysicalExamination

Inquiry

Observation

eperormance

ecalculation

Audit

Evidence


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4eationships4eationships


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2012 Prentice Hall Business Publishing,2012 Prentice Hall Business Publishing,Auditing 14/e,Auditing 14/e,Arens/Elder/BeasleyArens/Elder/Beasley 7 -7 - 1!1!

-hysica E3amination-hysica E3amination

%t is the inspection or count by theauditor of a tangible asset.

!his type of evidence is most oftenassociated with inventory and cash.


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Con8rmationsCon8rmations


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2012 Prentice Hall Business Publishing,2012 Prentice Hall Business Publishing,Auditing 14/e,Auditing 14/e,Arens/Elder/BeasleyArens/Elder/Beasley 7 -7 - 1"1"

%nformation often Con8rmed%nformation often Con8rmed


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2012 Prentice Hall Business Publishing,2012 Prentice Hall Business Publishing,Auditing 14/e,Auditing 14/e,Arens/Elder/BeasleyArens/Elder/Beasley 7 -7 - 1#1#

&ocumentation&ocumentation

%t is the auditor6s inspection of theclients documents and records.

%nterna

documents

E3terna

documents


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Anaytica -roceduresAnaytica -rocedures


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%n"uiries of the Cient%n"uiries of the Cient

%t is the obtaining of writtenor oralinformation from the cient in response to

"uestions from the auditor.


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4ecacuation4ecacuation

%t invoves rechec/ing a sampe of cacuationsmade by the cient.


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4eperformance4eperformance

%t is the auditor6s independent tests of cientaccounting procedures or contros thatwere originay done.


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ObservationObservation


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Appropriateness of !ypes ofAppropriateness of !ypes of

EvidenceEvidence

App cat on o !ypes opp cat on o ypes o


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App cat on o !ypes opp cat on o ypes oevidence to the fourevidence to the four

Evidence &ecisionsEvidence &ecisions


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!erms and !ypes of!erms and !ypes of

EvidenceEvidence

#erms #ype o Evidence

Examine!can

eadComputeecompute$oot#race

CompareCountObserve%n"uire&ouch

DocumentationAnalytical procedures

DocumentationAnalytical proceduresecalculationecalculationDocumentation'eperormance

DocumentationPhysical examinationObservation%n"uiries o clientDocumentation


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Audit &ocumentationAudit &ocumentation

Audit documentation is theprincipal recordof auditing procedures applied, evidenc

obtained, and conclusions reached bythe auditor in the engagement.


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Audit &ocumentationAudit &ocumentation

-urposes of audit documentation

Ownership of audit 8es

Con8dentiaity of audit 8es


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0arbanes=O3ey Act0arbanes=O3ey Act

!he 0arbanes=O3ey Act re"uires auditors ofpubic companies to prepare and maintain

audit wor/ing papers for a period of noess than seven years.


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Learning Objective :Learning Objective :

-repare organi(ed audit-repare organi(ed audit

documentation.documentation.


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Audit >ie Contents andAudit >ie Contents and

Organi(ationOrgani(ation


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-ermanent >ies-ermanent >ies

!hese 8es are intended to containdata of a historical or continuingnaturepertinent to the current audit.


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Current >iesCurrent >ies

Audit program

?enera information

'or/ing tria baance

Adjusting and recassi8cation entries

0upporting schedues

4eationship of Audit4eationship of Audit


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4eationship of Audit4eationship of Audit


to >inancia 0tatementsto >inancia 0tatements


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!ypes of 0upporting!ypes of 0upporting

0chedues0chedues

Anaysis

!ria baance or ist

4econciiation of amounts

!ests of reasonabeness


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!ypes of 0upporting!ypes of 0upporting

0chedues0chedues

0ummary of procedures

E3amination of supporting documents

%nformationa

Outside documentation


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-reparation of Audit-reparation of Audit


-roper identi8cation of each 8e

>ies inde3ed and cross=referenced

Cear indication of wor/ performed

%ncude su2cient information

0tate concusions reached

i f di


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-reparation of Audit-reparation of Audit



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&escribe how technoogy a5ects audit&escribe how technoogy a5ects audit

evidence and audit documentation.evidence and audit documentation.


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E5ect of !echnoogyE5ect of !echnoogy

Audit evidence is increasingy in eectronic for

Auditors must evauate how eectronic inform

a5ects their abiity to gather evidence

Auditors use computers to read and e3amine

evidence0oftware programs are typicay 'indows=bas


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End of Chapter 7End of Chapter 7

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Arens14e_ch07_ppt