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Flashcards in Week 6 Deck (14):
1

Persuasiveness of Evidence

Sufficient = Quantity
Appropriate = Quality
Timeliness

2

Appropriate = Quality

Relevant
Logical connection between evidence & audit assertion at risk
If high risk that inventory is inappropriately valued, should gather a lot of evidence that proves the value of the inventory

Reliable
Source of the information, internal vs. external held by client vs. external directly to auditor
Expertise of the respondent
Consistency of the information

3

Sufficient = Quantity

Depends on RMM
High = low DR, more evidence
Low = high DR, less evidence

4

Persuasiveness of Audit Evidence

Auditor is seeking evidence to corroborate client’s recorded transactions and balances

Greater corroboration is provided by more persuasive evidence

Evidence types vary in persuasiveness

Least to most persuasive:
Evidence generated internally by client
Evidence generated externally, held by client
Externally generated evidence send direct to auditor

5

Drawing Conclusions

Evidence is the information used to decide
Free of material misstatement
Fair presentation

What constitutes sufficient & appropriate evidence requires professional judgement

6

Working Papers
What?

Documentation of
Knowledge gathered
Decisions made & why
Tests performed & results

7

Working Papers
Why

It is your evidence
Support audit opinion
Proof that followed GAAS….thus assist with legal liabilities

8

Working Papers
How

Each public accounting firm establishes their own approach to preparing & organizing working papers

9

Types of Working Papers

Permanent
Historical or continuing nature
Ex: articles of corporation, long-term debt contract

Current
All working papers applicable to the year under audit
Ex: Risk assessment & materiality, trial balance, lead schedule, supporting schedules

10

Characteristics of a good working paper:

Properly Identified
What section is it?
Prepared and reviewed by?

Cross-Referenced
Link to entire audit or supporting schedules

Clearly indicate the audit work performed

Include sufficient information
Can a reasonable person understand what was done?

Conclusions reached should be plainly stated

11

The audit program consist of 3 parts:

Test of Controls
Test of Details
Analytical Procedures

12

Test of Controls

Purpose:
Verify risk assessment

Examples:
Observe Inventory Count
Inspect approvals
Reperform bank reconciliations

13

Analytical Procedures

Purpose:
Assess reasonableness of a balance

Examples:
Mtc expense year over year
Sales commission ratio to commission plan

14

Test of Details

Purpose:
Verify monetary correctness

Examples:
Confirm cash balance with Bank
Inspect sales to shipping documents
Recalculate client AFDA using their method