Audit Evidence, Procedures, and Reporting Overview

Occurrence/Existence

Transactions occurred; balances exist.

Completeness

All transactions/events included.

Authorization

Proper authorization obtained.

Accuracy

Amounts correctly recorded.

Cutoff

Transactions recorded in correct period.

Classification

Transactions properly classified.

Presentation

Clearly presented and disclosed.

Relevance and Reliability

Evidence must relate directly to assertion; reliability varies by source.

Types of Evidence

Physical inspection, documentation, confirmation, analytical procedures, inquiry, observation, recalculation, and reperformance.

Audit Documentation

Supports auditor's conclusions.

Audit Procedures

Evaluating financial information through analysis of plausible relationships.

Test of Controls

Assess effectiveness of internal controls.

Substantive Procedures

Detect material misstatements through tests of details and analytical procedures.

Control Environment

Sets organization's ethical tone.

Control Risk

Risk internal controls won't prevent/detect misstatements.

Preventive Controls

Avoid misstatements before occurrence.

Detective Controls

Identify misstatements after occurrence.

Corrective Controls

Address and correct errors.

Internal Controls over Financial Reporting (ICFR)

Management establishes and maintains effective ICFR (SOX 404a).

Control Deficiency

Failure of control to prevent/detect misstatement timely.

Significant Deficiency

Important enough for governance's attention.

Material Weakness

Reasonable possibility of material misstatement.

Statistical Sampling

Uses probability theory; quantifies sampling risk.

Types of Statistical Sampling

Attribute Sampling (test of controls), Monetary Unit Sampling, Classical Variables Sampling.

Non-statistical Sampling

Auditor judgment-based; sampling risk not quantified.

Sampling Risk

Risk conclusions differ due to sample not representing entire population.

Type I (Incorrect Rejection)

Risk of rejecting a true null hypothesis.

Type II (Incorrect Acceptance)

Risk of accepting a false null hypothesis.

Types of Audit Reports

Unqualified (Clean), Qualified, Adverse, Disclaimer.

Standard Unqualified Audit Report

Title, Addressee, Introductory Paragraph, Scope Paragraph, Opinion Paragraph, Auditor's Signature, Report Date.

Modified Wording

Emphasis of Matter and Explanatory Paragraphs.