Audit Chapter 5 - Evidence and Documentation

audit evidence

the information used by the auditor in arriving at the conclusions on which the audit opinion is based, including the information contained in the accounting records underlying the financial statements and other sources

assertions

representations with respect to recognition, measurement, presentation, and disclosure of information in the financial statements, which are inherent in management, representing that the financial statements are prepared in accordance with the applicable financial reporting framework

Assertions about classes of transactions and events, and related disclosures, for the period under audit

occurrence, completeness, authorization, accuracy, cutoff, classification, presentation

Occurrence

transactions and events that have been recorded or disclosed have occurred, and such transactions and events pertain to the entity

Completeness

all transactions and events that should have been recorded have been recorded, and all related disclosures that should have been included in the financial statements have been included

Authorization

all transactions and events have been properly authorized

Accuracy

amounts and other data relating to recorded transactions and events hav been recorded appropriately, and related disclosures have been appropriately measured and described

Cutoff

transactions and events have been recorded in the correct accounting period

Classification

transactions and events have been recorded in the proper accounts

Presentation

transactions and events are appropriately aggregated or disaggregated and clearly described, and related disclosures are relevant and understandable in the context of the requirements of the applicable financial reporting framework

Assertions about account balances, and related disclosures, at the period end

existence, rights and obligations, completeness, accuracy valuation and allocation, classification, and presentation

Existence

assets, liabilities, and equity interests exist

Rights and Obligations

the entity holds or controls the rights to assets, and liabilities are the obligation of the entity

Accuracy, valuation, and allocation

assets, liabilities, and equity interest have been included in the financial statements at appropriate amounts, and any resulting valuation or allocation adjustments have been appropriately recorded, and related disclosures have been appropriately measured and described

Classification (BS)

assets, liabilities, and equity have been recorded in the proper accounts

Presentation (BS)

Assets, liabilities, and equity interests are appropriately aggregated or disaggregated and clearly described, and related disclosures are relevant and understandable in the context of the requirements of the applicable financial reporting framework.

Sufficiency

the measure of the quantity of evidence

Appropriateness

the measure of quality of audit evidence

Relevance

refers to the relationship of evidence to the assertion or to the objective of the control being tested

Reliability

refers to whether a particular type of evidence can be relied upon to signal the true state of an assertion

Audit Procedures

specific acts performed by the auditor to gather evidence about whether specific assertions are being met

risk assessment procedures

used to obtain an understanding of the entity and its environment, including its internal control, to assess the risks of material misstatement at the financial statement and relevant assertion levels

further audit procedures (tests of control and substantive procedures)

used to test the operation effectiveness of controls in preventing, or detection, and correcting material misstatements; used to detect material misstatements at the relevant assertion level

audit program

a set of audit procedures prepared to test assertions for a component of the financial statements; can provide evidence for more than one assertion

Inspection

involves an examination of an asset or an examination of records or documents, whether internal or external or in paper form, electronic form, or other media

vouching

selecting items for testing from the accounting journals or ledgers and then examining the underlying source documents

tracing

refers to first selecting the source document and then following it into the journal or ledger

observation

consists of looking at a process or procedure being performed by others

inquiry

consists of seeking information, both financial and non financial, of knowledgable persons within the entity or outside of the entity

confirmation

represents audit evidence obtained as a direct written response to the auditor from a third party

recalculation

consists of checking the mathematical accuracy of information

Reperformance

involves the independent execution of procedures or controls by the auditor that were originally performed as part of the entity's internal control

analytical procedures

consists of evaluations of financial information through analysis of plausible relationships among both financial and non-financial data

audit documentation

the record of audit procedures performed, relevant audit evidence obtained, and conclusions the auditor reached

three purposes for audit documentation

provide principal support behind the opinion given about the financial statements in the auditor's report, to aid in the planning, performance, and supervision of the audit, and to provide the basis for the review of the quality of the work by providing a written documentation of the evidence supporting the auditor's significant conclusions