Lecture 7 - Advanced Auditing

What is audit evidence?

Information used to determine whether assertions are reasonable.

What makes audit evidence appropriate?

Relevance + reliability.

What makes audit evidence sufficient?

Quantity needed based on risk.

Name the 8 types of audit evidence.

Analytical procedures, inquiry, inspection of tangible assets, external confirmation, inspection of documents, observation, recalculation, reperformance.

What does vouching test?

Existence/occurrence.

What does tracing test?

Completeness.

Why is inquiry insufficient alone?

Must be corroborated by other evidence.

Five attributes of high-quality inquiry?

Interviewee, interviewer, conduct, documentation, synthesis.

What did Bennett & Hatfield (2013) find?

Auditors request less evidence from older/more experienced clients; email reduces social pressure.

What did Saiewitz & Kida (2018) find?

Email + unprofessional tone leads to more biased and less cooperative client responses.

Three types of AP?

Preliminary, substantive, final.

Purposes of preliminary AP?

Understanding business, identifying risks, assessing going concern.

Purpose of substantive AP?

Obtain substantive evidence to reduce tests of details.

Purpose of final AP?

Overall reasonableness check of FS.

What are the 6 steps of substantive analytical procedures?

Suitability, data reliability, expectation, tolerable difference, comparison, investigation.

What affects expectation precision?

Predictability, disaggregation, availability of data.

What affects tolerable difference?

Materiality + desired assurance.

Positive vs. negative confirmations?

Positive: must respond; negative: respond only if disagreement.

When are confirmations highly reliable?

Independent respondents, relevant information, closed format.

What is recalculation?

Verifying mathematical accuracy.

What is reperformance?

Auditor independently redoes control.

What is a limitation of observation?

Behavior may change when being watched.

Name common pitfalls in analytical procedures.

Vague expectations, unreliable data, incomplete explanations, biased inquiry.