Modern Auditing:

Assurance Services and the Integrity of Financial Reporting, 8th Edition

William C. Boynton
California Polytechnic State University at San Luis Obispo

Raymond N. Johnson
Portland State University

Chapter 6 Audit Evidence

Chapter 6 Overview

Audit Evidence Defined

Audit Evidence
Accounting records Corroborating information

Accounting Records

Other Information

Assertions and Specific Audit Objectives

Five Management Assertions (GAAS)
Existence and Occurrence
Completeness Rights and Obligations

Valuation or Allocation
Presentation and Disclosure

Assertions and Specific Audit Objectives

Transaction Class Audit Objectives
Occurrence
Completeness Accuracy

Cutoff
Classification

Assertions and Specific Audit Objectives

Account Balance Audit Objectives
Existence
Completeness Rights and Obligations Valuation and Allocation

Assertions and Specific Audit Objectives

Disclosure Audit Objectives
Occurrence and Rights and Obligations
Completeness Understandability Accuracy and Valuation

Sufficiency of Audit Evidence

Materiality Risk of Material Misstatement Size of Population Characteristics of Population

Sufficiency of Audit Evidence

Competency of Evidence
Relevance of Audit Evidence

Reliability of Audit Evidence

Professional Judgment

Reliability of Audit Evidence

Reliability of Documentary Evidence

Study Break
1. Which of the following is not a transaction class audit objective? A. Existence B. Occurrence C. Accuracy D. Cutoff A. Existence

Study Break
2. Which of the following is not an account balance audit objective? A. Existence B. Completeness C. Classification D. Rights and Obligations C. Classification

Study Break
3. All of the following affect the sufficiency of audit evidence except: A. Materiality B. Risk of Material Misstatement C. Relevance of Audit Evidence D. Size and Characteristics of the Population C. Relevance of Audit Evidence

Objectives of Audit Procedures

Obtain an understanding of the entity and its environment Test operating effectiveness of controls

Support assertion or detect material misstatements

Types of Audit Procedures

Inspection of Documents or Records
Vouching Tracing

Types of Audit Procedures

Inspection of Tangible Assets Observation Inquiry Confirmation

Types of Audit Procedures

Recalculation Reperformance Analytical Procedures Computer-Assisted Audit Techniques

Four Decisions About Audit Procedures

Staffing and Supervising the Audit Nature of Audit Procedures Timing of Audit Procedures Extent of Audit Procedures

Documenting Audit Decisions and Audit Evidence

Audit Program
Recommended by GAAS Documents decisions

Working Papers
Documents audit decisions Documents audit evidence obtained

Types of Working Papers

Working Trial Balance Schedules and Analyses Audit Memoranda and Corroborating Information Adjusting and Reclassifying Entries

Preparing Working Papers

Heading Index Number Cross-Referencing

Tick Marks
Signatures and Dates

Working Paper Example

Reviewing Working Papers

Scope of Work Performed Evidence and Findings Obtained Audit Judgment Exercised Conclusions Reached by the Auditor

Working Paper Files

Permanent File

Current File

Ownership and Custody

Study Break
4. ________ involves selecting entries in the accounting records and inspecting the documentation that served as the basis for the entries. A. Vouching B. Tracing C. Observation D. Inquiry A. Vouching

Study Break
5. These decisions involve determining whether the procedures will be performed at an interim date or at fiscal year-end. A. Staffing and Supervision B. Nature of Audit Tests C. Timing of Audit Tests D. Extent of Audit Tests C. Timing of Audit Tests

Study Break
6. This working paper file contains data that are expected to be useful to the auditor in future engagements with the client. A. Permanent file B. Current file C. Daily file D. Annual file A. Permanent file