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About this document
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- 40 pages
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- $40 one-time, yours to keep
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- Format
- Subject
- Accounting, Auditing
- Module
- Chapter 7
This document provides solutions to review questions on audit evidence. It explains the framework for gathering sufficient, competent audit evidence, including the five main assertions. It is useful for understanding the concepts in Chapter 7.
What's inside
- Definition of audit evidence
- Types of audit evidence
- Five main assertions
- Valuation assertion for investments
- Reliability of audit evidence
- Audit risk and evidence reliability
Who it is for: For students taking an auditing course, especially Chapter 7. (Postgraduate)
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Summary
Audit evidence is what auditors use to form opinions. This text explains the types of evidence, how to assess them, and how they relate to audit risk.
Audit Evidence
Audit evidence is any information used by auditors to form conclusions. The main sources are industry knowledge, analytical procedures, control tests, and direct balance tests.
Audit Assertions
These are the five main assertions that auditors test. They tie into generally accepted accounting principles. They are existence, completeness, rights and obligations, valuation, and presentation and disclosure.
Reliability of Audit Evidence
The reliability of audit evidence depends on its source and form. More reliable evidence is directly observable, from independent sources, and documented. Less reliable evidence is indirectly observable, from within the client's organisation, and verbal.
Audit Evidence Procedures
Analytical procedures can show unexpected account relationships. Recomputation ensures account balances are correct. Confirmation with borrowers is more persuasive evidence.
Key terms
- Audit Evidence
- All the information used by auditors to form their conclusions and opinions.
- Audit Assertions
- Statements about the financial statements that auditors test to form their opinion.
- Audit Risk
- The risk that the auditor expresses an inappropriate audit opinion when the financial statements are materially misstated.
- Analytical Procedures
- Evaluations of financial information through analysis of plausible relationships among both financial and non-financial data.
- Recomputation
- Recalculating amounts to ensure their accuracy.
- Confirmation
- A direct response from a third party in response to a request for information about a particular item.
Questions this document helps with
- How do auditors decide what evidence to gather?
- What are the main assertions that auditors test?
- What makes audit evidence more or less reliable?
Summary written with AI from the document's text.
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