Audit Evidence

• Audit Evidence - information obtained by the auditor on which opinion is based
• The major reason why an auditor gathers audit evidence is to form an opinion on the financial statements
• Sufficiency and appropriateness of audit evidence is based on professional judgment of the auditor
• Accounting records includes General journal, Worksheet cost allocation, Cash receipts journal
• Corroborating information includes purchase orders
• Management assertions can be implied or expressed
• Sales invoice - documents used to indicate to the customer the amount of a sale and the due date of the payment
• Bill of lading - document prepared to initiate shipment
• External Confirmation - process of obtaining evidence through direct communication from 3rd party
• Negative confirmation - do not needs letter to be returned, non-response is deemed confirmation
• Positive confirmation - needs letter to be returned
• Negative confirmation is used when there are several customers with small value of accounts
• Auditor's search for unrecorded liabilities is completed subsequent to audit
• Indexing in Working papers permits cross referencing and simplify review
• AUdit procedures is an umbrella term for Risk assessment procedures, Test of controls and Substantive testing
• Balance sheet assertions

  1. Existence - mostly on asset
  2. Completeness - mostly on Liabilities
  3. Rights and Obligations - assets and liabilities
  4. Valuation and Allocation - Financial instruments and Depreciation
  5. Presentation and Disclosures
• Tracing - from source document to accounting records
• Vouching - from accounting records to source documents
• Kiting - overstating account by non recording
• Lapping - delays in recording of account receivable