MIRANDA, SHARMAINE C.

BSA-3A
Pre-Test - Performing The Engagement
1. What is audit evidence?
An audit is a systematic independent examination of financial statements, records, documents
with an objective to express an opinion on the financial statements of an entity whether they
are giving a true and fair view or not. Auditor expresses his opinion whether the financial
statements of an entity are giving a true and fair view or not on the basis of audit evidence
collected by him.
2. What is the role of the auditor in gathering audit evidence?
An auditor must gather sufficient and appropriate audit evidence and test them to make a
judgment of opinion. The auditor shall design and perform audit procedure that are
appropriate in the circumstances for the purpose of obtaining sufficient appropriate audit
evidence. If audit evidence obtained from one source is inconsistent with that obtained from
another, or the auditor has doubts over the reliability of information to be used a s audit
evidence, the auditor shall determine what modifications or additions to audit procedures are
necessary to resolve the matter and shall consider the effect of the matter if any, on other
aspect of the audit. Lastly, The auditor shall obtain sufficient appropriate audit evidence
regarding the presentation and disclosure of segment information in accordance with
applicable financial reporting framework
3. What are the attributes of an audit evidence?
Relevancy- The relevancy of the Audit evidence is largely influenced by the type of audit
evidence being conducted and how to the point the information received, in comparison to the
overall analysis.
Source- It is one of the major factors that influence the reliability of the audit evidence. External
source information will always be preferred over any internal information because it is
generally considered void of any bias.
Nature - Audit evidence is usually considered sufficient when the information is provided
through presentations, physical confirmation or legal documents.
Sufficiency-Audit evidence meaning also takes into account the material provided, such as bank
statements, which further help determine the financial position of the company.
4. How do auditor gather audit evidence?
It can be through Risk Assessment wherein obtaining an understanding of the entity and its
environment including its internal control to assess the risk of material misstatement at the
financial statement and assertion levels. Second, Test of controls can be done to test the
operating effectiveness of control in preventing or detecting and correcting material
misstatements at the assertion level. Third, Substantive procedures in detecting material
misstatement at the assertion level.
Other ways to gather can be:
a. Analytical procedures: Comparing what’s on the client’s books to what’s expected to be on
the books.
b. Confirmations: Asking for independent verification supporting management assertions.
c. Inspection of records: Asking the company for relevant documents in support of
management assertions.
d. Observation: Watching the client’s employees do their jobs to obtain an understanding of
how each job is done.
e. Recalculation: Verifying the mathematical accuracy of your client’s computations.
f. Reperformance: Doing the client’s accounting or internal control procedure to make sure the
company is following its own rules.
g. Scanning: Looking over client transactions on the general ledger or other accounting reports.
h. Client tour: Checking to make sure all assets shown on the client’s balance sheet exist.
i. Inquiry: Inquiry consists of seeking information from knowledgeable persons, both financial
and non-financial, within the entity or outside the entity.
j. Physical Examination: means physical verification of an asset, like stocks, investment
certificates, and glued assets, as evidence of its existence and its condition.
k. Documentation: documentation is that the auditor’s examination of the client’s documents
and records to substantive the knowledge that’s or should be included within the financial
statements.

5. What are the responses of the auditor after the gathering audit evidence?
The auditor can establish the truthfulness of the system to record these transactions and verify
the financial information on the financial statements by reviewing the financial information
from the various data sources, including inventory reports, available receipts, and payments to
suppliers. Most importantly, auditor gathers to reach his audit opinion about an organization’s
financial statements and/or internal control environment.