Sesi 8

Audit Evidence
Nature of Audit Evidence
Audit evidence is all information used by auditors in
arriving at the conclusions on which the audit
opinion is based.
Audit evidence as any information used by the
auditor to determine whether the information being
audited is stated in accordance with the established
criteria.
Basic Evidence Questions
Sufficient appropritae evidence:
What procedures,
How much,
When to perform them ?

Sources of Audit Evidence
Knowledge of business and industry,
Analytical procedures,
Tests of control,
Direct tests of account balance and
transaction.
Assertion Model for Financial
Statements Audits
Primary assertions :
Existence and occurence,
Completeness,
Rights and Obligations,
Valuation and allocation,
Presentation and disclosure.
Overall Audit Evidence Collection Approach
Steps Concerns Action
1. Understand client and
Industry
Industry characteristic,
Management integrity and
pressure
Nature and quality
information system
Economic influence
Review database on client and
industry,
Assess management integrity
Identify red flage,
Perform preliminary analytical
procedure
2. Assess risk of material
misstatement by assertion for
each significant components of
the clients financial or other
information
Inherent risk,
Control risk,
Computer system
Identify factors affecting
reliability of client data,
Obtain and understanding of
and, when appropriate, test
internal control
3. Test detail of account
balance and transactions.
How much
Which procedure
When to perform
Perform analytical procedures,
and/or disret test aof account
balances and transactions
4. Assess adequacy of evidence
documented and issue a report
Need for adjustments
System deficiencies
Perform final analytical
procedures and additional
procedures
Decide on the type of report the
evidence support
Persuasiveness of Evidence
Appropriateness of evidence:
Independence of provider,
Effectiveness of client internal controls,
Auditors direct knowledge,
Qualifications of individuals providing the information,
Degree of objectivity,
Timeliness.
Sufficiency
Types of Audit Evidence
Physical examanation
Confirmation
Inspection
Analytical procedures
Inquiries of the client
Recalculation
Reperformance
Observation
Audit Documentation
Purposes of Audit Documentation :
A basis for planning the audit,
A record of the evidence accumulated and the
results of the test,
Data for determining the proper type of audit
report,
A basis for review by supervisors and partner
Ownership and Confidentiality of audit
file
Audit documentation prepared during the
engagement, including schedules prepared by
the client for the auditor, is the property of
the auditor.
A member shall not disclose any confidential
information obtained in the course of a
professional engagement except with the
conset of the client.
Contents and Organization
Permanents Files:
Copies of company documents,
Analyses from previous years of account
that continuing importance to the auditor,
Information related to understanding
internal control and assessing control risk,
The results of analytical procedures from
previous years audits.

Contents and Organization
Current Files:
Audit program,
General information,
Working trial balance,
Adjusting and reclassification entries,
Supporting schedules
Preparation of Audit Documentation
Each audit file should be properly identified,
Audit documentation should be indexed and
cross referenced,
Completed audit documentation must clearly
indicate the audit work performed,
Audit documentation should include sufficient
information to fulfill the objectives for which it
was design,
The conclusions that were reached about the
segment of the audit under consideration should
be plainly stated.