How to Assess Audit Evidence
By Maire Loughran from Auditing For Dummies
Audit evidence documents give you the substantiation for your professional audit opinion. When performing an audit, you must assess the nature, competence, sufficiency, and evaluation of the audit evidence to determine its accuracy. After all your audit depends on the veracity of the evidence. The nature of the audit evidence
The nature of audit evidence refers to the form of the evidence you’re looking at during the audit. It should include all accounting documents and may include other available information, such as meeting minutes of the board of directors. Here are some examples of books:
* General ledger: A file of all financial accounts, usually by account number, that shows all events that affected each account during the month. * Subsidiary ledger: A file that shows more detailed information than is shown on the general ledger. * Journals: Day-by-day records of transactions.
Here are some examples of records, which are also known as source documents: * Invoices from suppliers that show what the business ordered and how much it cost. * Z-tapes from cash registers that show daily sales in a retail shop. The Z-tape is the company’s version of the cash register tape you receive with your purchase, but the company’s Z-tape lists all sales made during the day. * Customer invoices that show what customers purchased from the company and how much it cost. * Time cards that show how many hours an employee worked during a pay period. The competence of the audit evidence
Competence refers to the quality of the audit evidence, regardless of whether the evidence is written, oral, or observed. The term competence also refers to whether the audit evidence is relevant to the work you’re doing and whether it’s reliable. Relevant and reliable are two staple auditing terms. They both focus on the quality of the supporting documentation and the audit tests performed. *...
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