a) Evidence supporting USSC’s claim that the costs in question involved tooling modifications: * Collected invoices/purchase orders, obviously labelled accordingly * USSC executives’ explanations
* Explanations of Mr. More and guided tour at Lacey Manufacturing Company b) Evidence supporting USSC’s claim that the costs in question involved generic production expenses: * Information provided by Mr. Yamont of Barden Corporation * Confusing nature of explanations provided by USSC executives * Changed opinion of Mr. More
* Per unit pricing
* Internal controls at Lacey shop floor, regarding charging working hours to production/tooling works * Analytical techniques: huge increase in USSC fixed assets (molds & dies) According to ISA 500, the following generalizations about the reliability can be presented: * “Audit evidence is more reliable when it is obtained from independent sources outside the entity.” * “Audit evidence that is generated internally is more reliable when the related controls imposed by the entity are effective.” * “Audit evidence obtained directly by the auditor is more reliable than audit evidence obtained indirectly or by inference.” * “Audit evidence is more reliable when it exists in documentary form.” * “Audit evidence provided by original documents is more reliable than audit evidence provided by photocopies or facsimiles.” Based on the criteria, we do not believe Hope fully was not justified in deciding that the costs were for tooling modifications. Even though internal documents providing support for his conclusion were available, he should have had put more weight on audit evidence from independent sources outside the entity (Mr. Yamont) and audit evidence easily available from the balance sheet (huge increase in fixed assets). Especially considering obvious conflict of interests in case of Mr. More and his changed opinion. 6)
On our opinion, we do not believe Hope satisfactorily...