Audit Evidence
Audit Evidence
This chapter deals with the types of evidence decisions auditors make, the evidence available to auditors, and the use of that evidence in performing audits.
NATURE OF EVIDENCE • Evidence is any information used by the auditor to determine whether the information being audited is stated in accordance with the established criteria. • Evidence includes information that is highly persuasive, such as the auditor 's count of marketable securities, and less persuasive information, such as responses to questions of client employees. • The use of evidence is not unique to auditors. Evidence is also used extensively by scientists, lawyers, and historians. • The auditor also gathers evidence to draw conclusions.
AUDIT EVIDENCE DECISIONS
• A major decision facing every auditor is determining the appropriate types and amounts of evidence to accumulate to be satisfied that financial statements are fairly stated and the internal control system is effective. • This judgment is important because of the prohibitive cost of examining and evaluating all available evidence. • The auditor 's decisions on evidence accumulation can be broken down into the following four sub-decisions:
1. Which audit procedures to use 2. What sample size to select for a given procedure 3. Which items to select from the population 4. When to perform the procedures
1. An audit procedure is the detailed instruction for the collection of a type of audit evidence that is to be obtained at some time during the audit. They should be spelled out in specific terms to permit their use as instructions during the audit. Example: Procedure for the verification of cash disbursements:
Obtain the cash disbursements journal and compare the payee name, amount, and date on the cancelled check with the cash disbursements journal.
2. Once an audit procedure is selected, it is possible to vary the sample size from one to all
This chapter deals with the types of evidence decisions auditors make, the evidence available to auditors, and the use of that evidence in performing audits.
NATURE OF EVIDENCE • Evidence is any information used by the auditor to determine whether the information being audited is stated in accordance with the established criteria. • Evidence includes information that is highly persuasive, such as the auditor 's count of marketable securities, and less persuasive information, such as responses to questions of client employees. • The use of evidence is not unique to auditors. Evidence is also used extensively by scientists, lawyers, and historians. • The auditor also gathers evidence to draw conclusions.
AUDIT EVIDENCE DECISIONS
• A major decision facing every auditor is determining the appropriate types and amounts of evidence to accumulate to be satisfied that financial statements are fairly stated and the internal control system is effective. • This judgment is important because of the prohibitive cost of examining and evaluating all available evidence. • The auditor 's decisions on evidence accumulation can be broken down into the following four sub-decisions:
1. Which audit procedures to use 2. What sample size to select for a given procedure 3. Which items to select from the population 4. When to perform the procedures
1. An audit procedure is the detailed instruction for the collection of a type of audit evidence that is to be obtained at some time during the audit. They should be spelled out in specific terms to permit their use as instructions during the audit. Example: Procedure for the verification of cash disbursements:
Obtain the cash disbursements journal and compare the payee name, amount, and date on the cancelled check with the cash disbursements journal.
2. Once an audit procedure is selected, it is possible to vary the sample size from one to all