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1、,CPA Exam Review Auditing & Attestation Part III Module 3: Evidence,Plan Audit,Obtain Understanding of Client and Its Environment Including Internal Control,Assess Risks of Misstatement and Design Further Tests,Perform Substantive Procedures,Complete the Audit,Issue Audit Report,Perform Tests of Con
2、trols,Audit Diagram,2,Module 3: Evidence,Evidence-General1. Appropriate and Sufficient Evidence2. Types of Audit Evidence,Study Program,3,Module 3: Evidence,B. Evidence-Specific (Substantive Procedures)1. Types of Substantive Procedures2. Substantive Procedure Audit Programs3. Documentation,Study Pr
3、ogram,4,Other Specific Audit Evidence Topics,Study Program,5,Module 3: Evidence,E. Compilation and Review Procedures1. Compilation Procedures2. Review Procedures3. Review of Public Company Interim Financial Information4. Overall CommentsF . Other Related Topics: Operational Auditing,Study Program,6,
4、Module 3: Evidence,Pertaining SAS Standards,Study Program,7,Module 3: Evidence,Auditors are required to collect sufficient evidence to provide a reasonable basis for the conclusion in the audit report.AU326 identifies the assertions which underline the preparation of financial statements which are G
5、AAP compliance.Presentation and disclosure: accounts are described and classified in accordance with generally accepted accounting principles, and financial statement disclosures are complete, appropriate, and clearly expressed. Existence and Occurrence: assets, liabilities, and equity interests exi
6、st, and recorded transactions and events have occurred. Rights and obligations: the company holds rights to the assets, and liabilities and are the obligations of the company. Completeness and cutoff: all assets, liabilities, and equity interests, and transactions that should have been recorded have
7、 been recorded, and all transactions and events are recorded in the appropriate accounting period. Valuation, allocation and accuracy: all transactions, assets, liabilities, and equity interests are included in the financial statements at proper amounts.,A. Evidence-General,8,Module 3: Evidence,Comp
8、leteness vs. existence.The Statement on Attestation Standards suggests two basic types of evidence collection procedures1) Search and Verification: includes procedures such as inspecting assets, confirming receivables and observing the courting of inventory.2) Internal inquiries and comparison: incl
9、ude discussions with firm representatives and analytical procedures such as ratio analysis.The level of audit evidence required depends on the type of engagement the auditor is engaged to perform.,A. Evidence-General,9,Module 3: Evidence,Examinations: offers the highest level of assurance. Accountan
10、ts select from all available procedures to determine whether the appropriate assertions have been met.Reviews: limited or negative assurance with respect to information. Consists of internal inquiries and comparisons.Agreed-upon procedures: issuance of a report in which a summary of findings is prov
11、ided. The extent of the procedure is specified by the user but must be beyond reading!Compilation: Accounting other than attestation service, resulting in a report that provides no explicit assurance on the information. Accountant is required to read the information to aid understanding, but no requ
12、irement to inquiry or perform any other verification procedures.,A. Evidence-General,10,Module 3: Evidence,Three presumptions relate to the validity of evidence* independent evidence provides more assurance than evidence solely from within the company* Information from direct personal knowledge is m
13、ore persuasive than information obtained indirectly and* assertions developed under effective internal control are more reliable than those developed in the absence of internal controlSufficient Appropriate Audit EvidenceSufficiency is the measure of the quantity of audit evidence that must be obtai
14、ned; Appropriateness is the measure of the quality of that audit evidence, both its relevance and reliability in providing support for, or detecting misstatements.,A. Evidence-General,11,Assertion being addressed,Module 3: Evidence,1. Sufficient Appropriate Audit Evidence- Audit evidence is more rel
15、iable when it is:Obtained from knowledgeable independent sources outside the client company rather than on independent sources Generated internally through a system of effective controls rather than ineffective controls Obtained directly by the auditor rather than indirectly or by inference Document
16、ary in form rather than an oral representation Provided by original documents rather than copies or facsimiles- Auditors must form an opinion within a reasonable period of time, at a reasonable cost, by exercising professional judgment, and consider both the materiality of the item in question as we
17、ll as the inherent risk of the item.,A. Evidence-General,12,Module 3: Evidence,Module 2: Internal Control,1. Sufficient Appropriate Audit EvidenceIn relation to auditing accounting estimates, AU342 suggests that auditors to determine that all estimates 1) have been developed 2) are reasonable and 3)
18、 follow GAAP. This means the three basic approaches for evaluating the reasonableness of the estimates are 1) to review and test managements process of deriving the estimate 2) develop ones own expectation of the accounting estimate and compare it to managements and 3) review subsequent events or transactions occurring prior to the completion of fieldwork.,
