FINANCIAL STATEMENT

AUDIT

Based on AICPA Pronouncement

In financial audit, the primary

concern is with the assertions
explicitly or implicitly made by
the
information
or
its
presentation, e.g., amount of the
revenue or expense and the
balances of assets and liabilities.
Thus, internal auditors must
develop and use engagement

TYPES OF FINANCIAL
STATEMENT
ASSERTIONS
Based from a pronouncement of the
American Institute of Certified Public
Accountants

TYPES OF FINANCIAL
STATEMENT ASSERTIONS
A). Completeness
B). Rights and Obligation
C). Valuation or Allocation
D).
Existence
or
Occurrence
E). Statement Presentation
and
Disclosure

TYPES OF FINANCIAL
STATEMENT ASSERTIONS
A). COMPLETENESS
- all the transactions
accounts that should be
presented in the financial
statements or other report
are included.

TYPES OF FINANCIAL
STATEMENT ASSERTIONS
B). RIGHTS AND
OBLIGATIONS
- all assets are the rights
of the entity and all
liabilities are the obligations
of the entity.

TYPES OF FINANCIAL
STATEMENT ASSERTIONS
C). VALUATION OR
ALLOCATION

- the assets, liabilities,

revenue and expenses of an
entity have been included in
the financial statements.

TYPES OF FINANCIAL
STATEMENT ASSERTIONS
D). EXISTENCE OR
OCCURRENCE
- assets or liabilities exist at a
given
date
and
whether
recorded transactions have
occurred during a given period.

TYPES OF FINANCIAL
STATEMENT ASSERTIONS
E). STATEMENT PRESENTATION
AND DISCLOSURE
- financial statement components
have been properly classified,
described, and disclosed.

Sources of Evidence for

Financial Statement Audit
Nature of Evidence for
Financial Statement Audit
Sufficiency of Evidence Matter
Evaluation of Evidence Matter

SOURCES OF EVIDENCE FOR

FINANCIAL STATEMENT AUDIT

Evidence supporting the

financial statements
consists of:
1). Underlying accounting data
2). All corroborating information

SOURCES OF EVIDENCE FOR

FINANCIAL STATEMENT AUDIT
1). Underlying accounting data
books of original entry
general subsidiary ledgers
related accounting manuals
worksheets and spreadsheets supporting cost
allocation
computation and reconciliation
often in electronic form
Note: Accounting date alone cannot be
considered sufficient support for financial
statements.

SOURCES OF EVIDENCE FOR

FINANCIAL STATEMENT AUDIT
The Auditor tests Underlying Accounting Data
by:
Analysis and review
Retracing the procedural steps and in

developing
the
work
sheets
and
allocations involved.
Recalculation
Reconciling
related
types
and
applications of the same information.

SOURCES OF EVIDENCE FOR

FINANCIAL STATEMENT AUDIT
2). All corroborating information
written and electronic information
confirmations
and
other

written

representations
information obtained by the auditor from
inquiry, observation, inspection and physical
examination
other information developed by, or available
to

SOURCES OF EVIDENCE FOR

FINANCIAL STATEMENT AUDIT
Accounting Data and

Corroborating Evidence
- may be available only in
electronic form and may exist
only at a certain moment
time.

Sources of Evidence for

Financial Statement Audit
Nature of Evidence for
Financial Statement Audit
Sufficiency of Evidence Matter
Evaluation of Evidence Matter

NATURE OF EVIDENCE FOR

FINANCIAL STATEMENT AUDIT

Audit evidence
Sufficient
Appropriate or component

NATURE OF EVIDENCE FOR

FINANCIAL STATEMENT AUDIT

Component

evidence
Valid
Relevant

Sources of Evidence for

Financial Statement Audit
Nature of Evidence for
Financial Statement Audit
Sufficiency of Evidence Matter
Evaluation of Evidence Matter

SUFFICIENCY OF EVIDENTIAL
MATTER
The amounts and kinds of

evidence needed are matters

The auditor typically has a

rely on persuasive evidence.

SUFFICIENCY OF EVIDENTIAL
MATTER

The

auditor
must
decide
whether the evidence available
within time and cost.

A rational relationship should

exist between the cost of

obtaining evidence and the
usefulness of the information
obtained.

Sources of Evidence for

Financial Statement Audit
Nature of Evidence for
Financial Statement Audit
Sufficiency of Evidence Matter
Evaluation of Evidence Matter

EVALUATION OF EVIDENTIAL
MATTER
the auditor considers whether and specific audit

objectives have been achieved.

The independent auditor should be thorough in

the search of evidence and unbiased in its

evaluation.
The auditor should recognize the possibility that

the financial statements may not be in conformity

with applicable authoritative accounting principles
when designing engagement procedures.

EVALUATION OF EVIDENTIAL
MATTER
The auditor should consider relevant

evidence regardless of whether it

appears to corroborate or contradict to
financial statement assertions.
The

auditor should refrain from

forming an opinion until obtaining
sufficient competent evidence to
remove the doubt express a qualified
opinion, or disclaim an opinion.

Summary
A financial statement audit is the examination of an

entitys financial statements and accompanying

disclosures by an independent auditor.
Financial Statement Assertions are management

explanation about the recognition, measurement,

presentation and disclosure of information in the
financial statement.
TYPES OF FINANCIAL STATEMENT ASSERTIONS

A). Completeness
B). Rights and Obligation
C). Valuation or Allocation
D). Existence or Occurrence
E). Statement Presentation and Disclosure

 Sources of Evidence for Financial

Statement Audit
1). Underlying accounting data
2). All corroborating information available
to the auditor.
Nature of Evidence for Financial Statement

Audit
Audit evidence
Component evidence
Sufficiency of Evidence Matter
Evaluation of Evidence Matter

END

Seatwork (True or False)

1. The independent auditor should not be thorough
in the search of evidence and unbiased in its
evaluation.
2. The auditor typically has a rely on sufficient
evidence.
3. Rights and Obligation whether assets or liabilities
exist at a given date and whether recorded
transactions have occurred during a given period.
4. Audit evidence should be sufficient and
appropriate or component.
5. Valuation or Allocation whether, at a given date,
all assets are the rights of the entity and all
liabilities are the obligations of the entity.

Seatwork (True or False)

6. Statement Presentation and Disclosure whether the assets,
liabilities, revenue and expenses of an entity have been
included in the financial statements at the appropriate
amounts in conformity with applicable authoritative
accounting principles.
7. The auditor must decide whether the evidence available
within time and cost limits is sufficient to justify opinion.
8. The component of evidence needed are matters to be
determined in the exercise of the professional judgment of
the auditor.
9. A rational relationship should exist between the cost of
obtaining evidence and the usefulness of the information
obtained.
10. The management should recognize the possibility that the
financial statements may not be in conformity with
applicable authoritative accounting principles when
designing engagement procedures.