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Evidence and
Documentation
Management
Management assertions
assertions Auditor
Auditor reaches
reaches
about
about elements
elements of
of aa conclusion
conclusion based
based
financial
financial statements
statements on
on the
the evidence
evidence
Provide
Provide evidence
evidence on on the
the
Audit
Audit fairness
fairness of
of the
the
procedures
procedures financial
financial statements
statements
Completeness
Completeness
Occurrence
Occurrence Classification
Classification
Assertions about
classes of transactions
and events for the
period under audit
Cut-off
Cut-off Accuracy
Accuracy
Authorization
Authorization
© 2017 McGraw-Hill Education (Malaysia) Sdn Bhd
Management Assertions
Existence
Existence Completeness
Completeness
Assertions about
account balances
at the period end
Rights
Rights and
and Valuation
Valuation
obligations
obligations and
and allocation
allocation
© 2017 McGraw-Hill Education (Malaysia) Sdn Bhd
Management Assertions
Assertions Accuracy
Accuracy and
and
Completeness
Completeness about presentation valuation
valuation
and disclosure
(continued)
© 2017 McGraw-Hill Education (Malaysia) Sdn Bhd
Management Assertions
All
All the
the information,
information, from
from
whatever
whatever source,
source, used
used
by
by the
the auditor
auditor in
in arriving
arriving at
at
the
the conclusions
conclusions on on which
which the
the
audit
audit opinion
opinion isis based.
based.
Nature
Nature of
of audit
audit evidence
evidence
Sufficiency
Sufficiency and
and appropriateness
appropriateness
of
of audit
audit evidence
evidence
Evaluation
Evaluation of
of audit
audit evidence
evidence
Records General
General
Records of of Spreadsheets
Spreadsheets
initial and
and subsidiary
subsidiary
initial entries
entries and
and supporting
supporting cost
cost
supporting ledgers
ledgers
supporting records
records allocations
allocations
Minutes
Minutes
from Benchmarking
Benchmarking
Invoices
Invoices from meetings
meetings
Analyst’s
Analyst’s
Worksheets
Worksheets Contracts
Contracts reports
reports
Adjustments Other
Other
Adjustments Information
Information
to computations,
computations,
to financial
financial obtained
obtained from
from
statements reconciliations
reconciliations and
and
statements audit
audit procedures
procedures
disclosures
disclosures
© 2017 McGraw-Hill Education (Malaysia) Sdn Bhd
Sufficiency of
Audit Evidence
Sufficiency
Sufficiency is
is aa measure
measure ofof
the
the quantity
quantity of
of audit
audit evidence.
evidence.
Greater
Greater risk
risk of
of Higher
Higher quality
quality
misstatement
misstatement requires
requires audit
audit evidence
evidence results
results
aa higher
higher quantity
quantity in
in aa lower
lower quantity
quantity
of
of audit
audit evidence.
evidence. of
of audit
audit evidence.
evidence.
Independent
Independent source
source outside
outside the
the entity
entity
Effectiveness
Effectiveness of
of internal
internal control
control
Auditor’s
Auditor’s direct
direct personal
personal knowledge
knowledge
Documentary
Documentary evidence
evidence
Original
Original documents
documents
© 2017 McGraw-Hill Education (Malaysia) Sdn Bhd
Evaluation of Audit Evidence
Proper
Proper evaluation
evaluation of
of evidence
evidence
requires
requires an
an understanding
understanding of
of the:
the:
Types
Types of
of evidence
evidence available.
available.
Relative
Relative reliability
reliability of
of available
available evidence.
evidence.
An
An auditor
auditor should
should be
be thorough
thorough in in searching
searching
for
for evidence
evidence and
and be
be unbiased
unbiased in
in its
its evaluation.
evaluation.
Specific acts
performed by the auditor
to gather evidence about
whether specific assertions
are being met.
Risk
Risk assessment
assessment Test
Test of
of Substantive
Substantive
procedures
procedures controls
controls procedures
procedures
External
External
Inquiry
Inquiry Recalculation
Recalculation
Confirmation
Confirmation
Reperformance
Reperformance Analytical
Analytical
procedures Scanning
Scanning
procedures
Vouching
(Occurrence) Journal
Source or
Documents Tracing Ledger
(Completeness)
© 2017 McGraw-Hill Education (Malaysia) Sdn Bhd
Audit Procedures for
Obtaining Audit Evidence
Inspection
Inspection Physical examination of a
of
of tangible
tangible tangible asset.
assets
assets
External
External
Confirmation
Confirmation
Information Frequently
Confirmed by Auditors Source of Confirmation
Cash balance Bank
Accounts receivable Individual customers
Inventory on consignment Consignee
Accounts payable Individual vendors
Bonds payable Bondholders/trustee
Common stock outstanding Registrar/transfer agent
Insurance coverage Insurance company
Collateral for loans Creditors
Audit
Audit documentation
documentation (working
(working papers)
papers) has
has three
three functions:
functions:
11 To
To provide
provide support
support for
for the
the audit
audit report.
report.
22 To
To aid
aid in
in the
the planning,
planning, performance
performance and and supervision
supervision ofof
the
the audit.
audit.
33 To
To provide
provide basis
basis for
for quality
quality reviews;
reviews; to
to provide
provide evidence
evidence
supporting
supporting the the auditor’s
auditor’s significant
significant conclusions.
conclusions.
Demonstrate
Demonstrate how
how the
the audit
audit complied
complied with
with auditing
auditing
and
and related
related professional
professional practice
practice standards.
standards.
Enable
Enable an
an experienced
experienced auditor
auditor to
to understand:
understand:
Permanent
Permanent files
files Current
Current files
files
Corporate
Corporate charter
charter Important
Important contracts
contracts
Chart
Chart of
of accounts
accounts Internal
Internal control
control documentation
documentation
Organization
Organization chart
chart Terms
Terms ofof stock
stock and
and bond
bond issues
issues
Prior
Prior years’
years’ analytical
analytical procedures
procedures
© 2017 McGraw-Hill Education (Malaysia) Sdn Bhd
Content of Audit
Documentation
Most
Most public
public accounting
accounting firms
firms maintain
maintain
audit
audit documentation
documentation in
in two
two types
types of
of files:
files:
Permanent
Permanent files
files Current
Current files
files
Audit
Audit report
report Adjusting
Adjusting journal
journal entries
entries
Audit
Audit strategy
strategy and
and plan
plan Reclassification
Reclassification journal
journal entries
entries
Working
Working trial
trial balance
balance Current
Current financial
financial statements
statements
Minutes
Minutes ofof meetings
meetings Working
Working papers
papers supporting
supporting accounts
accounts
© 2017 McGraw-Hill Education (Malaysia) Sdn Bhd
Format of Audit
Documentation
Entity
Entity name
name
Heading
Heading Title
Title of
of the
the working
working paper
paper
Entity’s
Entity’s year-end
year-end date
date
Notations
Notations that
that provide
provide aa trail
trail
Indexing
Indexing and
and from
from financial
financial statements
statements to to
cross-referencing
cross-referencing audit
audit documents.
documents.
Notations
Notations made
made next
next to
to
Tick
Tick marks
marks work
work paper
paper items
items indicating
indicating
auditor/reviewer
auditor/reviewer actions.
actions.
© 2017 McGraw-Hill Education (Malaysia) Sdn Bhd
Audit Documentation
Audit
Audit documentation
documentation should
should be
be organized
organized soso
that
that audit
audit team
team members
members andand others
others can
can find
find
evidence
evidence supporting
supporting financial
financial statement
statement accounts.
accounts.
All
All audit
audit documentation
documentation is is the
the property
property of
of the
the
auditor,
auditor, including
including documents
documents prepared
prepared
by
by the
the entity
entity at
at the
the auditor’s
auditor’s request.
request.
ISQC1
ISQC1 requires
requires audit
audit documentation
documentation to to be
be retained
retained
ordinarily
ordinarily for
for minimum
minimum fivefive years
years from
from
the
the date
date ofof the
the auditor’s
auditor’s report.
report.
Trend Analysis
Ratio
Analysis
Reasonableness
Analysis
Risk
Final Analytical
Assessment
Procedures
Procedures Differences
Differences
Corroborating Corroborating
evidence evidence
is not required is required
Current Ratio
Quick Ratio
Operating Cash
Flow Ratio
Days Outstanding
Receivables in Accounts
Turnover Receivable
Days of
Inventory
Inventory on
Turnover
Hand
Return on Return on
Assets Equity
Debt to Equity