slsus500 - audit evidence
TRANSCRIPT
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SLAuS 500 Audit Evidence04 October 2012
By Nilani De Silva
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SLAuS 500- AUDIT EVIDENCE
04 October 2012
Content
Introduction
Concept of audit evidence
Sufficient appropriate audit evidence
The use of assertions
Audit procedures
Compliance with International Standards
Effective date
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Introduction
Purpose of the standard is :
Toestablishstandardsandprovideguidanceon
Whatconstituteauditevidence?
Quantityand
quality
of
audit
evidence
to
be
gathered
Availableauditprocedures
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Auditor should obtain sufficient appropriate audit
evidence to be able to draw reasonable conclusions
on which to base the audit opinion.
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Auditors responsibility with respect to audit evidence
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Recordsofinitialentries,supportingdocs
invoices
contracts
mainledgerandsubsidiaryledgers
Journalentriesandotheradjustmentsnotreflectedin
formalJ/Es
Worksheetssuchascostallocations
computations
reconciliations
disclosures
Minutesofmeetings Confirmations/benchmarkinformation
AnalysisreportsControlmanuals
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What is meant by audit evidence?
Alltheinformationusedbyauditor in
arrivingattheconclusionsonwhichtheaudit
opinionisbased.
Includestheinformationintheaccounting
recordsunderlyingfinancialstatementsand
other
information.
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Quantity
Levelofauditrisk Relevant Reliable
Quality
Sufficient
Howmuch?
Appropriate
Howgood?
Auditevidence
shallbe
Impacts
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Relationship between Audit risk , Quality &
Quantity of audit evidence
Highertherisk higherthe
quantityofauditevidencerequired.
Higherthequality lowerthe
quantityofauditevidencerequired
Merely obtainingmoreaudit
evidencemaynotcompensateits
poorquality. 9
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Higher
AuditRiskHigherQtyofauditevidence
HigherQuality
LowerQuantity
Generalisations about reliability of evidence :
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Morereliablewhenitisobtained fromanIndependentsourceoutsidetheentity.Internally generatedevidencearemorereliable,whencontrolsareeffective.Evidenceobtaineddirectlybytheauditorratherthanindirectlyorbyinference.Writtenevidenceismorereliablethantheothers.
Originaldocumentsofevidenceismorereliablethanthephotocopies.
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When internally produced information is used
following shall be established;
accuracy
and
completeness of the information
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More assurance is obtained through consistent
audit evidence from different sources /different
nature.
Auditor is not expected to obtain all the information
as conclusions can be reached by using sampling.
Necessarily rely on persuasive evidence thanconclusive.
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Management
Assertions
Audit
Objectives
AuditEvidence AuditReport
onFinancial
Statements
Financial
Statements
Audit
Procedures
Relationship of Financial Statement Assertions and the Audit
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Transactionsandevents Occurrence
Completeness
Accuracy
Cutoff
Classification
Accountbalancesatperiodend Existence
Rights&obligations
Completeness
Valuation&allocation
Financial Statement Assertions
Presentationanddisclosure OccurrenceandRights&obligations
Completeness
Classification&understandability
Accuracyandvaluation
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Given set of audit evidence may provide
evidence to certain assertions but not for
others.
Lets look at F/S assertions in bit more detail
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Inventory
Auditprocedure Physicalobservation
Assertionscovered existencenothingelse
Trade receivable
AuditprocedureCheckingsupportings for
subsequentsettlements.
Assertionscoveredexistenceandvaluation,
butnotcutoff.
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Corroborating information obtained from a source
independent of the entity may increase the assurance
obtained from internal sources
Relationship between cost vs. benefit of obtaining
audit evidence is not valid if no alternatives.
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Auditor usually rely on persuasive evidence than
conclusive.
Auditor shall exercise professional skepticism in
evaluating quantity , quality(sufficiency) and
appropriateness of audit evidence to support audit
opinion.
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Audit procedures for obtaining audit evidence
Risk assessment procedures
Test of controls
Substantive procedures
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Inherent
Risk
Control
Risk
Detection
Risk
Audi t Risk
Any mater ial
error at all?
YesCaught by
controls?
NoCaught by
our audit?
No
Wrong opinion
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Obtainingcomfort
Audit procedures for obtaining audit evidence
Inspectionofrecordsordocuments
Inspectionoftangibleassets
Observation
Inquiry
Confirmation
Recalculation
Reperformance
Analyticalprocedures
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Compliance with ISAs
EnsurescompliancewithISA500inallmaterial
respects.
Effective Date
Effectiveforalltheauditscommencingonorafter
01Jan
2010.
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Thank you.
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