Audit Evidence and Documentation. The Third Standard of Field Work. Sufficient appropriate evidential matter is to obtained by performing audit procedures to afford a reasonable basis for an opinion regarding the financial statements under audit.
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Sufficient appropriateevidential matter is to obtained by performing audit procedures to afford a reasonable basis for an opinion regarding the financial statements under audit.
Audit Report on Financial Statements
Audit ProceduresRelationship of Financial Statement Assertions and the Audit
Risk of Material Risk that the Auditors
Audit Risk = Misstatement * Fail to Detect
= Inherent Control Detection
Risk * Risk * Risk
The risk of a material misstatement occurring in an assertion assuming no related internal controls.
Risk that a material misstatement in an assertion will not be prevented or detected on a timely basis by the company’s internal control.
Risk that the auditors’ procedures will lead them to conclude that a material misstatement does not exist in an assertion when in fact such misstatement does exist.
Detection risk restricted by performing substantive tests
AR = IR x CR x DR
AR = Audit risk
IR = Inherent risk
CR = Control risk
DR = Detection risk
↑ combined IR and CR ↓ allowed DR ↑ substantive evidence
any information that corroborates or refutes an assertion
Evidence that can actually be seen by auditors.
Four basic types (helps determine competence):
Data interrelationships (i.e., analytical procedures) rely on plausible relationships among financial and non-financial data.
Clients’ accounting records (e.g. ledgers and journals) may provide worthwhile evidence in themselves.