NATURE AND TYPE OF

AUDIT EVIDENCE
BASED ON BOOK CASES PAGE221
TYPES OF AUDIT EVIDENCE
(CONT)

inspection or Receipt of a Examination of consist of

count by the direct written the client evaluations of
auditor of response from documents and financial
tangible asset. independent records to information
3rdparty, substantiate the made by a study
verifyingthe information that of plausible
accuracy of is, or should be, relationships
information inclueded in the among both
specifically financial financial and
requested by the statement. nonfinancial
auditor data
 Types Of Audit Evidence

written or oral rechecking a auditors Use of senses

response to sample of independent to asses client
questions not calculations tests of client activities
usually done by made by the accounting cannot be done
itself client. procedures or by itself must
controls domore
7-30
1 Review the accounts receivable with the Inquiry of
creditmanager to evaluate their collectability.
the client
2. Compare a duplicate sales invoice with the sales
journal for customer name and amount. Inspection
3. Add the sales journal entries to determine whether
they were correctly totaled. Recalculation
4. Count inventory items and record the amount in Physical Examination
theaudit files

5. Obtain a letter From the clients attorney addressed

tothe CPA frm stating that the attorney is not aware Confirmation
of any existing lawsuits.

6. Extend the cost oF inventory times the quantity on

aninventory listing to test whether it is accurate. Recalculation
7. Obtain a letter from an insurance company to the
CPA firm stating the amount of the fre insurance
coverageon buildings and equipment. Confirmation

8. Examine an insurance policy stating the amount of

the fire insurance coverage on buildings and Inspection
equipment.

9. Calculate the ratio of cost of goods sold to sales

as a test of overall reasonableness of gross margin Analytic
relativeto the preceding year. Procedures
10. Obtain information about internal control by Inquiry of
requesting the client to fill out a questionnaire.
the client
11. Trace the total in the cash disbursements journal to
the general ledger. Reperformance
12. Watch employees count inventory to determine
whether company procedures are being followed. Observation
13. Examine a piece of equipment to make sure that
amajor acquisition was actually received and is Physical
inoperation. Examination
14. Calculate the ratio of sales commission expense Analytic
tosales as a test of sales commissions.
Procedures
15. Examine corporate minutes to determine
theauthorization of the issue oF bonds. Inspection

16. Obtain a letter from management stating that Inquiry of

there are no unrecorded liabilities.
the client
17. Review the total of repairs and maintenance For
eachmonth to determine whether any months total Analytic
wasunusually large. Procedures
18. Obtain a written statement from a bank stating
thatthe client has $15,671 on deposit and
liabilities of $500,000 on a demand note. Confirmation