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Audit Evidence

Bonitian Rifiansyah (008201800042)


Eleonora Vinessa (008201800068)
Sausan Sania (008201800087)
LEARNING OBJECTIVE

1 2 3 4
Contrast Identify the four Specify the Identify and
audit audit evidence characteristics apply the
evidence decisions that that determine eight types
with are needed to the of evidence
evidence create an audit persuasiveness used in
used by program. of evidence. auditing.
other
professions.
LEARNING OBJECTIVE

5 6 7 8
Know the Compute Understand the Prepare
types of common purposes organized
analytical financial ratios. of audit audit
procedures documentation. documentation
and their .
purposes.
Nature of
01 Evidence
The use of
evidence is not
unique to auditors

Evidence is also
used by scientists,
lawyers, and
historians
Audit
02 Evidence
Decisions
What sample size to
Which audit select for a given
procedures to procedure
use

Which items to When to


select from the perform the
population procedures
Persuasiveness of
03 Evidence
Appropriateness Sufficiency
6 Characteristics of Reliable Evidence
 Independence of Provider
 Effectiveness of Client’s Internal
Controls
 Auditor’s Direct Knowledge
 Qualification of Individuals Providing the
Information
 Degree of Objectivity
 Timeliness
Types of
04 Audit
Evidence
Types of Audit Evidence

01 02 03 04
Analytical
Physical Examination Confirmation Inspection Procedures

05
Inquiries of the 06 07 08
Client Recalculation Reperformance Observation
05 Appropriateness of
Types of Evidence
Cost of Types of Evidence
 The two most expensive types of evidence are
physical examination and confirmation.

 Inspection, analytical procedures, and


reperformance are moderately costly.

 The three least-expensive types of evidence are


observation, inquiries of the client, and
recalculation.
Analytical
06 Procedures
Purposes of Analytical Procedures
During the Audit Engagement

 Analytical procedures are required in the planning phase as


part of risk assessment procedures to understand the client’s
business and industry and to assist in determining the nature,
extent, and timing of audit procedures.
 Analytical procedures are often done during the testing
phase of the audit as a substantive test in support of account
balances.
 Analytical procedures are also required during the
completion phase of the audit.
Types of Analytical Procedures
The auditor typically compares the client’s balances
and ratios with expected balances and ratios using one
or more of the following types of analytical procedures.
In each case, auditors compare client data with:
● Industry data
● Similar prior-period data
● Client-determined expected results
● Auditor-determined expected results
COMMON
07 FINANCIAL
RATIOS
Short-term Debt-Paying Ability
Liquidity Activity Ratios
Ability to Meet Long-term Debt
Obligations
Profitability Ratios
Audit
08 Documentation
Auditing standards state that audit
documentation is the record of the
audit procedures performed,
relevant audit evidence, and
conclusions the auditor reached.
Audit Documentation

Purpose of Audit Ownership of Audit Confidentiality of


Documentation Files Audit Files
To aid the auditor in Audit documentation A member in public
providing reasonable prepared during the practice shall not
assurance that an engagement is the disclose any
adequate audit was property of the confidential client
conducted auditor. information without the
specific consent of the
client
Requirements for Retention of Audit
Documentation
 Auditing standards require that records for audits
of private companies be retained for a minimum of
five years.
 The Sarbanes–Oxley Act requires auditors of public
companies to prepare and maintain audit files and
other information for a period of not less than
seven years.
Contents
and
09 Organization
Permanent Files
These files is auditors’ files that contain data
of a historical or continuing nature pertinent
to the current audit such as copies of articles
of incorporation, bylaws, bond indentures, and
contracts.
Current Files
These files include all audit
documentation applicable to the year
under audit.
• Audit Program
• Working Trial Balance
• Adjusting Entries
• Supporting Schedules
Types of Supporting Schedule

 Analysis
 Trial balance or list
 Reconciliation of amounts
 Substantive analytical procedures
Types of Supporting Schedule

 Summary of procedures
 Examination of supporting
documents
 Informational
 Outside documentation
Preparation of Audit Documentation

 Proper identification of each file


 Files indexed and cross-
referenced
 Clear indication of work
performed
 Include sufficient information
THANK YOU
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