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Audit Evidence & Financial
Statement Assertions
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Key ISAs
ISA 200 Overall Objectives of the IndependentAuditor and the Conduct of an Audit
in Accordance with Internal Standards
on Auditing
ISA 500 Audit EvidenceISA 315 Identifying and assessing risks of material
misstatement through understanding the
entity and its environment
ISA 330 The auditors responses to assessed risk
ISA 520 Analytical procedures
ISA 570 Going concern
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Why is audit evidence important?
Auditors should obtain sufficient appropriate auditevidence to be able to draw reasonable conclusions
on which to base the audit opinion
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But what is it?
Audit evidence is the information used to get to theconclusion on which to base an opinion
It includes:
Information contained in the accounting records
underlying the financial statements; and Other information (e.g. management expert)
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So we have some key words
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Auditors should obtain sufficientappropriate auditevidence to be able to draw reasonable conclusions
on which to base the audit opinion
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Sufficient
This is about quantity Must be enough to be representative
Need to consider the risks of material misstatement
and the quality of evidence
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Materiality
An item reported is likely to be relevant by virtue ofits nature and materiality
Information is material if its omission or
misstatement could influence decision-making ofusers
Information can be relevant due to nature,
irrespective of materiality
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Appropriate
This is about quality Quality is about:
Relevance
Reliability
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Relevance
To be useful, info must be relevant to users
Information is relevant when it influences users
economic decisions
Although information in published accounts is
historic, users can use this as a basis for evaluating
future performance and ultimately make investment
decisions
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Reliability
Information is reliable when it is free from material errorand bias and can be considered to be a faithfulrepresentation of the underlying transactions and events
Reliable information will have taken account of the
following: faithful representation
substance over form
neutrality
prudence completeness
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Objective of Financial Statements
Provide information about an entitys financialperformance and financial position that is useful to a
wide range of users for assessing the stewardship of
the entitys management and for making economic
decisions.
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Published financial statements include:
Financial review / management commentary Statement of financial performance
Statement of comprehensive income
Statement of changes in equity
Statement of cash flows
Notes to the accounts
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Financial Statement Assertions
Existence Rights and obligations
Occurrence
Completeness
Valuation
Measurement
Presentation and disclosure
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Procedures for obtaining evidence
Inspection of assets Inspection of documents
Observation
Inquiries
Confirmation
Computations
Analytical procedures
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But in this you need to ensure evidence is..
Sufficient and appropriate: Risk assessment
Nature of accounting and internal control systems
Materiality
Experience from previous audits
Knowledge of the business / industry
Results of audit procedures
Source and reliability of information available
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Audit Documentation
Working papers are used May be on paper, film, electronic media or other
media
Provide the audit evidence to support any
statements in the report Provide evidence that the audit was conducted in
accordance with regulatory requirements
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Other reasons for using working papers
Assist in planning, performance, supervision andreview
May be needed if a negligence claim is made
Because we have to!its a mandatory professional
requirement
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Audit evidence
The information auditors obtain in arriving at theconclusions on which their report is based
There is a need to ensure it is:
Sufficient; and
appropriate
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