The main goals of this chapter are to: Understand the relationship between audit evidence and the auditor's report; know management assertions about classes of transactions, account balances, and presentation and disclosure; learn the basic concepts of audit evidence; know the audit procedures used for obtaining audit evidence; understand the reliability of the types of evidence; understand the audit testing hierarchy;. | Chapter 5 Evidence and Documentation McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved. Relationship of Audit Evidence to the Audit Report Management assertions about components of financial statements Financial statements Audit procedures Audit report Provide evidence on the fairness of the financial statements LO# 1 Auditor reaches a conclusion based on the evidence 5- Management Assertions LO# 2 5- The Concepts of Audit Evidence Nature of audit evidence Sufficiency and appropriateness of audit evidence Evaluation of audit evidence LO# 3 5- Audit Procedures Specific acts performed by the auditor to gather evidence about whether specific assertions are being met. Risk assessment procedures Test of controls Substantive procedures LO# 4 5- Audit Procedures A set of audit procedures prepared to test assertions for a component of the financial statements is referred to as an audit program. LO# 4 5- Audit Procedures for Obtaining Audit Evidence Inspection of records and documents LO# 4 Inspection of tangible assets Observation Inquiry Confirmation Recalculation Reperformance Analytical procedures Scanning 5- Reliability of Types of Evidence LO# 5 5- Audit Testing Hierarchy Figure 5-3 Audit Testing Hierarchy: An Evidence Decision Process for Testing Significant Balances or Classes of Transactions LO# 6 5- Audit Documentation The auditor’s principal record of the audit procedures performed, evidence obtained, and conclusions reached. Audit documentation (working papers) have two functions: To provide support for the audit report. To aid in the planning, performance, and supervision of the audit. LO# 7 5- Content of Audit Documentation Audit documentation should: Demonstrate how the audit complied with auditing and related professional practice standards. Support the basis for the auditor’s conclusions concerning each material financial statement . | Chapter 5 Evidence and Documentation McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved. Relationship of Audit Evidence to the Audit Report Management assertions about components of financial statements Financial statements Audit procedures Audit report Provide evidence on the fairness of the financial statements LO# 1 Auditor reaches a conclusion based on the evidence 5- Management Assertions LO# 2 5- The Concepts of Audit Evidence Nature of audit evidence Sufficiency and appropriateness of audit evidence Evaluation of audit evidence LO# 3 5- Audit Procedures Specific acts performed by the auditor to gather evidence about whether specific assertions are being met. Risk assessment procedures Test of controls Substantive procedures LO# 4 5- Audit Procedures A set of audit procedures prepared to test assertions for a component of the financial statements is referred to as an audit program. LO# 4 5- Audit
