Question

In: Accounting

The auditor’s decisions regarding evidence accumulation can be broken into four sub decisions: Which audit procedures...

The auditor’s decisions regarding evidence accumulation can be broken into four sub decisions:

  • Which audit procedures to use
  • What sample size to select for a given procedure
  • Which items to select from the population covering the sampling area
  • When to perform the procedures (timing)

One decision relates to determining the nature of the audit procedure to be used to collect the evidence; i.e., which audit procedures to use.

Examine one of the remaining three audit evidence decisions that the auditor makes.

  • Which of the four sub decisions is the most important and why?
  • Which is the least important and why?
  • If one of the sub decisions were removed, how would it impact the auditor’s decisions regarding evidence accumulation?

Solutions

Expert Solution

All the four sub decisions are equally important as they are parts of the full audit process. Every sub decision plays an important role for the sub decision preceding and succeeding it. If any of the sub decision is wrongly taken, then it impacts the final audit result. Hence, all the sub decisions hold equal importance for the achievement of effective and correct audit results.

-But if we have to choose one of the four sub decisions, the first decision regarding which audit procedure to choose is the most important. This is because the whole audit is dependent on this critical decision regarding the processes to undertake for the audit. If we commit mistake on this decision, there is no chance that the audit will go smoothly without error.

The planning stage is the most important stage of all decisions. Here, we even plan for the events where any of the rest of the three sub decisions go slightly wrong or misdirected. Thus the first sub decision is the most important, on which whole audit is dependent.

-No decision is least important, but if we have to choose, then the third decision regarding which items to select from the population covering the sampling area is least important. This is because audit is performed based on sampling. But if we choose some samples based on our logic and decision, even if it keeps out the items which are having error or misstatements, then it’s the sampling risk which cannot be avoided and can cause us to reach incorrect conclusions.

But the sampling is always done with risk involved, and different people would have selected different samples, based on their judgement and expertise. So this decision is least important amongst the four, as this decision is always accompanied with risk and different people can decide differently under this decision.

-If you remove any of the four sub decisions, this may lead to haphazard audit been performed, with no planning and proper procedure implemented. All the four sub decisions are part of a process and the process remains incomplete without any of the four sub decisions.

If we remove any of the four sub decisions, the auditor can never collect sufficient audit evidence for performing the audit.


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