Question

comprehensive research report paper on a topic " Audit evidence and the external audit" with references to CAS, CPA Handbook and other relevants international audit standards. The paper will be a maximum of 20 pages including exhibits. List the sources of information used both primary and secondary.

Answer 1

Auditing iievidence iiis iithe iiinformation iicollected iifor iireview iiof iia iicompany's iifinancial iitransactions, iiinternal iicontrol iipractices, iiand iiother iiitems iinecessary iifor iithe iicertification iiof iifinancial iistatements iiby iian iiauditor iior iicertified iipublic iiaccountant ii(CPA). iiThe iiamount iiand iitype iiof iiauditing iievidence iiconsidered iivary iiconsiderably iibased iion iithe iitype iiof iifirm iibeing iiaudited iias iiwell iias iithe iirequired iiscope iiof iithe iiaudit.

External iiAudit iiis iidefined iias iithe iiaudit iiof iithe iifinancial iirecords iiof iithe iicompany iiin iiwhich iiindependent iiauditors iiperform iithe iitask iiof iiexamining iivalidity iiof iifinancial iirecords iiof iithe iicompany iicarefully iiin iiorder iito iifind iiout iiif iithere iiis iiany iimisstatement iiin iithe iirecords iidue iito iifraud, iierror iior iiembezzlement iiand iithen iireporting iithe iisame iito iithe iistakeholders iiof iithe iicompany.

The iiobjective iiof iithe iiexternal iiaudit iiincludes iithe iidetermination iiof iithe iicompleteness iiand iiaccuracy iiof iithe iiaccounting iirecords iiof iithe iiclient, iito iiensure iithat iithe iirecords iiof iithe iiclients iiare iiprepared iias iiper iithe iiaccounting iiframework iiwhich iiis iiapplicable iito iithem iiand iito iiensure iithat iithe iifinancial iistatements iiof iithe iiclient iipresent iithe iitrue iiand iifair iiresults iiand iithe iifinancial iiposition.

An iiaudit iiis iia iisystematic iiindependent iiexamination iiof iifinancial iistatements, iirecords, iidocuments iiwith iian iiobjective iito iiexpress iian iiopinion iion iithe iifinancial iistatements iiof iian iientity iiwhether iithey iiare iigiving iia iitrue iiand iifair iiview iior iinot. iiAuditor iiexpresses iihis iiopinion ii(whether iithe iifinancial iistatements iiof iian iientity iiare iigiving iia iitrue iiand iifair iiview iior iinot) iion iithe iibasis iiof iiaudit iievidence iicollected iiby iihim.

An iiauditor iiapplies iivarious iiaudit iiprocedure iito iiobtain iiaudit iievidence iiwhich iienables iihim iito iiform iian iiopinion iiwhether iithe iifinancial iistatements iiof iian iientity iiare iifree iifrom iimaterial iimisstatement iiand iistate iia iitrue iiand iifair iiview iior iinot.

Audit iiEvidence iiis iithe iiinformation iithat iithe iiauditor iiuses iiin iiarriving iiat iia iiconclusion iion iithe iibasis iiof iiwhich iihe iiforms iihis iiopinion.

The iiauditor iishould iiobtain iisufficient iiand iiappropriate iievidence iiwhich iienables iithe iiauditor iito iiarrive iiat iia iiconclusion iiand iisupports iihis iiopinion. iiAudit iievidence iiforms iithe iibasis iifor iiforming iian iiopinion iiwhether iithe iifinancial iistatements iiof iian iientity iistate iitrue iiand iifair iiview iior iinot.

Evidence iicollected iiby iithe iiauditor iishould iisupport iithe iicontents iiof iiits iiaudit iireport. iiSufficiency iiof iiaudit iievidence iiis iithe iimeasure iiof iithe iiquantity iiof iiaudit iievidence. iiAppropriateness iiof iievidence iiis iithe iiquality iiof iithe iievidence, iii.e., iiits iirelevance iiand iireliability iito iisupport iithe iiauditor’s iiopinion.

Audit iievidence iiincludes iiinformation iiprovided iiin iibooks iiof iiaccounts iias iiwell iias iiinformation iifrom iiother iisources. iiFor iiExample ii– iiPurchase iiinvoice iiand iimaterial iireceived iinote iiprepared iiby iithe iistore’s iidepartment iiare iievidence iito iisupport iithe iipurchase.

An iiexternal iiaudit iiis iian iiexamination iithat iiis iiconducted iiby iian iiindependent iiaccountant. iiThis iitype iiof iiaudit iiis iimost iicommonly iiintended iito iiresult iiin iia iicertification iiof iithe iifinancial iistatements iiof iian iientity. iiThis iicertification iiis iirequired iiby iicertain iiinvestors iiand iilenders, iiand iifor iiall iipublicly-held iibusinesses.

The iiobjectives iiof iian iiexternal iiaudit iiare iito iidetermine:

1. The iiaccuracy iiand iicompleteness iiof iithe iiclient's iiaccounting iirecords;

2. Whether iithe iiclient's iiaccounting iirecords iihave iibeen iiprepared iiin iiaccordance iiwith iithe iiapplicable iiaccounting iiframework; iiand

3. Whether iithe iiclient's iifinancial iistatements iipresent iifairly iiits iiresults iiand iifinancial iiposition.

There iiare iiother iitypes iiof iiexternal iiaudits iithat iimay iibe iitargeted iiat iispecific iiissues iiconcerning iia iiclient's iiaccounting iirecords, iisuch iias iian iiexamination iithat iisearches iifor iithe iiexistence iiof iifraud.

The iigoal iiof iiany iiaudit iiis iito iidetermine iiwhether iia iicompany's iifinancial iistatements iicomply iiwith iigenerally iiaccepted iiaccounting iiprinciples ii(GAAP), iiinternational iifinancial iireporting iistandards ii(IFRS), iior iianother iiset iiof iiaccounting iistandards iiapplicable iito iian iientity's iijurisdiction. iiPublicly iitraded iicompanies iiare iigenerally iirequired iito iipresent iifully iiaudited iifinancial iistatements iito iishareholders iiperiodically, iiand iithus iithe iicompilation iiand iiorganization iiof iiauditing iievidence iiare iiessential iifor iiauditors iiand iiaccountants iito iido iitheir iiwork. iiIn iishort, iiauditing iievidence iiis iimeant iito iiprovide iiauditors iiwith iithe iiinformation iifor iithem iito iimake iithe iijudgment iion iiwhether iior iinot iifinancial iistatements iiare iiaccurate iiand iitrue.

Essentials iiof iigood iiaudit iievidence

1. Sufficient: iiSufficiency iiis iithe iimeasure iiof iiquantity. iiAudit iievidence iiis iisufficient iiwhen iithey iiare iiavailable iiin iiadequate iiquantity. iiAn iiauditor iiapplies iidifferent iiaudit iiprocedures iito iiobtain iisufficient iiaudit iievidence iilike iitest iichecking.

2. Reliable: iiEvidence iiobtained iiby iithe iiauditor iiis iipersuasive iirather iithan iiconclusive. iiWe iicannot iiconsider iisuch iievidence ii100% iireliable iifor iiforming iian iiopinion. iiReliability iiof iiaudit iievidence iidepends iion iiits iisource iiand iinature iiof iisuch iievidence.

3. Source: iiAudit iievidence iiobtained iiwithin iithe iienterprise iiis iiknown iias iithe iiinternal iisource. iiEvidence iiobtained iifrom iian iioutside iienterprise iilike iiconfirmation iifrom iithe iithird iiparty iiis iiknown iias iithe iiexternal iisource. iiWe iiconsider iithe iiexternal iisource iito iibe iimore iireliable.

4. Nature: iiCan iibe iidocumentary ii(like iibills, iivouchers), iivisual ii(like iithe iiphysical iiverification iiof iifixed iiassets), iior iioral ii(confirmation iifrom iiemployees)

5. Relevant: iiWhether iithe iiaudit iievidence iiobtained iiby iithe iiauditor iiis iirelevant iior iinot iidepends iion iithe iipurpose iiof iiaudit iiprocedures.

Why iiis iiAudit iiEvidence iiImportant?

Audit iievidence iiis iiimportant iibecause iiit iiis iiall iithe iiinformation iithat iian iiauditor iigathers iito iireach iihis iiaudit iiopinion iiabout iian iiorganization’s iifinancial iistatements iiand/or iiinternal iicontrol iienvironment. ii

Audit iievidence iiis iicritical iito iithe iiaudit iiand iiinternal iicontrols iiprocess iibecause iiit iiallows iiexecutives iiof iipublic iicompanies iito iitrust iithe iiopinions iiof iitheir iiauditors. iiThere iiare iia iinumber iiof iilaws iiand iiregulations iithat iimake iiit iiclear iithat iithe iiexecutives iiof iipublic iicompanies, iinot iithe iiauditors, iiare iiresponsible iifor iiestablishing iiand iimaintaining iiinternal iicontrol iiover iifinancial iireporting iiand iiassessing iithe iieffectiveness iiof iithose iiinternal iicontrols.

In iiaddition, iistakeholders iiinterested iiin iia iiparticular iibusiness, iiincluding iibanks iiand iiinvestors, iirely iion iithis iiaudit iiopinion iito iimake iitheir iibusiness iior iiinvestment iidecisions iiregarding iithe iiorganization. ii

These iistakeholders iitrust iithe iiauditor’s iiopinion iibecause iithey iicount iion iithe iifact iithat iithe iiauditor iihas iigiven iihis iiassurance iionly iiafter iiperforming iiquality iiwork. iiBecause iistakeholders iirely iion iithe iiauditor’s iiwork, iiit’s iicritical iithat iithe iiauditor iibase iihis iifinancial iistatement iiopinions iion iistrong iiaudit iievidence.

Audit iievidence iican iibe iidivided iiinto iiinternal iiand iiexternal iisources. iiInternal iisources iiof iiaudit iievidence iiinclude iia iicompany’s iidocumented iiprocesses, iipolicy iidocuments, iiaccounting iirecords, iiinvoices, iisystem iilogs, iiand iireports. iiExternal iisources iiof iiaudit iievidence iican iiinclude iiinformation iifrom iibanks, iidebtors, iisuppliers, iistock iiexchanges, iiand iithe iiInternal iiRevenue iiService.

An iiauditor iihas iito iicollect iiall iithe iipossible iiaudit iievidence iito iiestablish iithe iitruthfulness iiof iithe iisystem iito iirecord iithese iitransactions. iiAn iiauditor iican iiverify iithe iifinancial iiinformation iion iithe iifinancial iistatements iiby iireviewing iithe iifinancial iiinformation iifrom iithe iivarious iidata iisources, iiincluding iiinventory iireports, iiavailable iireceipts, iiand iipayments iito iisuppliers.

Auditors iiuse iia iinumber iiof iiaudit iiprocedures iito iiobtain iiaudit iievidence iiand iithey iifrequently iiuse iia iicombination iiof iiaudit iiprocedures. iiThese iiinclude iiobservation, iiinspection, iiconfirmation, iirecalculation, iiperformance, iiand iianalytical iiprocedures, iialong iiwith iiasking iiquestions.

Using iidata iianalytics iican iiimprove iithe iiquality iiof iia iifinancial iistatement iiaudit iiby iienabling iiauditors iito iidiscover iiand iianalyze iipatterns, iideviations, iiand iiinconsistencies. iiData iianalytics iican iialso iienable iithe iiauditors iito iiobtain iiother iihelpful iiinformation iiin iithe iidata iithat iiunderlies iior iiis iirelated iito iithe iisubject iimatter iiof iian iiaudit.

Example iiof iiAuditing iiEvidence

Company iiABC iihas iienlisted iithe iiauditing iiservices iiof iithe iiaccounting iifirm, iiAnderson iiBrothers, iito iihave iitheir iifinancial iistatements iifrom iithe iifiscal iiyear ii2019 iiaudited. iiThe iiauditor iibegins iiworking iion iithe iiaudit iiand iirequests iiinformation iiregarding iireported iirevenues iiand iibank iibalances. iiTo iiobtain iiaccurate iiand iireliable iiinformation, iiregarding iirevenues, iithe iiauditor iirequests iisales iireceipts iiand iiinvoices iiand iia iiphysical iiexamination iiof iiinventory. iiRegarding iibank iibalances, iithe iiauditor iirequests iiall iiof iithe iibank iistatements iiof iithe iicompany iidirectly iifrom iiABC's iibank. iiAll iiof iithis iiinformation; iithe iireceipts, iiinvoices, iiphysical iiobservations, iiand iibank iistatements iiare iiregarded iias iiauditing iievidence.

Types iiof iiaudit iievidence:

Auditors iiuse iiaudit iievidence iiin iimany iidifferent iiforms iiand iisources. iiThose iiaudit iievidence iicould iibe iidata iior iiinformation, iiphysical iior iinonphysical. iiFor iian iiexample iiof iiaudit iievidence:

1. Financial iistatements

2. Accounting iiinformation

3. Bank iiaccounts

4. Management iiAccounts

5. Fixed iiAssets iiRegister

6. Payrolls iiListing

7. Banks iiStatements

8. Bank iiconfirmation

9. Invoices

10. Receipts

And iiothers iidocuments iiuse iiby iibusinesses iito iisupport iifinancial iitransactions iior iievents iiin iithe iifinancial iistatements.

If iithe iiinformation iiis iinot iistrong iior iilow iiquality, iithe iiaudit iirisks iiof iimaking iiincorrect iiaudit iiopinions iiare iihigh.

The iiquality iiof iiaudit iievidence iiis iidependent iimainly iion iithe iiform iiand iisource iiof iithe iievidence. iiHere iiis iithe iidetail:

1. External iiSource: iiThe iievidence iithat iiobtains iidirectly iifrom iiexternal iiparties iilike iicustomers, iisuppliers, iior iibanks iiis iimore iireliable iithan iiobtaining iifrom iiclients. iiFor iiexample, iiaccounts iireceivable iiconfirmations iithat iiobtain iifrom iiclient’s iicustomers iiare iimore iireliable iithan iithe iirecords iithat iiprepare iiby iiclients.

2. Prepare iiby iiAuditor: iiThe iievidence iithat iiprepares iiby iiauditors iithemselves iiare iimore iireliable iithan iithe iione iithat iiprepares iiby iior iiobtains iifrom iithe iiclient. iiFor iiexample, iithe iibank iireconciliation iithat iiprepares iiby iithe iiauditor iiis iimore iireliable iithan iithe iibank iireconciliation iiprepared iiby iithe iiaccountant.

3. Prepare iiby iiclient: iiThe iilevel iiof iireliability iiof iievidence iithat iiobtains iifrom iiclients iiare iidepending iion iithe iireliability iiof iiclient iiinternal iicontrol.

4. Written iiform: iiThe iiaudit iievidence ii