Question

On a one page paper create a summary about audit evidence using the following guide:

a. Identify the three aspects associated with evaluating audit evidence.

b. Explain the purpose of evaluating deviations from prescribed control procedures as part of evaluating audit evidence.

c. If the auditor finds only one instance of unintentional error during the audit, can the auditor assume that this is an isolated instance? Why or why not?

d. What should be documented as part of the auditor’s working papers?

Answer 1

a.Identify the three aspects associated with evaluating audit evidence.

    For gathering and evaluating all audit evidences three main tools can be used by the auditor:

• Analytical Procedures
• Audit Sampling
• Generalized Audit Software

b.Explain the purpose of evaluating deviations from prescribed control procedures as part of evaluating audit evidence.

Since the audit sampling is the best to evaluate a decision when needed for audit control to find out whether it is less than 100 percent of the items within an account balance or class of transactions for the purpose of evaluating some characteristic of the balance or class.The auditor often is aware of account balances and transactions that may be more likely to contain misstatements. He considers this knowledge in planning his procedures, including audit sampling. The auditor usually will have no special knowledge about other account balances and transactions that, in his judgment, will need to be tested to fulfill his audit objectives. Audit sampling is especially useful in these cases.

c. If the auditor finds only one instance of unintentional error during the audit, can the auditor assume that this is an isolated instance? Why or why not?

If both the conditions are satisfied:

• If the auditor discovers a previously unintentional error of material misstatement or concludes that the evidence gathered is not adequate, he or she should modify his or her audit procedures or perform additional procedures as necessary in accordance with paragraph .36 of Audit Standard AS 2810 and
• the evidence gathered in response to unusual or unexpected transactions, events, amounts, or relationships previously identified during the audit is sufficient;

d.What should be documented as part of the auditor’s working papers?

There are two types of audit documentation that most of the public accounting firms maintain.First one is Permanent File which contains historical data about the client.The second one is the current file which contains a copy of the financial statements and auditors report for the current year.