Question

QUESTION 3         

The evaluating and concluding stage of the audit process is very important. At this stage all the evidence that has been gathered on the audit must be brought together so that decisions can be taken as to whether anything further needs to be done and ultimately what the appropriate audit opinion will be.

YOU ARE REQUIRED TO: a. State, giving reasons which member of the audit team should conduct the evaluation of audit evidence and conclude on fair presentation.    (3) b. Briefly discuss the factors which the auditor should consider when evaluating and concluding.         (12)

Answer 1

1. Audit is being conducted by Independent CPA Firm and during the course of audit, there are several persons involved in a audit such as CPA’s, Articles and Interns and Employees of CPA etc. however ultimate responsiblity with respect to opinion on Financial Statements lies only with the CPA. However he can take help from them.

Hence employees, articles or Interns are sent for field work like collecting or gathering evidences, checking Internal Financial controls, obtain written representation from management and other ancilliary works.

However, analysing such evidence and on the basis of such evidences, deciding whether substantive procedures are required to obtain assurance or not and then ultimately giving an opinion on financial statements on the basis of such evidences obtained.

Hence the team leader which is commonly CPA who will attest the financial statements and give an opinion on them conducs the evaluation of evidences.

Factors to be considered while evaluating evidences

A. Source of evidence: if the evidence is obtained from the outsider and independent source eg Debtor, Creditors, Bank, Lendor etc they shall be more reliable as compared to evidences obtained from any insider source.

B. Wriiten or oral evidence: any evidence which is in written form shall be considered more reliable than the oral evidences obtained as written evidences provides documentation and accountability.

C. Real or Duplicate evidences: Real evidences such as Fixed assets acquisition bills are more trustworty than the duplicate copies of such bills. Also such bills should be in the name of entity and not anyone else.

D. Evidences obtained : Audit evidences obtained directly by the auditor is more reliable than audit evidence obtained indirectly

E. Internal controls: the reliability and relevence of audit evidence that is generated internally Management letters are increased when the related internal controls are operating effectively and effeciently.

F. Management expert: when information to be used by auditor as audit evidence has been prepared by using the work of management expert , auditor shall evaluate the competence, capabilities and objectivity of that expert as well as appropriateness of that exper work.