Chapter 7Audit Planning and Analytical Procedures.ppt

Chapter 7Audit Planning and Analytical Procedures Presentation Outline Defining Audit Evidence Types of Audit Evidence Audit Documentation I. Defining Audit Evidence Audit Evidence Decisions Persuasiveness of Audit Evidence Competence Considerations A. Audit Evidence Decisions Audit procedures to use – specific procedures should be spelled out for instruction during the audit. Sample size – how many items should be tested for each audit procedure. Items to select – determine which items in the population should be selected. Timing – timing can vary from early in the accounting period to long after it has ended. B. Persuasiveness of Audit Evidence Audit evidence is any information used by the auditor to determine whether the information being audited is stated in accordance with established criteria. Two determinants of persuasiveness of evidence are: Competence – the degree to which evidence can be considered trustworthy. Sufficiency – amount of evidence is enough to form a reasonable opinion. C. Competence Considerations Relevance – must pertain to the audit objective being tested. Independence – evidence from outside the client is a stronger form of evidence Effectiveness of client internal controls – good internal controls can mean better information. Auditor direct knowledge – auditor determinations are stronger that client comments. Qualifications – individual is a qualified source. Degree of objectivity – objective evidence is stronger than subjective evidence. Timeliness – balance sheet account evidence is better when it is collected around the date of the financial statement. Income statement evidence should sample entire period. II. Types of Audit Evidence Physical examination Confirmations Documentation Analytical Procedures Inquiries of the Client Reperformance Observation A. Physical Examination Inspection or count by the auditor of a tangible asset. Different from examining documentation is that the asset has inherent value. B. Confirmations Pos