Audit evidance - notes - 4 Audit Evidence 4 Sufficient and Appropriate AU-C 500 The objective of the

Audit evidance - notes

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Auditing (ACG 4651)

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4 Audit Evidence

4 Sufficient and Appropriate

AU-C 500 The objective of the auditor is to design and perform audit procedures that enable the auditor to obtain sufficient appropriate audit evidence.

Sufficient, i., a sufficient quantity

Sufficiency is the measure of the quantity of audit evidence. The quantity of audit evidence needed is affected by the auditor's assessment of the risks of misstatement (the higher the assessed risks, the more audit evidence is to be required) and also by the quality of such audit evidence (the higher the quality, the less may be required).

The client’s accounting records (initial accounting entries, invoices; contracts; the general and subsidiary ledgers; journal entries; supporting spreadsheets; reconciliations) may be used to determine that the accounting records are internally consistent and agree to the financial statements. However, accounting records alone do not provide sufficient appropriate evidence.

Inquiry may provide important audit evidence, but inquiry alone does not provide sufficient audit evidence.

Appropriate, i., relevant and reliable

a) Relevant: on point; appropriate for the objective.

Relevance relates to the logical connection between the audit procedure and the assertion. Relevance may be affected by the direction of testing. For example, if the purpose of an audit procedure is to test for overstatement in the existence or valuation of accounts payable, testing the recorded accounts payable may be a relevant audit procedure. On the other hand, when testing for understatement/completeness of accounts payable, testing the recorded accounts payable would not be relevant, but testing subsequent disbursements, unpaid invoices, and unmatched receiving reports may be relevant. For example, the auditor may inspect all unpaid vendor invoices at January 1, 2023. If these invoices are for goods delivered in 2022, then the invoice amount should be included in the 12/31/2022 accounts payable list. If not, then the A/P list is not complete.

A given set of audit procedures may provide audit evidence that is relevant to certain assertions but not others. For example, inspection of documents related to the collection of receivables after the period-end may provide audit evidence regarding existence of A/R, but not necessarily evidence about cutoff. Similarly, obtaining audit evidence regarding a particular assertion (e., the existence of inventory) is not a substitute for obtaining audit evidence regarding another assertion (e., the valuation of inventory).

4.0 Audit Evidence

4.1 Sufficient and Appropriate

AU-C 500.04 The objective of the auditor is to design and perform audit

procedures that enable the auditor to obtain sufficient appropriate audit

evidence.

Sufficient, i.e., a sufficient quantity

Sufficiency is the measure of the quantity of audit evidence. The

quantity of

audit evidence needed is affected by the auditor's assessment of the

risks of

misstatement (the higher the assessed risks, the more audit evidence

is to be required) and also by the quality of such audit evidence (the

higher the quality, the less may be required).

The client’s accounting records (initial accounting entries, invoices;

contracts; the general and subsidiary ledgers; journal entries;

supporting spreadsheets; reconciliations) may be used to determine

that the accounting records are internally consistent and agree to the

financial statements. However, accounting records alone do not

provide sufficient appropriate evidence.

Inquiry may provide important audit evidence, but inquiry alone does

not provide sufficient audit evidence.

Appropriate, i.e., relevant and reliable

a) Relevant: on point; appropriate for the objective.

Relevance relates to the logical connection between the audit

procedure and the assertion. Relevance may be affected by the

direction of testing. For example, if the purpose of an audit procedure

is to test for overstatement in the existence or valuation of accounts

payable, testing the recorded accounts payable may be a relevant

audit procedure. On the other hand, when testing for

understatement/completeness of accounts payable, testing the

recorded accounts payable would not be relevant, but testing

subsequent disbursements, unpaid invoices, and unmatched

receiving reports may be relevant. For example, the auditor may

inspect all unpaid vendor invoices at January 1, 2023. If these

invoices are for goods delivered in 2022, then the invoice amount

should be included in the 12/31/2022 accounts payable list. If not,

then the A/P list is not complete.

Audit evidance - notes

Auditing (ACG 4651)

University of West Florida

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4 Audit Evidence

4 Sufficient and Appropriate