Distinguish between internal documentation and external documentation as audit evidence... Distinguish between internal documentation and external documentation as audit evidence.. Disti
Trang 1TRƯỜNG ĐẠI HỌC THƯƠNG MẠI
Khoa: Kế toán – Kiểm toán
BÀI THẢO LUẬN
Đề tài: The concept of audit evidence? Explain the meaning of the appropriateness and sufficiency of audit evidence Distinguish between internal documentation and external documentation as audit evidence Give examples
Trang 2PHÂN CÔNG NHIỆM VỤ THẢO LUẬN 2
LỜI CẢM ƠN 3
LỜI CAM KẾT 3
1 THE CONCEPT OF AUDIT EVIDENCE 4
1.1 Definition of audit evidence 5
1.2 Nature of evidence 6
1.3 Audit evidence decisions 7
1.4 Types of audit evidence 10
1.5 Characteristics of audit evidence 16
2 THE APPROPRIATENESS AND SUFFICIENCY OF AUDIT EVIDENCE 10
2.1 Explain the meaning of appropriateness and sufficiency of audit evidence 11
2.2 Factors that affect the sufficient appropriate audit evidence 13
3 DISTINGUISH BETWEEN INTERNAL DOCUMENTATION AND EXTERNAL DOCUMENTATION AS AUDIT EVIDENCE 16
3.1 Definition of internal and external documentation 5
3.2 Types of internal and external documentation 5
3.3 Distinguish between internal documentation and external documentation 7
BẢNG NGHIỆM THU KẾT QUẢ THẢO LUẬN 20
BẢNG ĐÁNH GIÁ KẾT QUẢ HỌP NHÓM THẢO LUẬN 21
PHÂN CÔNG NHIỆM VỤ THẢO LUẬN
Trang 3HỌC PHẦN: PRICIPLES OF AUDITING
LBp: K55DD1 NhEm: 3
Đề tài: The concept of audit evidence? Explain the meaning of the appropriateness and sufficiency of audit evidence Distinguish between internal documentation and external documentation as audit evidence Give examples of each.
10 Nguyễn Tuấn Minh
II Phân công cụ thể
STT Họ và tên Phân công nhiệm vụ
1 Trần Thị Thu Linh Giám sát toàn bộ công việc, tổng hợp word,
sửa word, tóm tắt nội dung, làm nội dungphần 2.2
2 Đoàn Khánh Huyền Làm nội dung phần 2.1
3 Lưu Ngọc Huyền Làm nội dung phần 1.4
4 Nguyễn Thu Hương Làm slide
5 Vũ Thị Mai Lan Làm nội dung phần 3.3
6 Đỗ Lê Thùy Linh Thuyết trình
Trang 47 Trần Khánh Linh Làm nội dung phần 1.3 và 1.5
8 Phạm Như Mai Làm nội dung phần 1.1 và 1.2
9 Vũ Ngọc Mai Làm nội dung phần 3.2
10 Nguyễn Tuấn Minh Làm nội dung phần 3.1
LỜI CẢM ƠN
Trang 5Chúng em xin gửi lời cảm ơn chân thành sâu sắc nhất đến cô Lại Thị ThuThủy – giảng viên môn Principles of Auditing Cô đã tận tình động viên hướng dẫnchúng em từ định hướng đến chi tiết để tháo gỡ những khó khăn trong quá trìnhhọc tập cũng như nghiên cứu, từ cách trình bày, cách thu thập tài liệu.
Tuy nhiên do trình độ có hạn và hạn chế về ngôn ngữ nên chúng em khôngthể tránh khỏi những thiếu sót Vậy nên nhóm chúng em rất mong nhận đượcnhững góp ý của cô và các bạn để hoàn thiện đề tài thảo luận
LỜI CAM KẾT
Nhóm 3 chúng em xin cam đoan mọi kết quả của đề tài “The concept of audit evidence? Explain the meaning of the appropriateness and sufficiency of audit evidence Distinguish between internal documentation and external documentation as audit evidence Give examples of each.” là bài nghiên cứu của
nhóm Nhóm nghiên cứu hoàn toàn chịu trách nhiệm về tính trung thực về nộidung trong đề tài của nhóm
Nội dung đề tài thảo luận: The concept of audit evidence? Explain the
meaning of the appropriateness and sufficiency of audit evidence
Trang 6Distinguish between internal documentation and external documentation
as audit evidence Give examples of each
1 THE CONCEPT OF AUDIT EVIDENCE
Good auditing evidence should be sufficient, reliable, provided from anappropriate source, and relevant to the audit at hand
Examples of auditing evidence include: bank accounts, managementaccounts, payrolls, bank statements, invoices, and receipts
1.2 Nature of evidence:
Evidence was defined in Chapter 1 as any information used by the auditor todetermine whether the information being audited is stated in accordance with theestablished criteria The information varies greatly in the extent to which itpersuades the auditor whether financial statements are fairly stated Evidenceincludes information that is highly persuasive, such as the auditor’s count ofmarketable securities, and less persuasive information, such as responses toquestions of client employees
The use of evidence is not unique to auditors Evidence is also usedextensively by scientists, lawyers, and historians For example, most people arefamiliar with legal dramas on television in which evidence is collected and used toargue for the guilt or innocence of a party charged with a crime In legal cases,there are well-defined rules of evidence enforced by the judge for the protection ofthe innocent In scientific experiments, researchers obtain evidence to testhypotheses using controlled experiments, such as a drug trial to test theeffectiveness of a new medical treatment Similarly, gathering evidence is a largepart of what auditors do Although these professionals rely on different types ofevidence, and use evidence in different settings and in different ways, lawyers,scientists, and auditors all use evidence to help them draw conclusions
Trang 7The table below illustrates six key characteristics of evidence from the perspectives of a scientist doing an experiment, an attorney prosecuting an accused thief, and an auditor of financial statements There are six bases of comparison Notice the similarities and differences among these three professions.
Characteristics of Evidence for a Scientific Experiment, Legal Case, and Audit of Financial Statements
Basic of
comparison
Scientific Experiment Involving Testing a Medicine
Legal Case Involving an Accused Thief
Audit of Financial Statement
Use of the
evidence
Determine effects
of using the medicine
Decide guilt or innocence of accused
Determine wetherstatements are fairly presentedNature of
evidence used
Results of repeated experiments
Direct evidence and testimony by witnesses and parties involved
Various types of audit evidence generated by the auditor, third parties and the client
Requires guilt beyond a reasonable doubt
High level of assurance
Nature of
conclusions
Recommend or not recommend use of medicine
Innocence or guilt of party
Issue one of several alternative types
of audit reportsTypical
Guilty party is not penalized or innocent party is found guilty
Statement users make incorrect decisions and auditor may be sued
Trang 81.3 Audit evidence decisions
Major decision of an auditor involves determining the appropriate type and amount of evidence In this judgment the cost factor should beconsidered
The auditors' decisions on evidence accumulation can be broken down in to
four sub decisions:
- Audit procedures: It is a detailed instruction for the collection of a type
of audit evidence that is to be obtained at some time during the audit Theinstructions should be clearly and specifically stated
Example: Obtain cash disbursement journal and compare the payer name,amount, and date on the cancelled cheque with cash disbursement journal
- Sample Size: After selection of audit procedure, the decision of how many
items to test must be made by the auditor for each audit procedures
Example: If 60,000 checks are recorded in cash disbursement journal, only
400 may be selected
- Items to Select: Following the sample size selection, it is necessary to
decide which items in the population to test
Example: The auditor may see the 400 checks based on random selection,weakly selection, amount etc
- Timing:
+ The timing decision is affected by when the client needs the audit to becompleted Also, it can be affected by the auditors' belief on effective timing foraccumulation and the availability of audit staff
Example: The auditor often prefer to count inventory up close to the balancesheet dates
+ The audit procedure often incorporates the other three sub decisions
Example: Obtain the October cash disbursement journal and compare thepayee, name, amount, and date on the cancelled cheque with cash disbursementjournal for a randomly selected sample of 40 cheque numbers
1.4 Types of audit evidence
- Physical examination: Physical examination consists of auditors
physically verifying the existence of various assets On the other hand, auditors canalso use a physical examination to verify the state or condition of an asset
Trang 9Auditors collect this type of audit evidence themselves Physical examinations areone of the main sources of audit evidence for fixed assets.
Example: Before a check is signed, it is a document; After it is signed, itbecomes an asset; And when it is cancelled, it becomes a document again Forcorrect auditing terminology, physical examination of the check can occur onlywhile the check is an asset Physical examination is a direct means of verifying that
an asset actually exists (existence objective), and to a lesser extent whetherexisting assets are recorded (completeness objective)
- Confirmation:
+ Confirmations consist of auditors sending circularization to third-parties,
which mainly include banks, accounts payables, and receivables Throughconfirmations, auditors confirm the closing balance recorded in the financialstatements for particular parties The most effective audit evidence gather foraccounts receivable is the circularization sent to receivable balance parties Thesame is true for accounts payable and bank balances
+ External confirmations allow auditors to obtain third-party accounts of thebalances recorded by the client in its financial statements
Example: A sample of accounts receivable should be confirmed by theauditor
- Inspection:
+ Inspection is an audit procedure in which auditors inspect the records,
documents or physical assets of the client
+ Internal documents have been prepared by the client and have not left theclient’s premises (less persuasive)
+ External documents are usually on the client’s premises but were eitherprepared by a third party or processed by a third party (more persuasive)
+ Documentation (vouching) – auditor examination of client documents andrecords
Example: The client often retains a customer order, a shipping document,and a duplicate sales invoice for each sales transaction These documents are usefulevidence for the auditor to verify the accuracy of the client’s records for salestransactions
- Analytical procedures:
+ Analytical procedures include performing various analyses on thefinancial statements of the client to identify any trends or discrepancies Auditors
Trang 10use their own calculations to perform analytical procedures Similarly, analyticalprocedures can help obtain an overall view of the changes in the financial year.+ Analytical procedures allow auditors to analyze the client’s financialstatements to identify discrepancies or trends.
Example: An auditor may compare the gross margin percent in the currentyear with the preceding year’s
- Inquiries of the client:
+ Inquiry is the obtaining of written or oral information from the client in
response to questions from the auditor
+ Although considerable evidence is obtained from the client throughinquiry, it usually cannot be regarded as conclusive because it is not from anindependent source and may be biased in the client’s favor
+ Therefore, when the auditor obtains evidence through inquiry, it isnormally necessary to obtain corroborating evidence through other procedures.(Corroborating evidence is additional evidence to support the original evidence).Example: When the auditor wants to obtain information about the client’smethod of recording and controlling accounting transactions, the auditor usuallybegins by asking the client how the internal controls operate Later, the auditorperforms audit tests using inspection and observation to determine whether thetransactions are recorded (completeness objective) and authorized (occurrenceobjective) in the manner stated
- Recalculation: Recalculation involves rechecking a sample of calculations
made by the client Rechecking client calculations consists of testing the client’sarithmetical accuracy and includes such procedures as extending sales invoices andinventory, adding journals and subsidiary records, and checking the calculation ofdepreciation expense and prepaid expenses A considerable portion of auditors’recalculation is done by computer-assisted audit software
Example: Checking the calculation of depreciation expense and prepaidexpenses
- Reperformance:
+ Reperformance is the process of auditors reperforming various internalcontrol processes to check for deficiencies Audit evidence examples forreperformance include reperforming bank or account receivables/payablesreconciliations to evaluate the internal controls in place at the client Throughreperformance, auditors can also determine the control risk of a client
Trang 11+ Reperformance allows auditors to reperform various internal controlprocedures of the client to identify any weaknesses.
Example: The cycle of sales recording process, procedures of payrollscalculation
- Observation:
+ The next type of audit evidence that auditors can obtain is throughobservation In observation, auditors observe various aspects of the client’soperations or processes It can help auditors get a view of the client’s processes andanalyze them for deficiencies Observation is different from a physical examination
as it focuses on processes rather than physical assets
+ Observation helps auditors in going through the operations and processes
of the client and observing them identify any weaknesses
Example: The auditor may tour the plant to obtain a general impression ofthe client’s facilities
1.5 Characteristic of audit evidence
An audit envidence requires a few characteristics to be considered valid Thecharacteristics are as follows:
- Nature: It is a term that describes the type of data received The details
may be given in a variety of ways, including legal records, presentations, or oralconfirmation from employees
- Relevance: It refers to the pertinence of the information to provide an
opinion
- Reliability: It refers to determining whether or not the material can be
trusted or used to form an opinion It is important to understand the information’ssource
- Source: Accounting evidence may be collected either directly from the
corporation or from a third party Externally sourced data is usually thought to bemore reliable and is therefore favored
- Sufficiency: It considers whether the information given is of sufficient
quantity to enable auditors to make an accurate determination If an auditor wasissued only one bank statement from a corporation, he or she would not be able todraw any conclusions about the company’s financial situation
QUESTIONS CHAPTER 1: