Chapter 05

Audit Evidence
Lecture 09
Dr/Mostafa I. EL-Feky
 Audit evidence decisions
(1)Audit Procedures
Detailed instruction that explains the audit evidence to be obtained during the audit
(2) Sample Size
Auditors can vary the sample size from one to all the items in the population being tested.
(3)Items to Select
The auditor must decide which items in the population to test

(4) Timing
An audit of financial statements usually covers a period such as a year.
Audit Program
Includes a list of the audit procedures, and it usually includes sample sizes, items to select, and
the timing of the tests.

Dr/Mostafa I. EL-Feky 2
 Persuasiveness of evidence
Audit standards require the auditor to accumulate sufficient and appropriate
evidence to support the opinion issued.

Appropriateness of evidence
✓ Relevance of Evidence
(Independence of provider – Effectiveness of client’s
✓ Reliability of Evidence internal controls – Auditor’s direct knowledge –
Qualifications of individuals providing the information –
Degree of objectivity – Timeliness)
✓ Sufficiency

✓ Combined Effect
✓ Persuasiveness and Cost

Dr/Mostafa I. EL-Feky 3
 Types of audit evidence
In deciding which audit procedures to use, the auditor can choose from eight broad
categories of evidence

1.Physical examination The two most expensive types of evidence

2.Confirmation are physical examination and confirmation.
3.Inspection
Inspection, analytical procedures, and
4.Analytical procedures reperformance are moderately costly.
5.Inquiries of the client
6.Recalculation The three least-expensive types of evidence
are observation, inquiries of the client, and
7.Reperformance
recalculation.
8.Observation
Dr/Mostafa I. EL-Feky 4
 Compute common financial ratios
Short-term Debt-Paying Ability Liquidity Activity Ratios

Ability to Meet Long-term Debt Obligations

Dr/Mostafa I. EL-Feky 5
 Compute common financial ratios
Profitability Ratios

Dr/Mostafa I. EL-Feky 6
 End of
Chapter 05
Dr/Mostafa I. EL-Feky
 End of
Lecture 09
Dr/Mostafa I. EL-Feky
 With All My
Best Wishes
In Final
Exam
Dr/Mostafa I. EL-Feky 9