Modern Auditing:

Assurance Services and the Integrity

of Financial Reporting, 8th Edition

William C. Boynton
California Polytechnic State
University at San Luis Obispo
Raymond N. Johnson
Portland State University

Chapter 6 – Audit Evidence

Chapter 6 Overview
 Audit Evidence Defined
• Audit Evidence
– Accounting records
– Corroborating information

• Accounting Records

• Other Information
 Assertions and Specific Audit
Objectives
• Five Management Assertions (GAAS)
– Existence and Occurrence

– Completeness

– Rights and Obligations

– Valuation or Allocation

– Presentation and Disclosure

 Assertions and Specific Audit
Objectives
• Transaction Class Audit Objectives
– Occurrence

– Completeness

– Accuracy

– Cutoff

– Classification
 Assertions and Specific Audit
Objectives
• Account Balance Audit Objectives
– Existence

– Completeness

– Rights and Obligations

– Valuation and Allocation

 Assertions and Specific Audit
Objectives
• Disclosure Audit Objectives
– Occurrence and Rights and Obligations

– Completeness

– Understandability

– Accuracy and Valuation

Sufficiency of Audit Evidence
• Materiality

• Risk of Material Misstatement

• Size of Population

• Characteristics of Population
Sufficiency of Audit Evidence
 Competency of Evidence
• Relevance of Audit Evidence

• Reliability of Audit Evidence

• Professional Judgment
Reliability of Audit Evidence
Reliability of Documentary
Evidence
 Study Break
1. Which of the following is not a
transaction class audit objective?
A. Existence
B. Occurrence
C. Accuracy
D. Cutoff

A. Existence
 Study Break
2. Which of the following is not an
account balance audit objective?
A. Existence
B. Completeness
C. Classification
D. Rights and Obligations

C. Classification
 Study Break
3. All of the following affect the sufficiency
of audit evidence except:
A. Materiality
B. Risk of Material Misstatement
C. Relevance of Audit Evidence
D. Size and Characteristics of the
Population

C. Relevance of Audit Evidence

 Objectives of Audit Procedures

• Obtain an understanding of the

entity and its environment

• Test operating effectiveness of

controls

• Support assertion or detect material

misstatements
 Types of Audit Procedures
• Inspection of Documents or Records
– Vouching
– Tracing
 Types of Audit Procedures
• Inspection of Tangible Assets

• Observation

• Inquiry

• Confirmation
 Types of Audit Procedures
• Recalculation

• Reperformance

• Analytical Procedures

• Computer-Assisted Audit Techniques

 Four Decisions About Audit
Procedures
• Staffing and Supervising the Audit

• Nature of Audit Procedures

• Timing of Audit Procedures

• Extent of Audit Procedures

 Documenting Audit Decisions
and Audit Evidence
• Audit Program
– Recommended by GAAS
– Documents decisions

• Working Papers
– Documents audit decisions
– Documents audit evidence obtained
 Types of Working Papers
• Working Trial Balance

• Schedules and Analyses

• Audit Memoranda and Corroborating

Information

• Adjusting and Reclassifying Entries

 Preparing Working Papers
• Heading

• Index Number

• Cross-Referencing

• Tick Marks

• Signatures and Dates

Working Paper Example
 Reviewing Working Papers
• Scope of Work Performed

• Evidence and Findings Obtained

• Audit Judgment Exercised

• Conclusions Reached by the Auditor

 Working Paper Files
• Permanent File

• Current File

• Ownership and Custody

 Study Break
4. ________ involves selecting entries in the
accounting records and inspecting the
documentation that served as the basis
for the entries.
A. Vouching
B. Tracing
C. Observation
D. Inquiry

A. Vouching
 Study Break
5. These decisions involve determining
whether the procedures will be
performed at an interim date or at
fiscal year-end.
A. Staffing and Supervision
B. Nature of Audit Tests
C. Timing of Audit Tests
D. Extent of Audit Tests

C. Timing of Audit Tests

 Study Break
6. This working paper file contains data
that are expected to be useful to the
auditor in future engagements with the
client.
A. Permanent file
B. Current file
C. Daily file
D. Annual file

A. Permanent file