Audit Management

 Audit Evidence
 Audit Procedures
 Recording Audit Work Done

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 AUDIT EVIDENCE
Audit evidence refers to information or data that is use or collected by auditors
as part their audit works to conclude their opinion on whether or not financial
statements are prepared in all material respect and in accordance with the
applicable financial frameworks
Before auditors could make the conclusion on the financial statements as a
whole or any part, they need to make sure that the evidence they obtain is
sufficient with appropriate quality to make the conclusion. Sufficient and
appropriate audit evidence is important for the auditor to form audit opinion
The auditor throughout all of the audit stages including the planning stage,
execution stage, as well as conclusion stages obtains audit evidence. In addition,
to gather this evidence, the auditors use many different technologies and
procedures suitable for them.

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Types of audit evidence
Financial statements
Fixed Assets Register
Payrolls Listing
Banks Statements
Invoices
Receipts
And other documents use by businesses
Audit evidence could also be in the form of video, email, audio, and verbal.

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 Procedures to obtain audit evidence
Audit inquiry: Auditor inquires management on certain business transactions or
events on the purpose of obtaining an understanding or to confirm some related
assertion.
Audit observation: Auditor observes the way that certain controls related to
financial reporting perform.
Audit Inspection: Auditor inspect on certain documents or evidence that related
to financial transaction or event.
Analytical Procedure: the auditor to assess the transactions or amounts in the
financial statements through other financial and non-financial data normally uses
analytical procedure.
Recalculation: The auditor sometimes recalculates some depreciation expenses
that prepare by management.
Re performance: The auditor sometimes re-performs bank reconciliation that
prepares by the client.
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 Quality of audit evidence
The quality of audit evidence is very important to make sure that the conclusion
that is made by the auditor is correct. If the information is not strong or low quality,
the audit risk of making incorrect audit opinions are high.
The quality of audit evidence is dependent mainly on the form and source of the
evidence. Here is the detail:
External Source: The evidence that obtains directly from external parties like
customers, suppliers, or banks are more reliable than obtaining from clients. For
example, accounts receivable confirmations that obtain from client’s customers
are more reliable than the records prepared by clients.
Prepare by Auditor: The evidence that prepares by auditors themselves are more
reliable than the one that prepares by or obtains from the client. For example,
the bank reconciliation that prepares by the auditor is more reliable than the
bank reconciliation prepared by the accountant.
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Prepare by client: The level of reliability of evidence that obtains from
clients are depending on the reliability of client internal control.
Written form: The audit evidence that forms in writing is more reliable
than the one that forms in verbal. For example, management confirmation
in the form of email is more reliable than the confirmation by verbal.
Original Form: Original invoices that use to support the payments
transactions are more reliable than the copy invoices.

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The Use of Assertions in Obtaining Audit Evidence

Auditors should prepare audit procedures to confirm and verify the financial
statements’ assertion as part of their materiality assessment in the financial
statements. In addition, auditors could tailor the procedures to obtain the
audit evidence to support their verification and confirmation of financial
statements’ assertion.

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 AUDIT PROCEDURES
Audit procedures are the processes, technique, and methods that auditors perform to
obtain audit evidence that enables them to make a conclusion on the set audit objective
and express their opinion. Sometimes we call audit procedures as audit programs. These
two terms refer to the same thing.
Auditors normally prepare audit procedures at the planning stages once they identified
audit objectives, audit scope, audit approach, and audit risks
Audit procedures might be different from client to client, and period to period. This is
because internal control over financial reporting is different from one client to another and
the control might change from time to time.
The auditor might need to update audit procedures from time to time event thought current
financial statements had been audited by its firm or team.
Typically, there are five audit procedures that normally use by auditors to obtain audit
evidence. Those five audit procedures include Analytical review, inquiry, observation,
inspection, and recalculation.

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 Audit Procedures
Analytical review
Analytical review is not the procedure that is use to obtain audit evidence, but it is
the procedure used to assess the unusual transactions or events as the principle or
basic to perform other procedures.
For example, when auditor found there is unusual transactions or event as the result
of using analytical review, then the auditor will use other procedures that are
applicable to obtain evidence.
The analytical procedure could be used for the types of transactions or events that
occur regularly or have a connection with other transactions or events.

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Inquiry

Auditors inquire management to gather information and obtain an explanation on

the matter that is found by auditors. The inquiry is also one of the most important
audit procedures and it could be used in different stages.

For example, the auditor might inquire management at the planning stage and
the auditor could inquire management to confirm the consignment liabilities at
the end of the audit work.

Audit inquiry is used by the auditor to obtain the audit evidence and sometimes is
used to obtain an understanding of some nature of business in order to gain
enough knowledge to design and perform testing. However, information from
inquiry is sometimes hard to be used as audit evidence.

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Observation

Observation is one of the audit procedures that auditors use to obtain an understanding
and gather audit evidence mainly to the real process or the ways that clients have done
some specific business process. This kind of audit procedure is mainly to confirm the
process that the client told, physical confirmation, or some time used to obtain audit
evidence in order to make his or her own projection, which will be used for comparison
with the client figure.
For example, auditor joins client stock take at the year-end and observe whether the
way that they count are in the correct procedures or not.
In this procedure, the audit is not confirmed whether the client counts their inventories
correct or not, but it confirms whether clients counting procedure is correct or not is
one thing. Another thing is the auditor tries to confirm whether the counting has really
existed. However, in practice, sometimes the auditor is not only observing how the
client counts but they also jointly perform counting inventories.

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Inspection
Inspection refers to verification or vouching documents. This is one of the most
important and it can be 60% of audit work involve with the inspection of
documents.
The auditor might examine whether the invoice issued by the client is really
based on the goods that is received. In addition, the goods being received is
actually the one the company makes an order.
The auditor might also examine the payment voucher against the authority that
approves the payment vouchers.
The auditor might also inspect the supporting documents recording the
inventory’s movement during the year. This is including the documents related
to purchasing raw material.

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Recalculation
Recalculation is the type of audit procedure that is normally done by re-
performing the works performed by the client in the purpose of assessing if
there are any difference between the audit’s work and the client’s work.
For example, the auditor might re-perform depreciation calculation and assess if
there are any difference between auditor calculation and its client’s calculation.
The auditor might also perform the recalculation on monthly salary expenses
that is prepared by the payroll and finance department to ensure that the net
salaries that paid to the employee are correct.
Recalculation is the procedure that is used to confirm the accuracy of
transaction that involves calculation.

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Recording the work done

Audit working papers

Audit working papers are the documents which record audit evidence obtained
during the auditing assignment and investigations. They are the record of
various audit procedures performed, audit evidence obtained, allocation of work
between audit team members and are also referred to as the documents and
evidence that an auditor collects and retains with himself during the audit.
Audit working papers are used to support the audit work done to provide the
assurance that the audit was performed in accordance with the relevant
auditing standards.

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Purpose of Audit working papers

They document the planning, performance, and review of audit work.

They provide the principal support for audit communications such as
observations, conclusions, and the final report.
They facilitate third-party reviews and re-performance requirements.

They provide a basis for evaluating the internal audit activity's quality control
program

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 Features of good audit working papers

It should clearly state the audit objectives.

It should clearly state the period of the audit so that whoever picks it knows
when the audit was conducted.

It should state the full extent of the audit test. For example, how many items
were tested and how this number was determined

The working paper should clearly and objectively state the results of the test,
without bias, and based on the facts documented.

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The conclusions reached should be consistent with the results of the test and
should be able to withstand independent scrutiny.

The working paper should be clearly referenced so that it can be filed

appropriately and found easily when required at a later date.

It should be signed by the person who prepares it so that queries can be
directed to the appropriate person.

It should be signed and dated by any person who reviews it, in order to meet
the quality control requirements of the review

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 Audit files
Audit file refers to one or more folders or other storage media, in physical or
electronic form, containing the records that comprise the audit documentation for a
specific engagement. There are two types of audit files. These are current audit file
and permanent audit file.
Permanent audit file
A permanent audit file contains information which is of continuous interest and is
relevant in future audits. Information like articles of association, loan agreements,
leases, documents related to internal control of the entity, record of accounting
policies followed by the entity on a continuous basis, significant observations of
previous audits etc.
Documents in the permanent file are carried from year to year. They form the base
for planning the subsequent year’s audit. Most of the information in the permanent
file doesn’t change from one year to the next.
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Current audit file
A current audit file contains information regarding audit conducted for the
current period.
It includes information like financial statements and audit report of the entity,
trial balance and worksheets, records regarding internal control risk of an entity,
external confirmations received, queries of auditor and reply received from the
management etc.
Procurement audit files include information on procurement processes and
findings in relation to procurement actions carried out within the period under
consideration.

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 Recording the audit
The auditor must record and document the nature, timing, and extent of audit
procedures performed.
Recording refers to documentation in the form of working papers prepared or
obtained by the auditor and retained by him in connection with the performance
of his audit.

In documenting the nature, timing, and extent of audit procedures performed,

the auditor must record:
The identifying characteristics of the specific items or matters tested
Who performed the audit work and the date such work was completed?
Who reviewed the audit work and the date and extent of such review?

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Audit information security
During the procurement audit process, information gathered must be protected
as unauthorized access can cause damage to the auditee.
Securing the information involves
Protecting information from unauthorised access or disclosure. In other
words, maintaining confidentiality. For example, the contents of tenders
examined during the audit must be kept in confidence.
Ensuring that systems and information are complete and free from
unauthorised change or modification or maintaining some level of integrity.
iii. Ensuring that information and associated services are available to
authorised users when and where required or information availability.

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Organising records
Whatever system is maintained, procurement audit information and records
should be appropriately organised. A file structure should be designed to ensure
that every piece of information has a logical home and can be located quickly
and easily.
Procurement audit file structures will typically reflect audit programmes with
files for individual reviews and other more general documents such as those
generated by support functions.
Filing systems can be paper-based, electronic or a mixture of both. There are
many mechanisms for capturing data including scanning and downloading.
Irrespective of the means and mechanisms used to capture and store data, they
will need to be robust. Consistent procedures must be adopted to handle the
records in line with set policies

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Procurement audit information and records should be organised to ensure that:
Staff can work effectively and efficiently without having to waste time hunting for
information
Procurement auditors can find what they need quickly and easily or determine who
has the data.
New staff can learn to use the system quickly.
Any risks that information can be accidentally amended, deleted or that confidential
information can be accidentally disseminated are minimised.

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The audit work is conducted in an orderly, efficient and accountable manner.
Audit findings, conclusions and recommendations are fully documented and
supported.
Continuity is provided in the event of a disaster and Legislative and regulatory
requirements are met.
Records are relevant, reliable, authentic, complete and usable and are retained
only for as long as they are needed and disposed of in accordance with the
organisation’s information disposal rules, relevant regulations and legislation

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THANK YOU

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