Audit evidence questions

AUDIT EVIDENCE QUESTIONS

Richard Clarke Academy aCOWtancy.com

AUDIT EVIDENCE QUESTIONS

QUESTION 1
How much evidence
should be
collected?

Richard Clarke Academy aCOWtancy.com

AUDIT EVIDENCE QUESTIONS

ANSWER
‣
SUFFICIENT & APPROPRIATE
‣
to draw a reasonable conclusion
‣
on which to base an opinion

Richard Clarke Academy aCOWtancy.com

AUDIT EVIDENCE QUESTIONS

QUESTION 2
What will increase
the reliability of
evidence?

Richard Clarke Academy aCOWtancy.com

AUDIT EVIDENCE QUESTIONS

ANSWER
‣
EFFECTIVE CONTROLS
‣
External rather than internal

Richard Clarke Academy aCOWtancy.com

AUDIT EVIDENCE QUESTIONS

QUESTION 3
Specifically why
gather evidence?

Richard Clarke Academy aCOWtancy.com

AUDIT EVIDENCE QUESTIONS

ANSWER
‣
UNDERSTAND THE ENTITY
‣
Assess controls
‣
Detect misstatements

Richard Clarke Academy aCOWtancy.com

AUDIT EVIDENCE QUESTIONS

QUESTION 4
What are the 7
ways of gathering
evidence?

Richard Clarke Academy aCOWtancy.com

AUDIT EVIDENCE QUESTIONS

ANSWER
‣
Inspection
‣
Observation
‣
External conﬁrmation
‣
Re-calculation
‣
Re-performance
‣
Analytical Procedures
‣
Inquiry
Richard Clarke Academy aCOWtancy.com

AUDIT EVIDENCE QUESTIONS

QUESTION 5
What are analytical
procedures?

Richard Clarke Academy aCOWtancy.com

AUDIT EVIDENCE QUESTIONS

ANSWER
‣
Analysis of trends & expectations
‣
Expected ratios

Richard Clarke Academy aCOWtancy.com

AUDIT EVIDENCE QUESTIONS

QUESTION 6
Are analytical
procedures enough
on their own?

Richard Clarke Academy aCOWtancy.com

AUDIT EVIDENCE QUESTIONS

ANSWER
‣
No
‣
Must corroborate other evidence

Richard Clarke Academy aCOWtancy.com

AUDIT EVIDENCE QUESTIONS

QUESTION 7
When are analytical
procedures
compulsory?

Richard Clarke Academy aCOWtancy.com

AUDIT EVIDENCE QUESTIONS

ANSWER
‣
Planning (risk assessment)
‣
Review

Richard Clarke Academy aCOWtancy.com

AUDIT EVIDENCE QUESTIONS

QUESTION 8
At the planning
stage what
limitations may
there be with AP?
Richard Clarke Academy aCOWtancy.com

AUDIT EVIDENCE QUESTIONS

ANSWER
‣
Prior to year end often
‣
Draft or projected ﬁgures

Richard Clarke Academy aCOWtancy.com

AUDIT EVIDENCE QUESTIONS

QUESTION 9
Do management
representations
offer high or low
reliability?
Richard Clarke Academy aCOWtancy.com

AUDIT EVIDENCE QUESTIONS

ANSWER
‣
Low
‣
Only use if no other evidence

Richard Clarke Academy aCOWtancy.com

AUDIT EVIDENCE QUESTIONS

QUESTION 10
What should we
definitely get
management
representations on?
Richard Clarke Academy aCOWtancy.com

AUDIT EVIDENCE QUESTIONS

ANSWER
‣
They approve FS
‣
Controls are in place
‣
Misstatements are immaterial

Richard Clarke Academy aCOWtancy.com

AUDIT EVIDENCE QUESTIONS

QUESTION 11
When using experts
who has
responsibility for
their work?
Richard Clarke Academy aCOWtancy.com

AUDIT EVIDENCE QUESTIONS

ANSWER
‣
External Auditor still

Richard Clarke Academy aCOWtancy.com

AUDIT EVIDENCE QUESTIONS

QUESTION 12
What must we
consider when
using the expert?

Richard Clarke Academy aCOWtancy.com

AUDIT EVIDENCE QUESTIONS

ANSWER
‣
Competence
‣
Objectivity
‣
Scope
‣
Evidence

Richard Clarke Academy aCOWtancy.com

AUDIT EVIDENCE QUESTIONS

QUESTION 13
What must be
agreed in writing
before using the
expert?
Richard Clarke Academy aCOWtancy.com

AUDIT EVIDENCE QUESTIONS

ANSWER
‣
Objective
‣
Scope
‣
Responsibilities
‣
Communication
‣
Conﬁdentiality

Richard Clarke Academy aCOWtancy.com

AUDIT EVIDENCE QUESTIONS

QUESTION 14
What must be
considered when
the experts work is
given to us?
Richard Clarke Academy aCOWtancy.com

AUDIT EVIDENCE QUESTIONS

ANSWER
‣
Consistency with other evidence
‣
Assumptions used
‣
Source data and methods used

Richard Clarke Academy aCOWtancy.com

AUDIT EVIDENCE QUESTIONS

QUESTION 15
Is there a reference
to the expert’s
work in the audit
report?
Richard Clarke Academy aCOWtancy.com

AUDIT EVIDENCE QUESTIONS

ANSWER

‣
No

Richard Clarke Academy aCOWtancy.com

AUDIT EVIDENCE QUESTIONS

QUESTION 16
When considering
using internal
auditor’s work -
what must you
know about them?
Richard Clarke Academy aCOWtancy.com

AUDIT EVIDENCE QUESTIONS

ANSWER
‣
Status in company
‣
Scope of their work
‣
Competence
‣
Due professional care

Richard Clarke Academy aCOWtancy.com

AUDIT EVIDENCE QUESTIONS

QUESTION 17
How can the
internal audit and
their work be
reviewed?
Richard Clarke Academy aCOWtancy.com

AUDIT EVIDENCE QUESTIONS

ANSWER

‣
Have they been trained?
‣
Have they been supervised?
‣
Sufficient, appropriate evidence?

Richard Clarke Academy aCOWtancy.com

AUDIT EVIDENCE QUESTIONS

QUESTION 18
Another auditor
should be able to
do what by looking
at your working
papers?
Richard Clarke Academy aCOWtancy.com

AUDIT EVIDENCE QUESTIONS

ANSWER

‣
Re-perform the work

Richard Clarke Academy aCOWtancy.com

AUDIT EVIDENCE QUESTIONS

QUESTION 19
How can you check
if all related parties
have been
identified?
Richard Clarke Academy aCOWtancy.com

AUDIT EVIDENCE QUESTIONS

ANSWER
‣
Check management procedures
‣
Inquire of management
‣
Shareholder records
‣
Tax returns
‣
Minutes
‣
Ask other auditors

Richard Clarke Academy aCOWtancy.com

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