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sufficient appropriate audit evidence auditing theory
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Sufficient appropriate evidenceSufficient appropriate evidence
Things to considerThings to consider
Professional Skepticism Sufficiency and Appropriateness of
Evidence Cost-Benefit Considerations Materiality Assurance Engagement Risk Quantity and Quality of available evidence
Professional skepticismProfessional skepticism
An attitude of professional skepticism means the practitioner makes a critical assessment, with a questioning mind, of the validity of evidence obtained and is alert to evidence that contradicts or brings into question the reliability of documents or representations by the responsible party.
The auditor must always conduct the audit with a questioning mind.
Sufficiency and Sufficiency and AppropriatenessAppropriateness
Sufficiency Quantity The greater the
RISK, the higher the QUANTITY of evidence
Appropriateness Quality The better the
quality, the lesser evidence is needed
Relevance + Reliability
RELIABILITY:External vs internal documentsIf internal, controls should be effectiveDirect vs indirect / by inferenceDocumentary vs oral/verbalOriginal vs photocopy/facsimile
Sufficiency and Sufficiency and AppropriatenessAppropriateness
Cost-benefit considerationsCost-benefit considerations
REMEMBER: The matter of difficulty or expense involved is NOT in itself a valid basis for omitting an evidence-gathering procedure for which there is no alternative.
MaterialityMateriality
Determined by practitioner’s professional judgment
Assurance Engagement RiskAssurance Engagement Risk
This is the risk that the practitioner expresses an INAPPROPRIATE conclusion when the subject matter information is materially misstated.
The more extensive the evidence-gathering procedures, the lower the chances of an inappropriate conclusion, and the higher the level of assurance that a practitioner can provide.
Assurance engagement risk consists of the following:
I. 1. INHERENT RISK- Susceptibility of the subject matter information
to a material misstatement, assuming NO related controls exist.
2. CONTROL RISK- Risk that a material misstatement will
NOT be prevented or detected or corrected in a timely basis.
II. DETECTION RISK- risk that the practitioner will not detect a material misstatement that exists.
Assurance Engagement RiskAssurance Engagement Risk
Quantity and Quality of Quantity and Quality of Available EvidenceAvailable Evidence
Ordinarily, available evidence will be PERSUASIVE rather than CONCLUSIVE