1. Relevance of audit evidence
- Relevance refers to the ability of the evidence to assist the auditor in testing management‘s assertions or to test the audit objective;
- Relevance of audit evidence should be considered in relation to the overall audit objective of forming an opinion and reporting on the financial statements. To achieve this objective the auditor needs to obtain evidence to enable him to draw reasonable conclusions on various management assertions made in preparing the financial statements.
2. Reliability of audit evidence
The reliability of audit evidence refers to the credibility of the evidence. This credibility is influenced by its source; whether from internal sources or external sources and by its nature; whether visual, documentary or oral. Reliability of the
evidence depends on individual circumstances but we can make the following generalizations:
- Audit evidence from external sources e.g. a third party (e.g. a debtor) confirming amount owing to the company is more reliable than evidence generated internally;
- Audit evidence generated internally e.g. from accounting records is more reliable when the related accounting and internal controls are effective;
- Evidence obtained by the auditor himself is more reliable than that obtained from the entity;
- Evidence in the form of documents and written representations is more reliable than oral representations.
3. Sufficiency of audit evidence
- Sufficiency is the measure of the quantity of audit evidence;
- Sufficiency is therefore the question of how much information is needed to be able to conclude on the financial statements.
Wilfykil answered the question on February 21, 2019 at 09:30
- Explain the meaning of the "audit evidence"(Solved)
Explain the meaning of the "audit evidence"
Date posted: February 21, 2019. Answers (1)
- Explain the meaning of the following audit terms:
i. Tests of control.
ii. Substantive tests.(Solved)
Explain the meaning of the following audit terms:
i. Tests of control.
ii. Substantive tests.
Date posted: February 21, 2019. Answers (1)
- List six examples of key control questions that would be suitable for inclusion in an ICEQ for a wages accounting system.(Solved)
List six examples of key control questions that would be suitable for inclusion in an ICEQ for a wages accounting system.
Date posted: February 21, 2019. Answers (1)
- Explain how an Internal Control Evaluation Questionnaire (ICEQ) differs from an Internal Control Questionnaire (ICQ).(Solved)
Explain how an Internal Control Evaluation Questionnaire (ICEQ) differs from an Internal Control Questionnaire (ICQ).
Date posted: February 21, 2019. Answers (1)
- Give four merits of using a flowchart to record an accounting system.(Solved)
Give four merits of using a flowchart to record an accounting system.
Date posted: February 21, 2019. Answers (1)
- The auditing standard on subsequent events provide the basic principles and procedures as to the auditor‘s responsibilities and deal with:
i. Dating the auditor‘s report
ii. Audit...(Solved)
The auditing standard on subsequent events provide the basic principles and procedures as to the auditor‘s responsibilities and deal with:
i. Dating the auditor‘s report
ii. Audit procedures
iii. Events after the date of the audit report.
Required:
a) In the context of subsequent events, what is the significance of the data of the auditor‘s report?
b) Outline the audit procedures considered necessary between the balance sheet date and the date of the auditor‘s report.
c) Summarise the appropriate actions of the auditor regarding events after the date of the audit report.
Date posted: February 21, 2019. Answers (1)
- Specialists or experts are occasionally required by external auditors mainly in connection with the valuation assets and the determination of liabilities.(Solved)
Specialists or experts are occasionally required by external auditors mainly in connection with the valuation assets and the determination of liabilities.
Required:
a) The necessity for reliance on specialist.
b) The extent to which the specialist should be independent?
c) Competence of the specialist.
Date posted: February 21, 2019. Answers (1)
- Most errors in computer based accounting systems can be traced to faulty input. Controls over the completeness and validity of all inputs are vital. Control...(Solved)
Most errors in computer based accounting systems can be traced to faulty input. Controls over the completeness and validity of all inputs are vital. Control over data conversions, controls over rejections and their correction and reprocessing, batch controls and computer edit controls affect both completeness and validity
Required:
a) Explain the controls that can be established over completeness of input.
b) What controls can be established over validity?
c) Programmed edit checks are probably the most familiar input controls and certainly the most effective. Give examples of these controls bringing out clearly:
i. The name of the edit control.
ii. Description of the control.
iii. The objective of the control.
Date posted: February 21, 2019. Answers (1)
- Your firm audits Clean Paints Ltd. and you are planning the audit of stock and work in progress for the year ended 31 December 2000....(Solved)
Your firm audits Clean Paints Ltd. and you are planning the audit of stock and work in progress for the year ended 31 December 2000. Clean Paints Ltd. determines the value of stock in its financial statements by the year -end stocktake. There is no perpetual Stock Inventory System though stock is counted quarterly for the purposes of management accounting
Stock and work in progress is held at the warehouse which is next to the company‘s factory.
Required:
a) State the areas that you will expect the client‘s stocktaking instructions to cover.
b) Describe the work you will perform and the matters you will record at the stock-take attendance.
Date posted: February 21, 2019. Answers (1)
- During the course of an audit, the auditor attempts to obtain sufficient relevant and reliable evidence to provide the satisfaction that the financial records are...(Solved)
During the course of an audit, the auditor attempts to obtain sufficient relevant and reliable evidence to provide the satisfaction that the financial records are completed and accurate. One of the ways that the auditor obtains satisfaction is to select representative samples of transactions and balances for detailed testing, such samples being made using either statistical of non-statistical methods.
Required:
a) Describe the main factors which influence the auditor in determining the size of the sample he will use for his detailed testing.
b) Describe three areas where the judgment will be exercised by the auditor when using statistical sampling.
Date posted: February 21, 2019. Answers (1)
- Write in point form an audit programme to cover salary and wages of a small size firm.(Solved)
Write in point form an audit programme to cover salary and wages of a small size firm.
Date posted: February 21, 2019. Answers (1)
- Define the term audit programme.(Solved)
Define the term audit programme.
Date posted: February 21, 2019. Answers (1)
- Write brief notes on the following auditing techniques:
i. Inspection;
ii. Observation;
iii. Enquiry.(Solved)
Write brief notes on the following auditing techniques:
i. Inspection;
ii. Observation;
iii. Enquiry.
Date posted: February 21, 2019. Answers (1)
- The matter listed below are always included in the internal control of a firm. You are required to explain the purpose of each of the...(Solved)
The matter listed below are always included in the internal control of a firm. You are required to explain the purpose of each of the items listed as (a), (b) and (c) below. Indicate the compliance tests you would carry out in order to ensure that the
intended controls were operating properly.
a) A requirement that mail is opened by two responsible employees who must promptly make listings of all receipts.
b) A rule that a fixed asset register must be maintained and updated promptly.
c) A requirement that a bank reconciliation statement is prepared on monthly basis.
Date posted: February 21, 2019. Answers (1)
- Working papers provide the audit evidence. They can be categorized into:
i. Auditors‘ prepared working papers.
ii. Client‘s schedules used as working papers.
iii. Audit programmes.
Working papers are...(Solved)
Working papers provide the audit evidence. They can be categorized into:
i. Auditors‘ prepared working papers.
ii. Client‘s schedules used as working papers.
iii. Audit programmes.
Working papers are then organized into files usually referred to as either current files of permanent files.
Required:
a) What details should each working paper which is prepared by an auditor indicate?
b) What details should each client schedule used as a working paper indicate?
c) What details should an audit programme indicate?
d) With appropriate illustrations, differentiate the use and contents of a permanent file from a current file and write brief notes on the evidence that is provided by working papers.
Date posted: February 21, 2019. Answers (1)
- Printa Limited is a large printing company, which has an on-line computer accounting system. The system is based around a central main frame computer, with...(Solved)
Printa Limited is a large printing company, which has an on-line computer accounting system. The system is based around a central main frame computer, with terminals serving individual departments. As part of the interim audit work, you have been asked to carry out a preliminary evaluation of ;
- The effectiveness of the computer controls over sales and debtors
Required:
Set out the points, which you would raise, in your preliminary evaluation of controls over sales and debtors
Date posted: February 21, 2019. Answers (1)
- It has often been said that the auditors‘ report is the formal result of all his efforts. This being the case, it is very important...(Solved)
It has often been said that the auditors‘ report is the formal result of all his efforts. This being the case, it is very important that the reader well understands the meaning of the Audit Report, particularly where the auditor wishes to qualify his opinion on the financial statements.
Required:
a) Under statutory provision, what are the main contents of the auditors‘ report?
b) Explain how the international standards on auditing attempt to ensure that the report of the auditors is clearly understood.
c) Describe clearly the circumstances in which an adverse opinion and a disclaimer of opinion would be appropriate and give two examples, one each, to illustrate your answer. (A full audit opinion is not required).
Date posted: February 21, 2019. Answers (1)
- The cashier of a firm who also acts a bookkeeper has been suspected of dishonesty. The books have not been audited for the last nine...(Solved)
The cashier of a firm who also acts a bookkeeper has been suspected of dishonesty. The books have not been audited for the last nine months. You have been asked to investigate the records to establish whether the cashier has committed a fraud
Required:
Outline how you would proceed with the investigation
Date posted: February 21, 2019. Answers (1)
- You are an audit senior in a firm of practicing accountants and your manager has gone out for an urgent meeting with a partner. Mr....(Solved)
You are an audit senior in a firm of practicing accountants and your manager has gone out for an urgent meeting with a partner. Mr. Charo, a manager with Charo and Company, a wholesale business has come to your office with a request that your firm becomes their auditors
Required:
a) Describe to Mr. Charo the legal, ethical and practical factors your firm would consider before accepting the appointment.
b) Explain to Mr. Charo the qualification and disqualification of an accounting firm under the provisions of the Companies Act to become auditors.
Date posted: February 21, 2019. Answers (1)
- Explain the following terms:
(a) Materiality;
(b) The duty of confidentiality;
(c) Professional indemnity insurance;
(d) Peer review;
(e) Quality Control(Solved)
Explain the following terms:
(a) Materiality;
(b) The duty of confidentiality;
(c) Professional indemnity insurance;
(d) Peer review;
(e) Quality Control
Date posted: February 21, 2019. Answers (1)