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Wiley CPAexcel Exam Review 2014 Focus Notes: Auditing and Attestation by Ray Whittington

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Focus on: Responding to Risk Assessment: Evidence Accumulation and Evaluation—Module 4

SUFFICIENT APPROPRIATE AUDIT EVIDENCE

Auditors must obtain sufficient appropriate audit evidence as a basis for their opinion.

Sufficient audit evidence—Relates to the quantity of evidence necessary to support the opinion

  • Auditors obtain persuasive audit evidence, not totally convincing audit evidence.
  • Cost of obtaining evidence should not exceed expected benefit.
  • The ultimate decision on sufficient audit evidence is a matter of the auditor’s judgment.

Appropriate audit evidence—Evidence that is relevant and reliable.

Reliability

While generalizations are difficult and subject to exceptions, audit evidence is ordinarily more reliable when it is

  • Obtained from knowledgeable independent sources outside the client company rather than nonindependent sources
  • Generated internally through a system of effective controls rather than ineffective controls
  • Obtained directly by the auditor rather than indirectly or by inference (e.g., observation of application of a control is more reliable than an inquiry to the client concerning the control)
  • Documentary in form (paper, electronic, or other) rather than an oral representation
  • Provided by original documents rather than copies or facsimiles

Nature, Timing, and Extent of Audit Evidence

Audit risk model used to determine acceptable level of detection risk

  • Understanding of design of internal control used to assess level of control risk
  • Assessed level of control ...

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