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Chapter 8 - Audit Evidence and Assurance.docx

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ACCT 3280

Chapter 8Audit Evidence and Assurance Audit Techniques and Related Types of Evidence Audit Techniques Types of Evidence Examples 1 RecalculationReperformance Auditors calculationsRecompute amortization expenseRecompute price x quantity on invoicesRecompute sales tax as a percentage of total sale on an invoice 2 Observation Auditors observationsObserve data entry proceduresObserve petty cash control 3 Confirmation Statements by independentObtain written confirmation of parties AR balance and detail from customerObtain written confirmation of loan amount interest collateral and payment dates from lender 4 Enquiry Statements by auditee personnelEnquire about frequency of bank reconciliation proceduresEnquire about which employee totals cash receipts and deposits them to the bank 5 InspectionDocuments prepared byRead terms of lease agreement independent partiesreview inventory varianceDocuments prepared by the analysis report prepared by auditee production deptPhysical inspection of tangibleauditors test counts of physical assets inventory quantities on hand at year end 6 Analysis Data interrelationshipsAnalyze monthly gross margin by product lineCompare inventory turnover rate to previous yearsRecalculationReperformanceCan serve the objectives of both existence and valuation eg depreciation pension liabilities actuarial reserves bad debt reservesAlso used to provide evidence of valuation for all other financial dataProvides highly reliable evidence of mathematical accuracy but the product is only as good as the componentsAuditor must audit every significant part of the original computation
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