ISA 500 Audit Evidence
Encyclopedia
Editing ISA 500 Audit Evidence is one of the International Standards on Auditing
. It serves to expect the auditor is to obtain audit evidence
from an appropriate mix of tests of control systems and substantive tests of transaction and balances.
It requests the auditor to obtain 'sufficient' and 'appropriate' audit evidence in order to draw reasonable conclusions on which to base the audit opinion.
The auditor considers reliability of audit evidence collected. For instance, audit evidence is more reliable when it exists in documentary form rather than subsequent oral representation of the matters. Auditors consider reliability of information but involve little authentication of evidence.
risks of material misstatement and the design and performance of further audit procedures.
The auditor uses assertions in assessing risks by considering potential misstatements that may occur, and thereby designing audit procedures that are responsive to the particular risks.
Assertions used by the auditor fall into the following categories:
(a) Assertions about classes of transactions and events for the period ended:
(b) Assertions about account balances at the period end:
(c) Assertions about presentation and disclosure:
The assertions are not individually assessed but quite often at the same time. For example, to ensure completeness of electricity expense, the auditor ensures the 12 months of payments were booked. Since the client may record the bills paid on a cash basis, electricity expense of a month of previous basis period might be entered in the current year. Electricity expense of last month of current year might be recorded next year.If the monthly fluctuation is immaterial, the auditor always ignore the cut-off issue. In case where electricity is a material expense, the auditor considers preparing adjustments for year ended cut-off purpose so that the profit or loss would not be materially misstated.
Methods or techniques of audit evidence gathering are classified in 6 categories:
For example, the auditor perform vouching to ensure such electricity expense occurred and whether correct amount was booked. The auditor compares electricity expense of current and last year to see whether there are fluctuations. If there are huge fluctuations, the auditor may examine electricity together with rental expense, water expense to find out reasons.
International Standards on Auditing
International Standards on Auditing are professional standards for the performance of financial audit of financial information. These standards are issued by International Federation of Accountants through the International Auditing and Assurance Standards Board .-Respective responsibilities:*ISA...
. It serves to expect the auditor is to obtain audit evidence
Audit evidence
Audit evidence is evidence obtained during a financial audit and recorded in the audit working papers.* In the audit engagement acceptance or reappointment stage, audit evidence is the information that the auditor is to consider for the appointment...
from an appropriate mix of tests of control systems and substantive tests of transaction and balances.
It requests the auditor to obtain 'sufficient' and 'appropriate' audit evidence in order to draw reasonable conclusions on which to base the audit opinion.
The auditor considers reliability of audit evidence collected. For instance, audit evidence is more reliable when it exists in documentary form rather than subsequent oral representation of the matters. Auditors consider reliability of information but involve little authentication of evidence.
Financial statement assertions
It is stated in ISA 500 that the auditor should use assertions for classes of transactions, account balances, and presentation and disclosures in sufficient detail to form a basis for the assessment ofrisks of material misstatement and the design and performance of further audit procedures.
The auditor uses assertions in assessing risks by considering potential misstatements that may occur, and thereby designing audit procedures that are responsive to the particular risks.
Assertions used by the auditor fall into the following categories:
(a) Assertions about classes of transactions and events for the period ended:
- Occurrence
- Completeness
- Accuracy
- Cut-off
- Classification
(b) Assertions about account balances at the period end:
- Existence
- Rights and obligations
- Completeness
- Valuation and allocation
(c) Assertions about presentation and disclosure:
- Occurrence
- Completeness
- Classification and understandability
- Accuracy and valuation
The assertions are not individually assessed but quite often at the same time. For example, to ensure completeness of electricity expense, the auditor ensures the 12 months of payments were booked. Since the client may record the bills paid on a cash basis, electricity expense of a month of previous basis period might be entered in the current year. Electricity expense of last month of current year might be recorded next year.If the monthly fluctuation is immaterial, the auditor always ignore the cut-off issue. In case where electricity is a material expense, the auditor considers preparing adjustments for year ended cut-off purpose so that the profit or loss would not be materially misstated.
Methods or techniques of audit evidence gathering are classified in 6 categories:
- InspectionInspectionAn inspection is, most generally, an organized examination or formal evaluation exercise. In engineering activities inspection involves the measurements, tests, and gauges applied to certain characteristics in regard to an object or activity...
- ObservationObservationObservation is either an activity of a living being, such as a human, consisting of receiving knowledge of the outside world through the senses, or the recording of data using scientific instruments. The term may also refer to any data collected during this activity...
- InquiryInquiryAn inquiry is any process that has the aim of augmenting knowledge, resolving doubt, or solving a problem. A theory of inquiry is an account of the various types of inquiry and a treatment of the ways that each type of inquiry achieves its aim.-Deduction:...
- Confirmation (audit)
- Re-performance
- Analytical proceduresAnalytical ProceduresAnalytical procedures are one of many financial audit processes which help an auditor understand the client's business and changes in the business, and to identify potential risk areas to plan other audit procedures....
For example, the auditor perform vouching to ensure such electricity expense occurred and whether correct amount was booked. The auditor compares electricity expense of current and last year to see whether there are fluctuations. If there are huge fluctuations, the auditor may examine electricity together with rental expense, water expense to find out reasons.