Question

You were recently hired by the CPA firm of Honson & Hansen. Within two weeks, you were sent to the first- year staff training course.
A. How is audit evidence defined?
B. How does audit evidence relate to assertions and to the audit report?
C. What characteristics of evidence should an auditor be concerned with when searching for and evaluating audit evidence?

Answer 1

Answer:

A. Obtained by the following :

1. Risk Assessment Procedures
2. Test of Controls
3. Substantive Procedures
4. Professional Skepticism

B. Audit Evidence and Audit Report

Audit Evidence support assertions made by management in the Financial Reports.

C. Characteristics of Audit Evidence

1. Sufficient and
2. Appropriate

Explanation:

Audit Evidence is evidence obtained by auditors during a financial audit. Audit evidence is used by management to support their assertions in the Financial statements.

An example of audit evidence is an Invoice. The invoice supports the value of sales on the Income Statement, the valuation of Accounts Receivables on the Statement of Financial Position.

Audit evidence that is acceptable must be Sufficient and Appropriate. Invoices in the example above are only sufficient and appropriate if they contain signatures and supported by other documents from third parties.