文档介绍：CHAPTER 5
AUDIT EVIDENCE
Objective :
l   what’s the audit risk? What’s the audit evidence? What’s the relationship between them?
l    Describe the types of audit risk
l    Learning to calculate the audit risk
l  know the types of evidence and learn to explain them
l what are the audit procedures and their nature, timing, extent and cost?
l  How to analysis audit procedures and judge their nature, timing, extent ?
Terms:
Audit petence
Control mon-size financial statements
Cross-sectional analysis
Cutoff
Detection risk
Electronic data interchange
Evidential matter
Horizontal analysis
Inherent risk
Material
Related party transaction
Representation letter
Specialist
Substantive tests
Sufficient
Vertical analysis
5-1 THE RELATIONSHIP OF AUDIT RISK TO EVIDENCE
l      What’s the audit risk?
l     How to reduce the audit risk?
1.       Financial Statement Assertions
(1)    existence or occurrence
(2)    completeness
(3)    rights and obligations
(4)    valuation or allocation
(5) presentation and disclosure
2.   Audit Risk at the Assertion Level
(1)    inherent risk -------the possibility of a material misstatement of an assertion before considering the client’s internal control
(2)    control risk------the risk that a material misstatement will not be prevented or detected on a timely basis by the client’s internal control
(3) detection risk ------the risk that the auditors will fail to detect the misstatement with their audit procedures
3.       Audit Risk Illustrated
Look at figure 5—1
4.       Measuring Audit Risk
AR=IR x CR x DR
5-2 AUDIT EVIDENCE
matter-------any information that corroborates or refutes an assertion.
Note: evidence must be both relevant and valid (1-3)
2.    Types of Evidence
(1)    physical evidence
(2)    third-party representations
a.       confirmations
b.       lawyer’s letters
c. reports of specialist
3. documentary evidence
a. documentary evidence created outside the anization a