EVIDENCE, DOCUMENTATION, AND AUDIT PROGRAMS

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Presentation transcript:

EVIDENCE, DOCUMENTATION, AND AUDIT PROGRAMS CPA JUAN M. GARCIA MERCED EVIDENCE, DOCUMENTATION, AND AUDIT PROGRAMS JUAN M. GARCIA MERCED 7/23/2019 CPA JUAN M. GARCIA MERCED

3RD STANDARD OF FIELD WORK Sufficient competent evidential matter is to be obtained trough inspection, observation, inquiries, and confirmations to afford a reasonable basis for an opinion regarding the financial statements under audit. 7/23/2019 CPA JUAN M. GARCIA MERCED

CPA JUAN M. GARCIA MERCED AUDIT EVIDENCE Any information that corroborates or refutes an assertion. Must be: Competent – relevant and valid (Quality) Sufficient – Quantity There is an inverse relationship between competent and sufficiency. 7/23/2019 CPA JUAN M. GARCIA MERCED

CPA JUAN M. GARCIA MERCED TYPES OF EVIDENCE Physical evidence- provides evidence about existence but needs to be supplemented by other types of evidence. 7/23/2019 CPA JUAN M. GARCIA MERCED

CPA JUAN M. GARCIA MERCED TYPES OF EVIDENCE 2. Third party representations Confirmations – effective at providing evidence about existence. Lawyers’ Letters – primary source of evidence regarding lawsuits and litigation. Reports of specialists 7/23/2019 CPA JUAN M. GARCIA MERCED

CPA JUAN M. GARCIA MERCED TYPES OF EVIDENCE Documents Created outside the client and transmitted directly to the auditors Created outside the client and held by the client Created and held within the client 4. Computations 5. Analytical reviews 6. Oral and written client representation 7. Accounting records 7/23/2019 CPA JUAN M. GARCIA MERCED

CPA JUAN M. GARCIA MERCED AUDIT PROCEDURES Timing Nature Extent Cost 7/23/2019 CPA JUAN M. GARCIA MERCED

CPA JUAN M. GARCIA MERCED WORKING PAPERS Functions: Assignment and coordinating audit work Supervising and reviewing the work of assistants Supporting the report Complying with the stds of field work Planning and conducting the next audit 7/23/2019 CPA JUAN M. GARCIA MERCED

CPA JUAN M. GARCIA MERCED OTHER CONSIDERATIONS Confidential nature Ownership of working papers Auditors’ liability Differences of opinion 7/23/2019 CPA JUAN M. GARCIA MERCED

TYPES OF WORKING PAPERS Administrative working papers Audit plan Audit program Time budget Internal control documentation Working trial balance Lead schedules Adjusting journal entries 7/23/2019 CPA JUAN M. GARCIA MERCED

Types of Working Papers Supporting schedules Analysis of a ledger account Corroborating documents 7/23/2019 CPA JUAN M. GARCIA MERCED

CPA JUAN M. GARCIA MERCED ORGANIZATION Current files – one file per year Permanent file – preserves working papers that show relatively few or no changes Articles of incorporation Bylaws Leases Pension plans, labor contracts Tax returns 7/23/2019 CPA JUAN M. GARCIA MERCED

AUDIT PLAN (AUDIT PROGRAM) Detailed listing of the audit procedures to be performed in the course of the audit (nature, timing, and extent). Objectives: Design to accomplish audit objectives with respect to each major account in the financial statements. These objectives are: Existence or occurrence Completeness Rights and obligations Valuation or allocation Presentation and disclosure Accuracy Cutoff Classification 7/23/2019 CPA JUAN M. GARCIA MERCED

CPA JUAN M. GARCIA MERCED EXISTENCE Existence of assets usually may be verified by physical observation or inspection. If assets are in custody of others, the auditor should confirm the existence For items without physical substance, the existence may be verified by confirming with outsiders 7/23/2019 CPA JUAN M. GARCIA MERCED

RIGHTS AND OBLIGATIONS To verify the client’s rights, the auditors must inspect documentary evidence To verify obligations, the auditors must inspect contracts, confirmations, and communications with debtors to account for contingencies and commitments 7/23/2019 CPA JUAN M. GARCIA MERCED

CPA JUAN M. GARCIA MERCED Completeness Total amount Trace total to general ledger Foot and crossfoot as necessary “Window dressing” 7/23/2019 CPA JUAN M. GARCIA MERCED

CPA JUAN M. GARCIA MERCED Valuation Valuation is appropriate in the circumstances. Vouch to source documents and other documentary evidence. Evaluate the reasonableness of the cost allocation program and verify the computation of the remaining unallocated cost. 7/23/2019 CPA JUAN M. GARCIA MERCED

CPA JUAN M. GARCIA MERCED Accuracy Financial and other information are disclosed fairly and at appropriate amounts 7/23/2019 CPA JUAN M. GARCIA MERCED

Classification and understandability Financial information is appropriately presented, described, and clearly expressed 7/23/2019 CPA JUAN M. GARCIA MERCED

CPA JUAN M. GARCIA MERCED Cutoff Transactions and events have been recorded in the correct accounting period 7/23/2019 CPA JUAN M. GARCIA MERCED

CPA JUAN M. GARCIA MERCED Questions?!?!?!?!?!?!?!? 7/23/2019 CPA JUAN M. GARCIA MERCED