Which statement is correct regarding the sufficiency and appropriateness of audit evidence?
Which statement is correct regarding the sufficiency and appropriateness of audit evidence? a. Sufficiency is the measure of the quality of audit evidence. transactions, account balances, and disclosures and related assertions.
What are the requirements of audit evidence?
The audit evidence generated by the planned audit procedures should be sufficient and appropriate to support and corroborate, or to contradict, the management’s assertions in respect of specific classes of transactions, account balances or disclosures in the financial statements.
How can auditors ensure the evidence they collect is sufficient appropriate relevant and reliable?
To ensure the sufficiency of audit evidence, auditors must obtain and evaluate audit evidence using various audit procedures. These procedures include analytical procedures, confirmation, inquiry, inspection, observation, recalculation, and re-performance.
What is the purpose of audit evidence?
Auditing evidence is the information collected by an auditor to ascertain the accuracy and compliance of a company’s financial statements. The auditing evidence is meant to support the company’s claims made in the financial statements and their adherence to the accounting laws of their legal jurisdiction.
What is the appropriate role of internal auditing in an Organisation?
The role of internal audit is to provide independent assurance that an organisation’s risk management, governance and internal control processes are operating effectively. … We must be independent from the operations we evaluate and report to the highest level in an organisation: senior managers and governors.
Which audit evidence is more reliable?
Audit evidence is more reliable when it exists in documentary form, whether paper, electronic, or other medium (for example, a contempo- raneously written record of a meeting is more reliable than a subse- quent oral representation of the matters discussed). audit evidence provided by photocopies or facsimiles.
Why is the appropriateness of audit evidence obtained by the auditor important in forming an audit opinion?
Appropriateness is a measure of the quality of evidence. Audit evidence that is considered appropriate contains the characteristics of relevance and reliability. Relevant evidence refers to the assertion being tested. … an assessment of whether the test indicates the possibility of material misstatement in the account.
Why is reliability of evidence important in auditing?
Audit evidence is critical to the audit and internal controls process because it allows executives of public companies to trust the opinions of their auditors. … An auditor has to collect all the possible audit evidence to establish the truthfulness of the system to record these transactions.
Which is generally the most reliable form of evidence?
Confirmation of accounts receivable balance
Answer: A. Confirmation of accounts receivable balance. Confirmation of accounts receivable balance is considered to be the most reliable because it…
Why does the auditor generally consider evidence supplied from sources outside the entity as more reliable than evidence supplied by the client itself?
The quantity of evidence obtained determines its sufficiency. Evidence obtained from a source outside the entity is more reliable than that obtained from within. When a client’ s internal controls are effective, evidence obtained is more reliable than when they are weak.
What does a qualified audit opinion mean?
A qualified opinion indicates that there was either a scope limitation, an issue discovered in the audit of the financials that were not pervasive, or an inadequate footnote disclosure. A qualified opinion is an auditor’s opinion that the financials are fairly presented, with the exception of a specified area.
How do you determine pervasiveness?
The bottom line is that if the auditor believes that the financial statements may be relied upon in some part for decision making then the matter is material and not pervasive. If, however, they believe the financial statements should not be relied upon at all for making decisions then the matter is pervasive.
Which of the following factors is the most important in determining the appropriateness of audit evidence?
The objectivity and integrity of the auditor.
Why external evidence is more reliable than internal evidence?
External evidence is considered more reliable than internal evidence because external evidence has been in the hands of both the client and another party, implying agreement about the information and the conditions stated on the document.
What is pervasiveness in audit?
(a) Pervasive – A term used, in the context of misstatements, to describe the effects on the. financial statements of misstatements or the possible effects on the financial statements of. misstatements, if any, that are undetected due to an inability to obtain sufficient appropriate. audit evidence.
In which of the following circumstances would a qualified opinion not be appropriate?
In which of the following circumstances would a qualified opinion not be appropriate? The auditors lack independence with respect to the audited entity. a violation of generally accepted accounting principles is sufficiently material and pervasive that a qualified opinion is not justified.
Why do auditors use the words present fairly and not correct in all respects in the audit report?
What is Present Fairly in Accounting? Present fairly is a term used within the text of an audit report to indicate that the following concepts were in place at the entity under review: … The accounting principles are appropriate under the circumstances encountered by the firm.
What is an except for qualified opinion?
What is an Except-for Opinion? An except-for opinion is rendered by an outside auditor when unable to audit parts of a client’s operations. The issue arises when management imposes restrictions or when other conditions occur that make it impossible to engage in certain auditing procedures.
What are the 4 types of audit reports?
There are four types of audit reports: and unqualified opinion, a qualified opinion, and adverse opinion, and a disclaimer of opinion.
What are the 4 audit opinions?
The four types of auditor opinions are:
- Unqualified opinion-clean report.
- Qualified opinion-qualified report.
- Disclaimer of opinion-disclaimer report.
- Adverse opinion-adverse audit report.
What is except for opinion in auditing?
An auditor’s opinion reflecting the fact that the auditor is unable to audit certain areas of the company’s operations because of restrictions imposed by management or other conditions beyond the auditor’s control.
When can an auditor issue an unqualified opinion?
It is issued when the auditor believes that all changes, accounting policies, and their application and effects, have accurately been disclosed.
What are the circumstances under which an auditor considers it necessary to qualify audit report?
Qualified report is given by the auditor in either of these two cases: When the financial statements are materially misstated due to misstatement in one particular account balance, class of transaction or disclosure that does not have pervasive effect on the financial statements.
Why are auditors generally required to express an opinion on the truth and fairness of the accounts and why they are not required to certify the accounts?
The purpose of the statutory audit is to provide an independent opinion to the shareholders on the truth and fairness of the financial statements, whether they have been properly prepared in accordance with the Companies Act and to report by exception to the shareholders on the other requirements of company law such as …
What is disclaimer of opinion in audit?
A disclaimer of opinion is a statement made by an auditor that no opinion is being given regarding the financial statements of a client. … For example, the auditor may not have been allowed or been able to complete all planned audit procedures.