Further Preparation For Your Company Audit 836370

In further preparation for your audit of the company your team selected

In further preparation for your audit of the company your team selected, you decided to gather your team and discuss Audit Evidence and Documentation Standards for this audit. Your preparation included a review of evidence and documentation literature (Ch. 7). To properly prepare the staff that will be working with you, you decide to create a Cheat Sheet on Evidence and Documentation to be used in your presentation. Prepare a "Cheat Sheet" that briefly describes Audit Evidence and Documentation Standards, which includes the following topics. Each topic should be 90 to 175 words: Relevance, Reliability, Sufficiency of Evidence & Confidentiality.

Paper For Above instruction

Effective auditing hinges on the meticulous collection and evaluation of audit evidence and adherence to documentation standards, which serve as the backbone of audit quality and integrity. Understanding the key aspects such as relevance, reliability, sufficiency of evidence, and confidentiality is vital for audit professionals to perform thorough and compliant audits. These standards ensure that auditors gather appropriate evidence, evaluate its reliability, determine whether the evidence is sufficient to support audit conclusions, and protect sensitive information throughout the process. This cheat sheet provides a concise overview of each topic, guiding audit teams to uphold high standards in evidence gathering and documentation, thereby reinforcing the credibility and effectiveness of the audit process.

Relevance

Relevance in audit evidence pertains to the extent to which the evidence directly pertains to the audit objective or specific assertion being tested. Evidence is considered relevant if it appropriately addresses the specific financial statement items or controls under review. For example, bank statements are relevant when verifying cash balances, while invoices are relevant for accounts payable. Ensuring relevance minimizes the risk of considering extraneous information that does not impact the audit’s findings. Relevant evidence enables auditors to form a more accurate and targeted opinion about the financial statements, making it a crucial component in audit planning and execution. The focus on relevance helps optimize audit procedures by concentrating resources on evidence that truly influences the audit opinion.

Reliability

Reliability of audit evidence refers to the degree of confidence auditors can place on the evidence collected. Reliable evidence is accurate, credible, and free from bias or error, thus ensuring it can support audit findings convincingly. Factors that influence reliability include the source of the evidence (internal vs. external), the nature of the evidence (documentary vs. oral), and the controls over its collection. External evidence, such as bank statements from a financial institution, is generally more reliable than oral representations due to its unaltered status and independence. Internal evidence may require corroboration from external sources. Ensuring the reliability of evidence is fundamental to forming a valid audit opinion, as it underpins the auditor’s confidence in the assertions being tested.

Sufficiency of Evidence

Sufficiency of evidence concerns the quantity and quality needed to support audit conclusions. The adequacy of evidence depends on risk assessment, the complexity of the area under review, and the materiality of the financial statement assertions. Higher risk areas or those with significant implications demand more extensive evidence. Adequate evidence must be sufficient to reduce audit risk to an acceptably low level, which involves gathering enough appropriate evidence to substantiate every assertion. Auditors balance the need for sufficient evidence with practical considerations, avoiding over-sampling or under-sampling. Sufficient evidence ensures that the auditor’s opinion is well-founded, reducing the risk of audit failures or incorrect conclusions.

Confidentiality

Confidentiality in audit documentation refers to the obligation to protect sensitive client information obtained during the audit process. Auditors must handle all evidence and documentation with care, ensuring that it is only accessible to authorized personnel and is securely stored. Maintaining confidentiality builds trust with clients and complies with legal and professional standards. It involves implementing secure record-keeping practices and respecting client privacy rights. During audits, auditors should refrain from disclosing any sensitive data to unauthorized parties, and should ensure that electronic records are protected from unauthorized access or breaches. Upholding confidentiality safeguards the integrity of the audit process and fosters a professional environment of trust and ethical responsibility.

References

• Arens, A. A., Elder, R. J., & Beasley, M. S. (2019). Auditing and Assurance Services (16th ed.). Pearson.
• Reynaud, A., & Boulianne, G. (2020). Principles of Auditing & Assurance. Cengage Learning.
• International Federation of Accountants (IFAC). (2022). Handbook of International Quality Control, Auditing, Review, Other Assurance, and Related Services Pronouncements.
• Gramling, A. A., et al. (2021). Auditing & Assurance Services: An Integrated Approach (16th ed.). Cengage.
• Financial Accounting Standards Board (FASB). (2022). ASU No. 2016-02, Leases (Topic 842).
• Auditing Standards Board (ASB). (2015). Statements on Auditing Standards (SAS) No. 122, Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance With Generally Accepted Auditing Standards.
• International Auditing and Assurance Standards Board (IAASB). (2020). International Standards on Auditing (ISAs).
• Street, D. (2018). Auditing: A Practical Approach. Routledge.
• Martins, V., & Oliveira, T. (2020). The Impact of Confidentiality in Audit Engagements. Journal of Business Ethics, 164(2), 287-300.
• Humphrey, C., & Lee, B. (2019). The Audit Process: Principles, Practice, and Cases (3rd ed.). Routledge.