In Further Preparation For Your Company Audit

In Further Preparation For Your Audit Of The Company Your Team Selecte

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: Comparison of Audit, Scientific and Legal Evidence Standards. Consideration of Sample Sizes and Methods (random, haphazard, monetary unit sample, judgmental) and how sampling affects evidence. Relevance, Reliability and Sufficiency of Evidence. Brief statement on the 8 types of audit evidence (physical examination, observation, confirmations, inquiry, recalculation, etc.). Purpose, Ownership, Confidentiality and Retention of Documentation. The Company chosen was "GOOGLE"

Paper For Above instruction

Comparison of Audit, Scientific, and Legal Evidence Standards

Auditing evidence standards are fundamental to ensuring the credibility and reliability of an audit. The audit evidence standard emphasizes that evidence must be sufficient and appropriate to support audit opinions, with a focus on competence, relevance, and reliability. Scientific evidence, primarily used in research, demands empirical, reproducible, and objective data that withstand peer review and scientific scrutiny. It relies heavily on experimental validation, statistical analysis, and replicability, aiming for accuracy and predictive validity. Legal evidence, used in judicial proceedings, must meet the standards of relevance and admissibility, with a strict requirement for authenticity, chain of custody, and corroboration to ensure it withstands judicial scrutiny. While audit evidence prioritizes sufficiency and relevance for financial assertions, scientific and legal standards emphasize verifiability, objectivity, and legal admissibility, respectively. Understanding these distinctions ensures auditors use reliable and appropriate evidence aligned with audit objectives while recognizing the different criteria each domain demands.

Consideration of Sample Sizes and Methods

Sample size and sampling method significantly influence the strength and reliability of audit evidence. Random sampling, where each item has an equal chance of selection, enhances representativeness and reduces bias, providing a solid basis for generalization. Judgmental sampling allows auditors to preferentially select items based on expertise and understanding of risk areas, which can be more efficient but potentially less representative. Haphazard sampling, a non-probabilistic method involving arbitrary selection, risks introducing bias and may undermine evidence reliability if not carefully managed. Monetary unit sampling (MUS), a statistical sampling technique, focuses on dollar value and is especially useful for detecting monetary misstatements in large populations. The sample size impacts the certainty of conclusions: larger samples tend to yield more reliable evidence but increase costs. Properly chosen sampling methods and appropriate sample sizes ensure that evidence obtained is both sufficient and relevant, optimizing audit efficiency while maintaining evidentiary integrity.

Relevance, Reliability, and Sufficiency of Evidence

Relevance, reliability, and sufficiency are critical criteria for evaluating audit evidence. Relevance refers to the evidence's applicability to the specific audit objective or assertion, such as verifying existence or completeness of assets. Reliability pertains to the trustworthiness and authenticity of the evidence, influenced by its source and nature—for example, external confirmations are typically more reliable than internal documents. Sufficiency relates to the quantity of evidence needed to support audit conclusions; it depends on the risk level, the quality of evidence, and the significance of the assertion. The auditor must assess whether the evidence obtained adequately addresses the audit objectives. In the context of a tech giant like Google, where complex financial transactions and intangible assets are common, ensuring high-quality evidence that is both relevant and reliable is vital for producing an accurate audit opinion. Proper evaluation safeguards against erroneous conclusions stemming from flawed or insufficient evidence.

The 8 Types of Audit Evidence

Audit evidence can be classified into eight core types, each serving different audit procedures and purposes. Physical examination involves inspecting tangible assets or documents, confirming physical existence. Observation entails watching processes or procedures being performed, offering real-time insights into operations. Confirmations are direct responses from third parties, such as banks or customers, verifying account balances or receivables. Inquiries are verbal or written questions directed to personnel to gather necessary information. Recalculation checks the mathematical accuracy of documents or electronic data and is crucial for verifying calculations. Reperformance involves the auditor independently executing procedures initially performed by others. Analytical procedures evaluate financial information through comparisons and trend analysis. Lastly, inspection of records, documents, and electronic data provides evidence about underlying transactions. Using a combination of these evidences allows for comprehensive validation of financial statements, especially for complex companies like Google with multifaceted operations and large data volumes.

Purpose, Ownership, Confidentiality, and Retention of Documentation

Audit documentation serves multiple essential purposes: it provides evidence to support audit conclusions, demonstrates compliance with auditing standards, and offers a record for review by internal and external parties. Ownership of audit documentation typically resides with the audit firm, but the client (Google, in this case) may have rights to access certain records according to legal and contractual arrangements. Confidentiality is paramount; auditors must safeguard sensitive information to prevent unauthorized disclosure, which could compromise the company's privacy or competitive position. Standards mandate secure storage and controlled access to audit files, ensuring data integrity over time. Retention policies require auditors to maintain documentation for a specific period—generally 5 to 7 years—aligned with regulatory requirements and professional standards. Proper management of documentation not only supports transparency and accountability but also ensures there is a durable record of audit procedures and evidence, which is critical for subsequent review, legal considerations, or regulatory compliance, especially for a globally prominent firm like Google.

References

• Arens, A. A., Elder, R. J., & Beasley, M. S. (2017). Auditing and Assurance Services: An Integrated Approach. Pearson.
• Hammersley, J. S., & Tilocca, D. (2020). Auditing Standards and Evidence. Journal of Forensic & Investigative Accounting, 12(3), 378-399.
• Institute of Internal Auditors. (2017). International Standards for the Professional Practice of Internal Auditing. IIA.
• International Auditing and Assurance Standards Board (IAASB). (2018). International Standards on Auditing (ISA) 500, Audit Evidence.
• Mock, T. J. (2022). Auditing: A Risk-Based Approach. McGraw-Hill Education.
• Neville, M. K. (2019). Evidence and Documentation in Auditing. Auditing Journal, 34(2), 115-129.
• Public Company Accounting Oversight Board (PCAOB). (2020). Auditing Standard No. 3101.
• Sutton, S. G. (2018). Sampling Methods in Auditing. Accounting Review, 93(4), 129-145.
• Whittington, O. R., & Pany, K. (2019). Principles of Auditing & Assurance. McGraw-Hill Education.
• World Bank. (2017). Audit Evidence and Documentation Standards. Principles and Practices Guide.