Professional Review and

Training Center (PRTC)

Audit Evidence
and Documentation:
The Framework
(AT.2503)
Leomar R. Cabarles
Auditor’s Overall Objectives
 All information on which the
opinion is based
Audit
Evidence Two types:
a. Underlying accounting
records
b. Other information
Summary of Audit Procedures
Summary of Audit Procedures

Purpose
Summary of Audit Procedures

Purpose
Types
Summary of Audit Procedures

Purpose
Types FAP
RAP
 Summary of Audit Procedures

Purpose
Types FAP
RAP
ToC SP

To obtain
To test operating
“understanding” in
effectiveness of To detect material
order to identify
controlsand
(assertion misstatements
assess ROMM level) (assertion level)
(F/S level and
assertion level)
 Summary of Audit Procedures

Purpose
Types FAP
RAP
ToC SP
Inspection
Observation
External Confirmation
Recalculation
Reperformance
Analytical Procedures
Inquiry
 Summary of Audit Procedures

Purpose
Types FAP
RAP
ToC SP
Inspection ✓
Observation ✓
External Confirmation
Recalculation
Reperformance
Analytical Procedures ✓
Inquiry ✓
 Summary of Audit Procedures

Purpose
Types FAP
RAP
ToC SP
Inspection ✓ ✓
Observation ✓ ✓
External Confirmation
Recalculation
Reperformance ✓
Analytical Procedures ✓
Inquiry ✓ ✓
 Summary of Audit Procedures

Purpose
Types FAP
RAP
ToC SP
Inspection ✓ ✓ ✓
Observation ✓ ✓ ✓
External Confirmation ✓
Recalculation ✓
Reperformance ✓
Analytical Procedures ✓ ✓
Inquiry ✓ ✓ ✓
Audit Risk and Audit Procedures
 Information as Audit Evidence

Audit Evidence

Sufficient Appropriate

Quantity Quality

ROMM Quality Relevance Reliability

 Quantity

ROMM Quality

Direct Inverse

• All items
• Specific items
• Audit sampling
More audit evidence may not
compensate for its poor quality
 Quality

Relevance Reliability

Purpose of
audit
procedure

Assertion

Direction of
test
 Purpose of Audit Procedures

• Whether:

a. Risk assessment
procedures (RAP)

b. Test of controls (ToC)

c. Substantive procedures
(SP)
 Assertions

• Evidence => relevant

assertions

• Used to:
 Consider potential
misstatements
 Guide audit procedures
as “audit objectives”
 Directional Testing

Understatement

Record Completeness
Vouching

Tracing
Support
Existence

Overstatement
 Quality

Relevance Reliability

Purpose of
audit Source
procedure

Nature
Assertion

Direction of Circumstance
test
 More Reliable Evidence

• Independent source

• Effective related controls

• Obtained directly

• Documented

• Original
Evidence Framework Summary
 Audit Documentation

Record of:
• Procedures
• Evidence
• Conclusions

a.k.a., “working papers”

or “workpapers”
Audit Documentation: Main Purpose
 Audit Documentation: Other Purposes

• Compliance with standards

• Assignment and
coordination

• Supervision and review

• Future audits

• Show reconciliation of
accounting records with F/S
 Audit File Preparation

• Proper identification
• Index/cross-reference
• Audit objective
• Procedures and results
• Conclusion Sufficient information
Understandable to
• Preparer
independent,
• Reviewer experienced auditor
 Audit Files

Current Permanent/Continuing
 Permanent/Continuing Files

• Long-term significance
• Examples:
 Debt agreements
 Pension contracts
 Articles of incorporation
 Flowcharts of internal control
 Bond indenture agreements
 Lease agreements
 Equity accounts
 Current Files

• Relate current period's audit

• Include:
 Reconciliation to F/S
 Lead schedules
 Supporting detailed schedules
 Supporting documents
 Audit programs
Documentation Assembly and Retention
• Types of evidence
• Audit procedures
• Audit risk and audit
procedures
• Information as evidence
• Audit documentation:
Definition and purpose
• Audit file: preparation, types,
assembly and retention
-now do the DIY drill-
 DIY Drill Answers

1. C
2. A
3. D
4. A
5. A
 DIY Drill Answers

6. C
7. A
8. D
9. D
10. B
 DIY Drill Answers

11. C
12. A
13. D
14. C
15. A
 DIY Drill Answers

16. A
17. B
18. A
19. D
20. C
 DIY Drill Answers

21. D
22. D
23. B
24. B
25. A
 DIY Drill Answers

26. A
27. A
28. B
29. D
30. C
 DIY Drill Answers

31. C
32. D
33. D
34. A
35. B
 end of AT.2503 