What is audit evidence, i.e. how does it relate to the auditor\'s opinion? II. C

Question

What is audit evidence, i.e. how does it relate to the auditor's opinion? II. Classify each of the following according to type of audit evidence: A. Analytical procedures B. Confirmation C. Examination of documents or Records D. Inquiry E. Observation F. Inspection of Assets [i.e. Physical examination] G. Recalculation H. Reperformance I. Scanning Procedures: 1. The auditor performs an internal control procedure (i.e. a walkthrough) to gain an understanding of the client's internal control system. 2. Send letters to customerss asking them how much they owe the company. 3. Ask the credit manager about the collectability of customer accounts as a test of the valuation of Accounts Receivable. 4. Review customer orders to verify that credit authorization required by company procedures was considered before a sale on credit was allowed. 5. Watch client employees take the physical inventory to see if they follow company procedures. 6. Check the extensions (multiplication) on sales invoices. 7. Count the pa per stock certificates in the company's safe. 8. Examine a check, or image of a check, returned in a bank statement, as support for the amount recorded as utility expense. 9. Auditors review customer balances in the Accounts Receivable Subsidiary Ledger to see if any have credit balances which should be reclassified. 10. Trace sales invoices to related shipping documents to determine that billed sales are proper. 11. Compare gross profit to sales to the ratio for previous years, as a test of the adequacy of the Cost of Goods Sold. Select only ONE letter for each of the procedures. Letters can be used more than once.

Explanation / Answer

Hi Dear Student !

I) Audit Evidences are the informations collected by Auditor during Audit. On which Auditor can rely upon to form his Opinion. Audit Evidences are the Main part of Auditors Working Papers. For Eg. Company Purchased Raw Material then to Audit the same we can considered Bills and Purchase order as Audit Evidence by which opinion of Auditor will get affected.

II)
1) E Observation
2) B Confirmation
3) D Inquiry
4) C Examination of Documents or Records
5) F Inspection of Assets (Physical Verification)
6) G Recalculations
7) F Inspection of Assets (Physical Verification)
8) C Examination of Documents or Records
9) C Examination of Documents or Records
10) C Examination of Documents or Records
11) A Analytical Procedure

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