Presented by; SHUAIB ADEADEBAYO

HND, B.sc, ACCA

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what is an audit? definition of audit evidence how to generate reliable audit evidence auditing standards and quality control quality audit work auditors right to generate audit evidence how much audit evidence degree of audit evidence sources of audit evidence the use of assertions audit documentation

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Audit evidence is the fact obtain by an auditor during the course of audit to formulate audit report

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According to ISA (international

Auditing Standard )500: it says that an auditor must generate Sufficient appropriate audit evidence to be able to draw reasonable conclusions on which to base an audit opinion

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Recognized Statutory Body For example ACCA, National Standards In UK, set by Auditing Practices Board,

ICAN(Nigeria) International Standards on Auditing Set by International Auditing and

Assurance Standards (ISA’s) Board (IAASB) – part of the International

Federation of Accounting Committee (IFAC)

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According to ISA 200 (international Auditing standard) Auditors are to;

… planned and performed the audit to obtain reasonable assurance whether the financial statements are free from material

misstatement…. ….in our opinion the financial statements

show a true and fair view…. • No guarantees • Not every error discovered • Not certifying accuracy

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• Access to records• Information and explanations• Attendance at and notice about general

meetings• Right to speak at general meetings on

relevant matters• Rights to receive proposed resolutions• Right to resign before audit completion• Right to have information circulated to

the shareholders

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Typical duties:• To issue an audit report, giving opinions

on: truth and fairness of the Financial

Statements whether the Financial Statements are

properly prepared any other opinions required. • When leaving a client, to issue a

Statement of Circumstances• After resignation, to supply information

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ISA500: Sufficient appropriate audit evidence to be able to draw

reasonable conclusions on which to base an audit opinion.

Sufficient = quantity Appropriate = relevant and reliability

External better than entity’s records Auditor-direct obtained better than indirect

evidence Entity – better if a good internal control

system Written – better than oral Originals better than photocopies

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Use of assertion Use of the work of an Expert Use of third party evidence Use of Audit working paper and

documentation

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AccuracyCompletenessCut offAllocationClassification and understandabilityOccurrenceValuationExistenceRights & obligations (ownership)

(ACCA COVER)

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If it relates to a transaction, then verify (controls and substantive evidence) the assertions of:

• Occurrence• Completeness• Accuracy• Cutoff• Classification

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If it relates to a year end balance then verify (controls and

substantive tests) the assertions of:

• Existence• Rights and obligations• Completeness• Valuation• Allocation

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If it relates to the presentation and disclosure in the FS:

• Occurrence• Rights and obligations• Completeness• Classification and understandability• Accuracy• Valuation

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• Experts (eg estate agents, actuaries, lawyers)• Internal auditors• External auditors

Before reliance can be placed on the work of an expert, internal auditor e.t.c they must be:

• Qualified• Experienced• Independent• Professional

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Should agree the following in writing:• Nature, scope and objectives of work• Respective responsibilities• Nature, scope and timing of

communications• That the expert observes confidentialityAuditor must examine the expert’s work

with respect to:• Consistency with other evidence• Assumptions made• Use and accuracy of source data.

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It is essential that the entire audit process is documented to:

• Document show that the audit work has been done properly

• Enable senior staff to review the work of junior staff

• Help the audit team in future years• Encourage a methodical, high-quality

approach.

Working papers will be retained for some years (at least 7) for safety and reference

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