Importance Of Audit Evidence Accounting Essay

Importance Of Audit Evidence Accounting EssayAccording to Companies Act 1965 Section 174, scrutiniseor should perform the following duties, Statutory Duties. Auditor should examine and form an opinion whether the monetary statements compliance the fiscal reporting standards of Malaysia and the Companies Act 1965.Duty to carry kayoed audit. Auditor should examine and form an opinion whether the financial statements give a true and fair view of the financial position of the Company as of the financial year end and of its financial performance and cash flows of the year end.Duty to report to subdue management. Auditor should report the throwawaying and some other records and the registers required by the Companies Act to be kept by the company energize been properly kept in accordance with the provisions of the Act.Duty to be independent. Auditor is down the stairs a duty to exercise the appropriate standard of c are to shareholders and outsiders.Duty to use reason open care an d skill. Auditor should obtain reasonable assurance that the financial statements are free from material misstatements.(2) The auditor must plan the audit so as to enable him/her to detect all misstatements. Discuss.The purpose of planning spirit level is plan the audit so that it leave be performed in an effective manner. During the planning stage, auditor should design and perform the audit planning to detect the voltage threat that may be occurred and also limited the audit risk to a lower level. Auditor will get the knowledge of the clients business, auditor able to identify the potential threat that may be occurred. The planning stage will be emphasis on the material misstatement based on the master judgement but not absolute detect all the misstatement such as immaterial misstatement will not be concern.(3) Explain the move to be taken by the auditor if there are reasons to believe that there are (i) errors and (ii) frauds.According to SAS 110, the auditors shall indicate s that fraud or error that exist by obtaining an correspondence of the nature of the event and the circumstances, and sufficient other randomness to evaluate the possible effect on the financial statements. If the auditors believe that the indicated fraud or error could have a material effect on the financial statements, they should perform appropriate modified or additional procedures.Where there is a significant error or fraud, the auditor should consider the necessity for a disclosure of the error or fraud in financial statements, and report to the relevance third party (management level). If fit disclosure is not made, the necessity for a suitable disclosure in his report so called qualified audit report.(4) What is an audit date letter? What steps should be taken by the auditor after receiving the audit appointment letter?According to standard, audit engagement letter refers to a written bring forth between accounting firm and the client. Its purpose is to confirm the rel ationship between the client engaging the auditor and the accounting firm accepting the audit engagement and to define matters such as the objectives of the engagement, the kitchen range of the audit, the responsibilities and duties of each party etc. The audit engagement letter has statutory binding force.After receiving audit engagement letter, there will be an interview or opening conference between engagement parties and audit firm. During the meeting, auditee is asked about the system to be reviewed available resources and other relevance resource. The auditor may be required to meet the person in charge those relevance resources.After getting the required info, auditor will perform a general overview on it and review the internal control of the auditee in order to determine the audit risk that may be occurred.(5) What are the purposes of the audit working papers?1. To provide a basis for planning the audit. The auditor may use reference information from the previous year in order to plan this years audit, such as the evaluation of internal control, the eon budget, etc.2. To provide a record of the recite accumulated and the results of the tests. This is the simple means of documenting that an adequate audit was performed.3. To provide data for deciding the proper type of audit report. Data are used in determining the scope of the audit and the fairness with which the financial statements are stated.4. To provide a basis for review by supervisors and partners. These individuals use the audit documentation to evaluate whether sufficient appropriate render was accumulated to justify the audit report.Audit documentation is used for several purposes, both during the audit and after the audit is completed. One of the uses is the review by more experienced personnel. A second is for planning the subsequent year audit. A third is to demonstrate that the auditor has accumulated sufficient appropriate evidence if there is a need to defend the audit at a late r date. For these uses, it is important that the audit documentation provide sufficient information so that the person reviewing an audit schedule knows the name of the client, contents of the audit schedule, period covered, who prepared the audit schedule, when it was prepared, and how it ties into the rest of the audit files with an index code.(6) Describe the different types of information that are kept in the current file.Current audit file include following resourcesAudit plan, report and audit programmes copiesClearance the problems and confusion during the time of audit work such as journal entries and minutes of meetings.Copies of annual records such as trade account, trial balance and profit and loss account and balance sheetBank reconciliation statementMinutes of meetingsCurrent financial statementsWorking papers supporting accountPaper of calculation of taxation bonus.List of lost proofsPaper regarding stock evaluation(7) State the nature and the importance of audit evid ence.According to ISA, there is nine type of audit evidence which include physical examination, confirmation, documentation, analytical procedures, inquiries, scanning, recalculation, reperformance and observation. The nature of audit evidences includes invoices, contracts, and worksheets, general and subsidiary ledger and so on.Audit evidence is important as it provides the auditor with the information regarding the potential threat or weakness that may be occurred in the clients financial statements. Audit evidence is useful as it provides the auditor with some stagecoach of competent evidential support for the expression of an audit opinion. It facilitates the completion of audit programme scheduled and undertaken.(8) According to ISA 500, what type of evidence is the auditor required to sop up?According to ISA 500, auditor required to collect sufficient and appropriate audit evidence in order to draw reasonable conclusions on which to base the audit opinion. Sufficiency and ap propriateness are interrelated and apply to audit evidence obtained from both tests of controls and substantive tests.Sufficiency is a measure of the quantity of evidence and it refers to exemplar size and items to select. Higher quality evidence results in a lower quantity of audit evidence.Appropriateness is a measure of the relevance and reliability of evidence, or the degree to which evidence can be considered believable or worthy of trust. Appropriateness relates to the audit procedures selected, including the timing of when those procedures are performed.