Importance Of Audit Evidence Accounting Essay

Importance Of scrutinize picture Accounting EssayAccording to Companies Act 1965 Section 174, examineor should work forbidden the following duties, Statutory Duties. attendee should examine and form an opinion whether the financial didacticss compliance the financial news reporting standards of Malaysia and the Companies Act 1965. profession to carry out size up. visitor 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 course of instruction end and of its financial performance and cash flows of the year end.Duty to report to give up management. Auditor should report the marking and oppositewise records and the registers required by the Companies Act to be kept by the friendship have been properly kept in accordance with the provisions of the Act.Duty to be independent. Auditor is under a duty to exercise the appropriate standard of c be to shareholders and outsi ders.Duty to use reason open care and skill. Auditor should obtain reasonable assurance that the financial statements are free from natural misstatements.(2) The meeter must plan the canvass so as to modify him/her to detect only misstatements. Discuss.The purpose of planning dot is plan the analyze so that it will be performed in an marrowive manner. During the planning stage, listener should design and perform the audit planning to detect the potential holy t misconduct 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 holy terror that may be occurred. The planning stage will be emphasis on the material misstatement showd on the professional judgement but not absolute detect all the misstatement such as immaterial misstatement will not be concern.(3) beg off the step to be taken by the auditor if in that respect are reasons to regard that there are (i) errors and (ii) frauds.According to SAS 110, the auditors shall indicates that fraud or error that exist by obtaining an understanding of the nature of the event and the circumstances, and sufficient other tuition 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 redundant procedures.Where there is a significant error or fraud, the auditor should subscribe to the necessity for a revelation of the error or fraud in financial statements, and report to the relevancy third party (management level). If adequate disclosure is not made, the necessity for a suitable disclosure in his report so called qualified audit report.(4) What is an audit difference letter? What steps should be taken by the auditor subsequently receiving the audit engagement letter?According to standard, audit engagement letter refers to a indite contract between accounting firm and the client. Its purpose is to confirm the relationship between the client engaging the auditor and the accounting firm pass judgment the audit engagement and to define matters such as the objectives of the engagement, the scope of the audit, the responsibilities and duties of separately party etc. The audit engagement letter has statutory hold fast force.After receiving audit engagement letter, there will be an converse or opening conference between engagement parties and audit firm. During the meeting, auditee is asked more or less the system to be reviewed available resources and other relevance resource. The auditor may be required to meet the mortal in charge those relevance resources.After getting the required information, auditor will perform a general overview on it and review the internal control of the auditee in mold to determine the audit risk that may be occurred.(5) What are the purposes of the audit working papers?1. To render 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 time budget, etc.2. To provide a record of the evidence hoard and the results of the tests. This is the primary 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 sustenance to evaluate whether sufficient appropriate evidence 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 testify that the a uditor has accumulated sufficient appropriate evidence if there is a need to defend the audit at a later date. For these uses, it is all important(predicate) 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 on the watch the audit schedule, when it was prepared, and how it ties into the rest of the audit reads 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 political platforms copiesClearance the problems and perplexity during the time of audit work such as journal entries and proceeding of meetings.Copies of annual records such as trade account, trial balance and win and loss account and balance sheetBank reconciliation statementMinutes of meetingsCurrent financial statementsWorking papers supporting accountPaper of calculation of tax bonus.List of lost proofsPaper regarding fall evaluation(7) State the nature and the importance of audit evidence.According to ISA, there is nine type of audit evidence which include physical examination, confirmation, documentation, analytic 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 degree of satisfactory 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 absorb?According to ISA 500, auditor required to collect suffic ient and appropriate audit evidence in order to draw reasonable conclusions on which to base the audit opinion. Sufficiency and appropriateness are interrelated and apply to audit evidence obtained from both tests of controls and substantive tests.Sufficiency is a measuring of the step of evidence and it refers to sample 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.