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Audit Evidence Sequence
Audit Evidence Sequence
Management Expert:-
Person or firm, whose expertise in the field other than
accounting or auditing is used by the management in
preparation of financial statements.
Factors to be considered in using the work done by
Management Expert
1. Work done by the expert: - Auditor should check whether
the work performed by the expert is appropriate. For this,
auditor should examine the followings:-
a. Source Data: - Auditor should check whether the source
data taken by the expert is correct.
b. Assumptions and methods applied: - Auditor should
check if the assumptions and methods applied by the
expert are correct.
c. Suitability of final outcome: - Auditor should check if the
final outcome/ end result calculated by the expert is
correct.
2. Competence of Expert: - Auditor should check whether
the expert is competent for the job. For this, he can
examine the degrees and certificates obtained by the
expert.
3. Objectivity of expert: - Auditor should check whether the
expert possesses objective mindset. The expert should
have a focused mindset while working on the project.
4. Capability of expert: - Auditor should check whether the
expert is capable for the given project. For this, auditor
should evaluate the past experience and track record of
the expert.
5. Appropriateness of expert: - Auditor should check
whether the job done by expert is appropriate for being
used by the auditor.
b. Competence of Expert :-
Auditor should check whether the expert is competent for
the job. For this, he can examine the degrees and
certificates obtained by the expert.
c. Objectivity of expert :-
Auditor should check whether the expert possesses
objective mindset. The expert should have a focused
mindset while working on the project.
d. Capability of expert :-
Auditor should check whether the expert is capable for the
given project. For this, auditor should evaluate the past
experience and track record of the expert.
e. Appropriateness of expert :-
Auditor should check whether the job done by expert is
appropriate for being used by the auditor.
5. Conclusion: -
Thus, as an auditor I will decide my action based on my
observation on above-mentioned points.
# Inconsistency in Audit Evidences
Answer: - If Audit evidences obtained from two or more
sources are inconsistent with each other, auditor will consider
the followings:-
1. Auditor will reconsider the reliability of audit evidences
earlier obtained.
2. Auditor will reconsider the level of integrity of
management and revise his understanding of inherent risk.
3. Auditor will extend the nature, timing and extent of audit
procedures
4. Auditor will consider its impact on the audit report as per
NSA 705
Assertions to be verified
- Existence
- Condition/Valuation
Illustration
Date of Balance Sheet :- 31 Asar :- Inventory :-
Impracticable:- Inventory is under the control of third party.
1. Your client is consignor. Inventory is in the custody of
consignees. There are 5 consignees. The consignees
deal with multiple suppliers.
2. The inventory is with transporter.
Unforeseen Situation
Q. The client of Auditor Mr. A is a producer of apples in
Mustang. Mr. A is of the view that since Mustang is a
remote place, he is not required to conduct physical
verification of apples in Mustang. Comment on Mr. A’s
Viewpoint.
Characteristics
1. Written Form
2. Written by Management : i.e. generated from internal
source
3. Additional Audit Evidence
4. Not a self-sufficient or self-appropriate audit evidence
To,
…. & Associates,
…………………,
Kathmandu.
Dear Sir,
Warm Regards,
………….
Managing Director,
…………..Pvt. Ltd.
Meaning of Written Representation/ Management
Representation Letter:-
Written representation is a statement written by management
and provided to auditor mentioning certain information or
confirming certain facts.
Specific Situations
1.Requested MRL denied by the management
2.MRL provided by management is inconsistent
with other audit evidences and hence it is
doubtful
Answer
1.Auditor reconsiders the reliability of audit
evidences earlier obtained.
2.Auditor reconsiders the level of integrity of
management and hence reconsiders his
assessment of inherent risk.
3. Auditor extends the nature, timing and extent
of audit procedures.
4.Auditor considers modifying his opinion as per
NSA 705 if he believes that the effect of such
inconsistency or denial to provide MRL is
material.
Auditor’s Expert
Person or firm whose expertise in the field other
than accounting or auditing is used by auditor in
obtaining sufficient and appropriate audit evidence.
Auditor's responsibilities
- He is solely responsible for expressing his opinion
-Use of expert's work does not reduce the responsibility of auditor
Written agreement with expert
For nature, scope & objectives of expert's work
Responsibility of auditor and expert
Communication between auditor and expert
Confidentiality requirement
Warm Regards,
Mr. X,
Finance Manager,
Worldlink………….
Method No. 2
Dear Gurjeet,
According to our records for the year 2078-79, we have
debit balance of Rs. 30,000 in your name.
Warm Regards,
Mr. X,
Finance Manager,
Worldlink………….
Dear Gurjeet,
According to our records for the year 2078-79, we have
debit balance of Rs. 30,000 in your name.
Warm Regards,
Mr. X,
Finance Manager,
Worldlink………….
B/S
Creditor :- 5 Lacs
320, 450 and 705
1. Materiality 320, 450 and 705
2. NSA 510
3. NSA 505
4. 210
Situation where negative confirmation request can
be used
1. There is low risk of ignorance from third party.
2. There is low level of expected error.
3. There is low level of control risk and inherent risk.
4. A large number of small balances is involved.
Illustration
Management-----------------------------------Auditor
Dispute