Evidence and Procedures The Third Standard of Field Work

"Sufficient competent evidential matter is to be obtained through inspection,observation,inquiries,and confirmations to afford a reasonable basis for an opinion regarding the financial statements under audit."

Nature of Evidential Matter
The auditor's consideration of the reliability of data for purpose of achieving audit objective is depend on:
1. Whether the data was obtained from independent sources outside the entity or from sources within the entity.
2. Whether sources within the entity were independent of those who are responsible for the amount being audited.
3. Whether the data was developed under a reliable system with adequate controls.
4. Whether the data was subjected to audit testing in the current or prior year.
5. Whether the expectations were developed using data from a variety of sources.
Evidential Matter
- Competent
- Sufficient
1. Completeness
2. Obligations and Rights
3. Valuations or Allocation
4. Existence or Occurence
5. Statement Presentation and Disclosure
1. [Step 1]Management's Assertions
2. [Step 2]Specific Audit objectives
3. [Step 3]Audit Procedures
One of the uses of analytical procedures is as a substantive test to obtain evidential matter about particular assertions.
Internal Auditors
The internal auditors' work may affect the nature,timing, and extent of the audit.
But the responsibility to report on the financial statements rests solely with the independent auditor.
Management Responsibilities
A management representation letter[AU333,SAS85] is from the audited entity's management to the auditor.It includes the completeness and availability of minutes of stockholders' and directors meeting.
Analytical Procedures[AU329,SAS56]
The objective of the procedures is to identify such things as the existence of unusual transactions and events, and amounts, ratios, and trends that might indicate matters that have financial statement and audit planning ramifications by a study of plausible relationships.
The purpose of applying analytical procedures in planning the audit is to assist in planning the nature,timing, and extent of auditing procedures that will be used to obtain evidential matter for specific account balances or classes of transactions.(Required by GAAS) Overall review of the financial information in the final review stage of the audit.(Required by GAAS)

Using the Work of a Specialist[AU336,SAS73] Effect on the Auditor's report
Unqualified opinion,Standard report No reference to the specialist

Unqualified,Explanatory paragraph added Only if it will clarify,refer to specialist in explanatory paragraph.

Qualified or Disclaimer (Scope limitation)No reference to the specialist

Qualified or Adverse (Departure from GAAP)Only if it will clarify,refer to specialist in explanatory paragraph.

Inquiry of a Client's Lawyer[AU337,SAS]
The auditor should obtain evidental matter relating to:
the existence of conditions or circumstances that indicate a possible loss from litigation,claima,and assessments
the period in which the underlying cause for legal action occured
the probability of an unfavorable outcome
the amount or range of potential loss
Work Paper
The auditor should prepare a written set of audit programs after considering the nature,extent,and timing of the work to be performed.
Related Parties

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Unqualified opinion,Standard report	No reference to the specialist
Unqualified,Explanatory paragraph added	Only if it will clarify,refer to specialist in explanatory paragraph.
Qualified or Disclaimer	(Scope limitation)No reference to the specialist
Qualified or Adverse	(Departure from GAAP)Only if it will clarify,refer to specialist in explanatory paragraph.