Audit Evidence Collection and Quality Control

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Solutions

Audit evidence is crucial for auditing, so it is necessary to strictly control the quality audit evidence in order to draw convincing conclusion and to issue fair audit reports.

The first solution relates to how to obtain sufficient and appropriate audit evidence. It means that auditors should make sure what the evidence is obtained for. In other words, auditors should choose evidence according to the actual needs of audit work. Different auditing work may need different types of evidence. In addition, since audit risk can vary from very low to very high, the quantity of evidence and the time to obtain the evidence can be different. Another aspect relates to the sample size (if using sampling) in testing. Auditors are required to analyze the characteristics of population being tested before computing the sample size. Therefore, they can understand what a sufficient and appropriate sample would be like.

Moreover, auditors should properly assess audit risk and materiality. It helps auditors control the quality of evidence from a macro-level perspective. If audit risk is deemed to be high, which means that audit work can be extensive, auditors will have to collect more evidence to reduce the audit risk to a tolerable level. Conversely, auditors may need to collect less evidence if they believe that audit risk is low. Also, materiality must be assessed. Materiality is a tolerable level of misstatement, which is inversely related to the quantity of evidence. If materiality is set low more evidence is needed, and vice versa.

Finally, auditors have to pay attention to the environment of companies. The most important one is clients’ internal control. Usually, it is believed that financial statements are more reliable when companies have better internal control. However, if internal control is poor auditors will require more evidence to make their opinions convincing. The quality of internal control, to some extent, determines the quantity and types of evidence needed for audit work. Also, the management of a client is worth analyzing. Management directly affects commitment to integrity and ethical values which is considered as tone at the top. The effectiveness of internal control significantly depends on it. Therefore, auditors are required to obtain an understanding of the management of clients.

Conclusion

Audit evidence is the core of auditing. Therefore, the quality of audit evidence is of significant importance to audit opinions and audit work. It ensures the accuracy and appropriateness of audit opinions, making the audit reports convincing.

As auditing develops, the requirement of audit evidence collection and quality control also improves. Auditors have to make different plans to obtain different audit evidence according to the requirement of engagements. In addition, they are required to make sure that the evidence used is of high quality and can make audit work effective and efficient.

Works Cited

O. Ray Whittington, Kurt Pany. Principles of Auditing & Other Assurance Services. McGraw-Hill Education, 2015. Print.

“Types of Audit Evidence.” Quizlet. Quizlet, n.d. Web. 30 November, 2015.

“Statements on Auditing Standards.” AICPA. AICPA, n.d. Web. 1 December, 2015.

AICPA. AU Section 326 Audit Evidence. Washington: AICPA, 2006. Web. 2 December,

2015.

AICPA. AU Section 9326 Audit Evidence: Auditing Interpretations of Section 326.

Washington: AICPA, 2006. Web. 2 December, 2015.

PCAOB. PCAOB Release No. 2010-004. Washington: PCAOB, 2010. Web. 2 December, 2015.