Limitations The auditor should be alert of the source and reliability of evidence, for example: – Audit evidence is generally more reliable if obtained from external source, than from the client – Effectiveness of internal control will affect reliability of audit evidence generated internally (a) Limitations of gathering audit evidence are:-- It is usually expensive to gather evidence especially from third parties where such third parties are numerous and geographically dispersed. Discuss the validity and limitations of the audit evidence provided by the procedure. Limitations of Auditing All transactions cannot be checked – It is not possible for an auditor to check each and every transaction; he has to check them on sample basis. Generally, the audit evidence the auditor collects is persuasive in nature, not conclusive in nature. 6-22 (Audit evidence) During the Auditing is the process of inspecting the books of accounts to authenticate their accuracy and reliability. This is one of the major limitations of auditing.
Audit Evidence Collection and Documentation The Basics of Internal Auditing October 9 ‐10, 2014 Stephanie Sgouros, CPA Owner, Sgouros Enterprises LLC TALLAHASSEE CHAPTER Agenda • Audit Evidence Definitions • Audit Evidence Types • Standards • Sufficiency, Competence, Relevance • Preserving Audit Evidence • Workpapers Auditing Assignment Help, Limitation of audit evidence, Limitation of Audit Evidence The quantity and quality of evidence is constrained through the following factors as: Absolute proof is not possible; Some assertions are not material; Cost and time must be considered as account Evidence is not conclusive – Audit evidence is not conclusive in nature the confirmation of debtors is not conclusive evidence that all amount will be collected, the conclusions are persuasive rather than conclusive.
It is important for auditors to obtain sufficient, appropriate and Annual Audit. Advantages and Limitations of Auditing. Audit Evidence Decisions and Documentation Audit evidence- is the information obtained by the auditor in arriving at conclusions on which their reports are based.During financial statement audits, the auditors gather and evaluate evidence to form an opinion about whether the financial statements follows the appropriate criteria, usually, generally accepted accounting principles.
It is an important process to the company itself, the government, the investors, creditors, shareholder etc.
Auditing Standard No. However, limitations may become so serious that auditor may not be in a position to provide any assurance at all i.e. Professional skepticism, and a continued focus on the quality of audit evidence, are required throughout an audit. Audit Evidence “Audit evidence” means the information obtained by the auditor in arriving at the conclusions on which the audit opinion is based. Auditing Evidence: The information collected for review of a company's financial transactions, internal control practices, and other factors necessary for … It is because of these inherent limitations of audit the practitioner cannot assure the users of financial statements that financial statements are absolutely free of (material) misstatements. 6-22 (Audit evidence) During the course of an audit, the auditor examines a wide variety of documentation. Performance Audit, Special Examination, and Other Assurance Engagements. 1/ Auditing Standard No. c) In connection with his audit of the financial statements of a manufacturing company, an auditor is observing the physical inventory of finished goods, which consists of expensive, highly complex electronic equipment. Inherent limitations are such features of audit that constrains the auditor to obtain absolute assurance. - There may be lack of co-operation from the staff and to some extent third parties in availing audit evidence. 1. Auditing - Limitations - Following are a few limitations of auditing − Following are a few limitations of auditing − Rely on Experts − An Auditor has to rely on experts like engineers, valuers and lawyers for estimation and valuation of fixed assets and estimation of contingent liabilities.. An audit is an Independent Examination of Financial Statements. Hence insufficient time is one of the main limitations of auditing. 3, Audit Documentation, establishes requirements regarding documenting the procedures performed, evidence obtained, and conclusions reached in an audit. 2/ Paragraph A5 of Auditing Standard No. Listed below are some forms of documentary evidence and the sources from which they are obtained.
Inconclusive Evidence. The auditor shall modify the opinion in the auditor’s report when: (a) The auditor concludes that, based on the audit evidence obtained, the financial statements as a whole are not free from material misstatement; or (Ref: Para. Gathering audit evidence as part of an audit involves a mix of techniques that are used interchangeably: visual observation, examination of records, and employee interviews. A2–A7) (b) The auditor is unable to obtain sufficient appropriate audit evidence 14, Evaluating Audit Results, establishes requirements regarding evaluating whether sufficient appropriate evidence has been obtained.
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