Responding to Audit Findings

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Running Head: AUDIT EVIDENCE

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AUDIT EVIDENCE

Audit Evidence

Katherine Askew

BSA 505

April 6, 2020

Evidence Gathering and Sampling Methodologies

Gathering techniques are the specific methods and techniques used to collect distinctive kinds of evidence. These techniques include re-performance, inquiry, inspection, and observation, as well as analytical procedures. Audit evidence termed as the information or data collected and used by an auditor as part of his audit work in concluding the opinions if the financial statements prepared in all the material respect and as per the applicable economic frameworks.

Inspection is one of the evidence-gathering procedures where an auditor inspects documents and records that provide varying reliability degrees depending on the source and nature of the material used. Inspecting physical assets provides evidence with higher reliability, and others indicate value. Observation entails checking the application of an entity's or client's procedure and policy hence getting assurance of the process at a particular point of time.

Recalculation entails computation or recalculating to provide a higher degree of assurance about arithmetical accuracy. Also used to check the client's records like subtotals for receivables ledger and pricing on invoices. Re-performance can be active in reviewing the client process like bank reconciliation (Abou-Seada & Abdel-Kader 2017). It can be performed via the use of computer-assisted audit techniques or manually. Recalculation and re-performance provide reliable evidence compares to enquiring and observation.

Analytical procedures entail studying of plausible relationships among the data. These procedures are limited since evidence relies on the validity of the set data. They are used in the entire audit process and conducted for primary purposes like risk assessment, substantive testing, and overall conclusion. An inquiry used to obtain knowledge of the entity, collect specific evidence, and corroborate evidence collected using other means.

The evidence gathering process is summarized or broken down into four primary steps. It begins with designing the audit tests or procedures, including re-performance, inquiry, inspection, and observation, as well as analytical methods. The second step entails carrying out the audit tests r procedures and gathering evidence. The third one involves an analysis of evidence and concluding as well as evaluation of performance against the audit criteria. The fourth step is deciding if additional information is required and can be acquired or if there exists adequate, appropriate evidence.

Audit sampling entails the use of audit procedures in selecting the items within a class of transactions or an account balance. It is the process of examining parts of the data set or population that is sufficient to attain rational assurance on the entire data or population. There are several sampling methodologies used for the controls under the test. The preferred sampling methods should yield some equal probabilities that every unit in the sample could be selected. The controls tested include manual and automated controls.

Automatic controls require one sample, while manual controls depend on the method of sampling that an IS auditor use to calculate the sample size. The sampling methodologies include variable sampling used for substantive procedures like testing details of balances. Quality sampling is active when testing internal controls and assessing the number of things in a population encompassing a particular point of interest. A selection is a system of sampling that confirms that every component within a community has an equal possibility of choice by using selective number generators or particular number diagrams. Auditors use haphazard sampling without necessarily following a structured technique. It is recognized as the most suitable method when using statistical sampling (Cascarino, 2017). Auditors must be careful when selecting haphazard sampling to avoid predictability or conscious bias.

Preliminary findings and Explanation

I. . The employees' data are encrypted and protected from external unauthorized access that might comprise confidentiality and privacy that the information carries. The control objective is that controls provide reasonable assurance that the access to production data files and application programs have strict restrictions on the right authorized programs and personnel. A random sample of six employee's data showed that no unauthorized access to data reported in the last thirty days.

II. Testing performed to ascertain that the change meets the outlined requirements in the change management system. The objective is that controls guarantee reasonable assurance that shifts to the statement application are approved, tested, authorized, implemented, and documented appropriately. A sample of five changes shows in the monitoring systems shows that three of the changes tested are not confirmed; they are meet the change requirements.

III. Controls certify reasonable undertakings that the general costs are processed timely and accurately, and the processing allowances resolved. Payments steered by mailroom dispensation and credentials and arrangement of payments. A sample of fifteen payments between date 15th and 26th November 2019 shows that they not governed by payment processing procedures and policies.

Keeping leadership abreast of the findings of the audit involves the application of different practices. Developing a timeline and assigning responsibility will help in tracking the results. I will review a list of schedules and work papers needed by the auditors ensuring that the clarifications of the requested information done when necessary—organizing data by creating a repository of audit schedules that can be assessed at any given time by the appropriate personnel.

Reference

Abou-Seada, M., & Abdel-Kader, M. (2017). Behavioral aspects of auditors' evidence evaluation: a belief revision perspective. Routledge.

Cascarino, R. E. (2017). Data Analytics for Internal Auditors. CRC Press.

Chang, Y. T., Chen, H., Cheng, R. K., & Chi, W. (2019). The impact of internal audit attributes on the effectiveness of internal control over operations and compliance. Journal of Contemporary Accounting & Economics, 15(1), 1-19.