Managerial Auditing Journal
Emerald Article: Audit evidence: the US standards and landmark cases Rocco R. Vanasco, Clifford R. Skousen, Richard L. Jenson
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To cite this document: Rocco R. Vanasco, Clifford R. Skousen, Richard L. Jenson, (2001),"Audit evidence: the US standards and landmark cases", Managerial Auditing Journal, Vol. 16 Iss: 4 pp. 207 - 214 Permanent link to this document: http://dx.doi.org/10.1108/02686900110389151 Downloaded on: 30-04-2012 References: This document contains references to 45 other documents To copy this document: permissions@emeraldinsight.com This document has been downloaded 2787 times.
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These are explained as follows: 1. Natural evidence is that which exists all around us. It is the most convincing evidence available. 2. Created evidence requires effort to bring forth, e.g. an auditor 's own computation. To the extent that created evidence is equally simple and clear as natural evidence, it may be equally compelling. 3. Rational argumentation may constitute evidence, e.g. when ideas or conditions follow logically from observed facts, they seem to be true. In August 1980, the Auditing Standards Board (ASB) of the AICPA issued SAS No. 31: Evidential Matter (AICPA, 1980), and defined evidential matter supporting the financial statements as consisting of ``the underlying accounting data and all corroborating information available to the auditors ' '. Underlying accounting data includes the books of original entry, ledgers, and supporting work sheets. Corroborating information includes such documentation as canceled checks, bank statements, sales invoices, vendors ' invoices, time cards, requisitions, purchase orders, bills of lading, and shipping orders. It also includes evidence developed by the auditor, such as confirmations, observations, recalculations, and reconciliations. In 1993, the American Accounting Association (AAA) defined auditing as:
F F F a systematic process of objectively obtaining and evaluating evidence regarding assertions about economic actions and events
What is evidence?
Evidence has been defined by several jurists,
An implicit theme of this case that I want students to recognize is the contrast between the persistent and vigorous efforts of David Sokol to “get to the bottom” of the suspicious items he uncovered in JWP’s accounting records versus what Judge William Conner referred to as the “spinelessness” of JWP’s auditors. The JWP audits were similar to most problem audits in that the auditors encountered numerous red flags and questionable entries in the client’s accounting records but, for whatever reason, apparently failed to thoroughly investigate those items. On the other hand, Sokol refused to be deterred in his investigation of the troubling accounting issues that he discovered. The relationships that existed between members of JWP’s accounting staff and the Ernst & Young audit team apparently influenced the outcome of the JWP audits. Of course, the Sarbanes-Oxley Act of 2002
This course is the first in a two-part series that deals with auditing a company 's financial reports, internal controls, and
ASC 410-20-25-8 indicates that an asset retirement obligation is estimable if all of the following exist:
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate (Louwers & Reynolds, 2007). We believe that the audit evidence obtained is sufficient and appropriate to provide a reasonable basis for our opinions.
• Given the changes in the company, there should be some periodic review of the organizational chart to assess whether changes are needed (having the same organizational structure for over 30 years may not be the most effective or efficient)
Quality Objectives - The quality objectives define measurable goals relative to the company's quality management system. Requirements on the quality objectives are in ISO 9001:2008 section 5.4.1.
Recommendation of types of accounting evidence and methods of gathering such evidence to support the financial status review.
This research paper is being submitted on March 10, 2013, for Tiffany Krogman, A340/ACG3085 Section 03, Advanced Auditing Concepts & Standards.
A review and an audit report are both a form of an attestation engagement. A Review, however, is less in scope so it provides a moderate level of assurance on the financial statements. It is considered a “sniff” of an audit, which comparatively provides reasonable assurance that no material misstatements occurred. Since a review deals with a limited scope, it does not provide the basis for expressing an opinion on the presentation of the
bebe target is a hip, sexy, sophisticated, body-conscious woman who takes pride in her appearance (bebe, 2010).
“Audit committee members or their agents may proactively examine areas, functions, and personnel where collusive fraud risk is reasonably likely to be perpetrated,” (Zmags). The search for fraud, even if performed in the same location multiple times, may continue until the audit committee feels confident that they have ruled out the probability that fraud is prevalent. One of the biggest risks of fraud is management override of controls, requiring the extensive search for risk in, “journal entries and other adjustments and reviewing accounting estimates for possible biases that could result in material misstatements,” (Nysscpa).
In today’s society there are rules that define evidence pertaining to a defendant’s trial. These rules are defined as the “The Rules of Evidence” or “The Law of Evidence.” These rules create a safe and orderly environment, promote efficiency, and enhance the quality of evidence that pertain to all criminal trials. These rules restrict what a jury can and cannot hear or see, details of the law, and the importance of the effective performance of the law enforcement officer. Americans are well aware of the rules that govern evidence; but what are they, what do they mean, how do they apply to each case, and how are they broken down.
Investigation and discipline of registered public accounting firms for violations of relevant laws or professional standards.
* On the job training is the primary method for employees to learn policies and procedures.
Cable provider Adelphia was one of the major accounting scandals of the early 2000s that led to the creation of the Sarbanes-Oxley Act. A key provision of the Act was to create a stronger ethical climate in the auditing profession, a consequence of the apparent role that auditors played in some of the scandals. SOX mandated that auditors cannot audit the same companies for which they provide consulting services, as this link was perceived to result in audit teams being pressured to perform lax audits in order to secure more consulting business from the clients. There were other provisions in SOX that increased the regulatory burden on the auditing profession in response to lax auditing practices in scandals like Adelphia (McConnell & Banks, 2003). This paper will address the Adelphia scandal as it relates to the auditors, and the deontological ethics of the situation.