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Module 3 Reviewer | PDF | Audit | Internal Audit
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Module 3 Reviewer

This document outlines the key phases and activities of an audit engagement performance: 1) Evidence is gathered through applying audit procedures like making inquiries, observing operations, and inspecting documents. All evidence gathering and procedures performed must be thoroughly documented. 2) The audit evidence is evaluated and conclusions are reached, requiring significant professional judgement. 3) Observations are documented by comparing criteria to conditions and identifying causes and effects. Recommendations aim to close gaps between criteria and conditions. 4) Extensive interaction with auditees is needed to gather sufficient evidence. Working papers provide complete documentation and support all audit outcomes.

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Lorence Ibañez
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51 views2 pages

Module 3 Reviewer

This document outlines the key phases and activities of an audit engagement performance: 1) Evidence is gathered through applying audit procedures like making inquiries, observing operations, and inspecting documents. All evidence gathering and procedures performed must be thoroughly documented. 2) The audit evidence is evaluated and conclusions are reached, requiring significant professional judgement. 3) Observations are documented by comparing criteria to conditions and identifying causes and effects. Recommendations aim to close gaps between criteria and conditions. 4) Extensive interaction with auditees is needed to gather sufficient evidence. Working papers provide complete documentation and support all audit outcomes.

Uploaded by

Lorence Ibañez
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Module 3: Engagement Performance Phase

● Conduct test to gather evidence

o Involves application of specific audit procedures to gather evidence

▪ Procedures include, for example, making inquiries, observing


operations, inspecting documents, and analyzing the reasonableness
of information

o A second important aspect of gathering evidence is documenting the


procedures performed and the results of performing the procedures.

● Evaluate audit evidence gathered and reach conclusions

o for example, whether controls are designed adequately and operating


effectively requires a significant degree of professional judgment.

● Develop observations and formulate recommendations

o Observations are pertinent statements of fact that emerge when criteria are
compared with the condition. Well-written audit observations contain the
following elements:

▪ Criteria: standards, measures, or expectations used in making an


evaluation and/or verification of an observation.
▪ Condition: Factual evidence is identified during the course of the
engagement.
▪ Cause: Underlying reason for the difference between the criteria and
the condition
▪ Effect: risk or exposure encountered because the condition is not
consistent with the criteria.

o Recommendations are aimed at closing the gap between the observation


criteria and condition.

● Audit evidence and Working Papers

o Gathering sufficient appropriate evidence requires extensive interaction and


communication with auditee personnel throughout the engagement. Such
interactions and communications are critical to conducting the engagement
effectively and efficiently.
o It is important, therefore, for internal auditors to be open, communicative, and
collaborative.
o The internal auditor must always be mindful, however, that the managers and
employees from whom evidence is gathered may not adequately understand
the purpose, objectives, and scope of the engagement, or the manner in
which the engagement is conducted
o Persuasiveness of Audit Evidence
▪ Audit evidence is persuasive if it enables internal auditor to formulate
well-founded conclusions and advice confidently. To be persuasive
evidence must be:

● Relevant

● Reliable

● Sufficient

o Audit Procedures

o Audit Working Papers


▪ Internal auditors record the evidence they accumulate as support for
engagement outcomes.

▪ Purposes and Content of Working Paper


● Because of the many purposes working papers serve, it is
difficult to overstate their importance. For example, working
papers:

● Aid in planning and performing the engagement.


● Facilitate supervision of the engagement and review of
the work completed.
● Indicate whether engagement objectives were achieved.
● Provide a principal support for the internal auditor’s
communications to the auditee, senior management, the
board of directors, and appropriate third parties.
● Serve as a basis for evaluating the internal audit
functions quality assurance program.
● Contribute to the professional development of the
internal audit staff.

The content of internal audit engagement working papers will


depend on the nature of the engagement. They should always,
however, provide complete, accurate, and concise
documentation of the engagement process.

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