Audit Evidence 26 October 2017 Petr Mališ Petr Blažek www.pwc.com/cz PricewaterhouseCoopers Audit, s.r.o. Agenda Theory 2 October 2017Introduction to Audit Actual audit approaches Questions PricewaterhouseCoopers Audit, s.r.o. Theory on audit evidence October 2017Introduction to Audit 3 PricewaterhouseCoopers Audit, s.r.o. October 2017Introduction to Audit 4 The main task of an auditor is to form an audit opinion. This opinion needs to be based on sufficient and appropriate evidence, not only based on judgement and good feeling. Financial statements are complex documents consisting typically of:  Income statement;  Statement of financial position;  Cash flow statement;  Notes. Main objective PricewaterhouseCoopers Audit, s.r.o. Nature of evidence How much evidence does the auditor need depends on: • The risk of material misstatement • The quality of the evidence obtained • The purpose of the procedure (test of controls or substantive test) ‘The objective of the auditor is to design an perform audit procedures in such a way to enable the auditor to obtain sufficient appropriate audit evidence to be able to draw reasonable conclusions on which to base the auditor’s opinion.’ October 2017Introduction to Audit 5 PricewaterhouseCoopers Audit, s.r.o. Sufficient versus Appropriate Sufficient There needs to be ‘enough’ evidence to support the auditor’s conclusion. What is ‘enough’ is a matter of professional judgement. Appropriate  Reliability  Relevance October 2017Introduction to Audit 6 PricewaterhouseCoopers Audit, s.r.o. Evidence tree October 2017Introduction to Audit 7 PricewaterhouseCoopers Audit, s.r.o. Control vs Substantive evidence October 2017Introduction to Audit 8 For material areas some substantive testing needs to be carried out always. The auditor may rely solely on substantive testing. PricewaterhouseCoopers Audit, s.r.o. Type of audit procedures Types of audit procedures • Reperformance • Analytical procedures • Confirmation • Inspection of documents • Inspection of tangible assets • Observation • Recalcualtion • Enquiry October 2017Introduction to Audit 9 PricewaterhouseCoopers Audit, s.r.o. Actual audit approaches 1/2 October 2017Introduction to Audit 10 PricewaterhouseCoopers Audit, s.r.o. October 2017Introduction to Audit 11 Agree detail to general ledger Fluctuation analysis Confirmations Receivables PricewaterhouseCoopers Audit, s.r.o. October 2017Introduction to Audit 12 CASH Confirmations PricewaterhouseCoopers Audit, s.r.o. Equity October 2017Introduction to Audit 13 General meeting agreement on distribution of profit/loss Agree share capital to commercial register Movement table PricewaterhouseCoopers Audit, s.r.o. Cost of Sales, Operating costs October 2017Introduction to Audit 14 Detailed testing Substantive analytical procedure PricewaterhouseCoopers Audit, s.r.o. October 2017Introduction to Audit 15 PAYROLL COSTS Substantive analytical procedure PricewaterhouseCoopers Audit, s.r.o. Questions October 2017Introduction to Audit 16 Thank you for your attention. Contacts: Petr Mališ> p.malis@pwc.com Petr Blažek> petr.blazek@pwc.com This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PricewaterhouseCoopers Audit, s.r.o., its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it. © 2017 PricewaterhouseCoopers Audit, s.r.o. All rights reserved. “PwC” is the brand under which member firms of PricewaterhouseCoopers International Limited (PwCIL) operate and provide services. Together, these firms form the PwC network. Each firm in the network is a separate legal entity and does not act as agent of PwCIL or any other member firm. PwCIL does not provide any services to clients. PwCIL is not responsible or liable for the acts or omissions of any of its member firms nor can it control the exercise of their professional judgment or bind them in any way.