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    The Third Standard - Audit field work

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    4. The third generally accepted standard of audit fieldwork requires that auditors obtain sufficient competent audit evidence to afford a reasonable basis for an opinion regarding the financial statements under examination. In considering what constitutes sufficient competent audit evidence, a distinction should be made between underlying accounting data and all corroborating information available to the auditor. What presumptions can be made about the following?

    1) The relative competence of evidence obtained from external and internal sources.

    2) The role of internal control with respect to internal evidence produced by a client's data processing system.

    3) The relative persuasiveness of auditor observation and recalculation evidence compared to external, external-internal, and internal documentary evidence.

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    Solution Preview

    It is clear that external documentation would normally be considered to be highly reliable, and particularly when the auditor received it directly (such as confirmations). There is external evidence which the client receives first but it doesn't have the same level of reliability as the former. Both of those sources rank higher in competency over internally prepared evidence. In the internal case, evidence derived from a well-controlled information system will be more reliable than that produced by a poorly controlled ...

    Solution Summary

    The 300+ word solution explains the nature of evidence and the competence that can be placed on the evidence. It ranks the evidence as to reliability, and suggest alternate procedures to compensate. There are also examples for the highest and best evidence for a variety of balance sheet accounts.