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© 2008 Prentice Hall Business Publishing     Accounting Information Systems, 11/e    Romney/Steinbart

37 of 151

THE NATURE OF AUDITING

Evaluation of Audit Evidence

The auditor evaluates the evidence gathered in light of the specific audit objective and decides if it supports a favorable or unfavorable conclusion.

If inconclusive, the auditor plans and executes additional procedures until sufficient evidence is obtained.

Two important factors when deciding how much audit work is necessary and in evaluating audit evidence are:

Materiality

Communicating Audit Results

Evaluating Evidence

Collecting Evidence

Planning

Because errors will occur anywhere, auditors focus on those that have a significant impact on management’s interpretation of the audit findings.

Materiality dictates what is and is not important in a given set of circumstances—primarily a matter of judgment.

It is generally more important to external audits, when the overall emphasis is on the fairness of financial statement presentations, than to internal audits, where the focus is on determining adherence to management’s policies.

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