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

38 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

Reasonable assurance

Communicating Audit Results

Evaluating Evidence

Collecting Evidence

Planning

Reasonable assurance is somewhat of a cost-benefit notion.

It is prohibitively expensive for the auditor to seek complete assurance that no material error exists, so he must accept risk that the audit conclusion is incorrect.

Therefore he seeks reasonable assurance, as opposed to absolute assurance.

Note that when inherent or control risk is high, the auditor must obtain greater assurance to offset the greater uncertainty and risks.

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