1. Relationship of Types of
Evidence to Audit Objectives

2. INFORMATION CONFIRMED
Assets
Cash in bank
Accounts receivable
Notes Receivable
Inventory out of consignment
Inventory held in public warehouse
Cash surrender value of life insurance
Liabilities
Accounts payable
Notes payable
Advances from customers
Mortgage payable
Bonds payable
CONFIRMATION OBTAINED FROM
Bank
Customer
Maker
Consignee
Public warehouse
Insurance company
Creditor/Supplier
Lender
Customer
Mortgagor
Issuer

3. INFORMATION CONFIRMED
Owners’ Equity
Shares outstanding
Other information
Insurance coverage
Contingent liabilities
Bond indenture agreement
Collateral held by the creditors
CONFIRMATION OBTAINED FROM
Registrar and transfer agent
Insurance Company
Company’s legal counsel
Issuer, Trustee
Creditor

4. Positive Accounts Receivable Confirmation

5. Positive Accounts Receivable Confirmation
Max A. Cruz & Co., CPAs
Ayala Avenue, Makati
The balance due from us of P14,324 as of December 31, 2013 is correct except as noted below.
_________________
Aquino Products, Inc,

6. Negative Accounts Receivable Confirmation

7. Accounts Payable Confirmation

8. Representation Letter for Accounts Receivable

9. Representation Letter for Inventory

10. Evidences About Accounting Estimates
 Examples of Accounting Estimates:
1. Allowances to reduce inventory and accounts receivable to their estimated realizable
value.
2. Provisions to aalovate the cost of fixed assets over their estimated useful lives
3. Accrued revenue
4. Deferred tax
5. Provision for a loss from a lawsuit
6. Losses on construction contracts in progress
7. Provision to meet warranty claims

11. Audit Procedures
 Review and test the process used by management to develop the estimate
 Use an independent estimate for comparison with that prepared by
management
 Review subsequent events which confirm the estimate made

12. Reviewing and Testing the Process Used by
Management
1. Evaluation of the data and consideration of assumptions on which the
estimate is based
2. Testing of the calculations involved in the estimate
3. Comparison, when possible, of estimates made for prior periods with
actual results of those periods
4. Consideration of management’s approval procedures

13. Evidence for Related Party Transactions
 Related parties – refers to the client entity and any other party with
which the client may deal where one party has the ability to influence
the other to the extent that one party to the transaction may not pursue
its own separate interests.
 Examples:
Officers, directors, principal owners, affiliated companies such as subsidiaries.
 Common methods of identifying related parties:
 Making inquiries of management
 Reviewing SEC filings, stockholders’ listings, and conflict-of-interest statements
obtained by the client from its executives

14.  Primary concern of auditors:
 Material related party transactions are adequately disclosed in the clients’ financial statements
or the related notes.
 Disclosure of related party transactions include:
 The nature of the relationship
 A description of the transactions, including peso amounts
 Amounts due to and from related parties, together with terms and manner of settlement