Les techniques et méthodes de l'audit

Audit Techniques and Methods

Part II：Audit Methodology of Traditional Financial Audit

HOMEWORK

The application of evidentiary triangulation in

DGS auditing

REPORT

Student ID: S121017

Name: EL M'HAMDI Asmae

November 7th, 2012Part I: Evidentiary Triangulation

a) The description of evidentiary triangulation from theoretical and practical

perspectives:

In a business environment characterized by an increasing level of complexity, auditors face

considerable challenges in designing audits aimed at meeting their increased responsibilities for the

prevention and detection of fraudulent financial reporting. In order to meet these challenges, in

auditors have to consider audit evidence from sources both within and external to the audited entity.

Complementing internally generated evidence with information from sources external to the firm

can help auditors to spot internal information that “appear too good to be true”. This process is

known as evidentiary triangulation.

Triangulation is the application and combination of more than one research perspective in

the study of the same phenomenon. It is the combination of two ore more data sources,

investigators, methodological approaches, theoretical perspectives or analytical methods. The

strength of the triangulation depends on the independence of the methods used. To gain helpful

insights in business, it is common for a company to survey its clients or customers. By nature, this

one-way research is not triangulated because the customers are responding directly to the company

that is fulfilling a stated need. The company executing the survey with its clients is a single

observer. However, when an independent third party asks questions of both a company and its

customers, it creates a triangulation of perspectives that helps to clarify issues better than one-way,

single-observer research. b. My understanding of the evidentiary triangulation:

Originally used in social sciences, triangulation is now used extensively in gathering

intelligence in business. It occurs when the auditors understand the degree to which the same audit

conclusion is supported by evidence and this happens from three fundamental sources: The

Management Information Intermediaries (MII), the Management Business Representation (MBR)

and finally the Entity Business State (EBS). Selected EBS are transformed into management

business representations (MBR) via management information intermediaries (MII).

MII are all of the mechanisms and processes that management uses to transform selected

EBS into MBR. Examples of MII include people, policies, applicable financial reporting and

internal control frameworks, computer networks, software programs and documentation (e.g.,

invoices), as well as internal control over financial reporting (including oversight by corporate

governors).

MBR are management representations of selected EBS within, for example, accounting

journals or ledgers, general purpose financial statements (including footnotes), and in other forms of

communication such as MD&A, press releases, and conference calls with analysts.

The EBS is the economic actions, conditions and events pertaining to the entity, other

business organizations, and other elements in its environment, that are relevant to auditors’

assessments of the Risk Material Weaknesses, the Risk of Material Misstatement, including, for

example, current and expected future economic and industry conditions, the entity’s business

strategy, and its performance in core business processes.

However, those sources should be corroborated via triangulation to have evidence. Auditors

have to continue to engage in evidence-driven, belief-based until they conclude that their beliefs are

sufficiently well justified. Evidentiary triangulation in audit is one of the most important tasks of an

audit work. It synthesizes evidence from multiple sources.

It encompasses multiple logics of how the auditors accomplish their work and multiple references points on which they make their judgments and decisions. Auditors can use audit documentation to

make an opinion and use audit procedures and audit programs to have the audit evidence.

Envidentiary triangulation isn't only used to have an evidence but it's also used to have

professional skepticism. It is the attitude of detecting possible misstatement. It helps to identify

risks of material misstatement based on an understanding of the entity and its environment, to

obtain sufficient appropriate audit evidence and to form an opinion on the financial statements

based on conclusions. It also one of the best ways to reduce the risks of overlooking unusual

circumstances or overgeneralizing while making conclusions.

c. The possible challenges of applying the evidentiary

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