A) Distinguish Between Internal Documentation and External Documentation as Types

question 44

Essay

A) Distinguish between internal documentation and external documentation as types of audit evidence. Give two examples of each. Which type is considered more reliable?
B) Below are 10 documents typically examined by auditors. Classify each document as either internal or external.
$$\begin{array} { | l | l | } \hline \begin{array} { l } \text { Type of } \\\text { Document }\end{array} & \text { Documents } \\\hline & \text { 1. Cancelled cheques for payments of accounts payable } \\\hline & \text { 2. Payroll time cards } \\\hline & \text { 3. Duplicate sales invoices } \\\hline & \text { 4. Vendor's invoices } \\\hline & \text { 5. Bank statements } \\\hline & \text { 6. Minutes of the board of directors' meetings } \\\hline & \text { 7. Signed lease agreements } \\\hline & \text { 8. Notes receivable } \\\hline & \text { 9. Subsidiary accounts receivable records } \\\hline & \text { 10. Customer payment remittance advices } \\\hline\end{array}$$

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Definitions:

AFN Equation

Additional Funds Needed equation, a financial formula used to estimate the additional amount of funding a firm would require to support its increased level of sales.

Sales Forecasts

The process of estimating future sales. It helps businesses make informed decisions regarding inventory management, workforce needs, and financial planning.

Historical Trends

Analysis of past data to identify patterns or changes over time that may influence future outcomes or behaviors.

Economic Forecasts

Predictions about future economic conditions, including growth rates, inflation, and employment, based on current and historical data.