Representing, planning and evaluating audit evidence with belief function theory.

Abstract

This paper presents a framework for the representation, planning and evaluation of uncertain audit evidence using a belief-function approach. We only consider the case of a financial statement audit. The framework allows for the modeling of audit risk and audit evidence at different levels of detail, thereby incorporating dependencies at all levels. It provides the information needed to plan an efficient audit and provides means for intermediate and final evaluation. The paper includes a basic introduction to belief-function theory. Then the framework is described in detail, first for aggregation purposes, then for disaggregation. Next, it is explained how different types of audit evidence should be represented. Finally, we use the audit of the sales and collection cycle and one other fictitious cycle to illustrate representation as well as planning and intermediate and final evaluation. We conclude with a discussion.Planning; Theory;