AUDIT EVIDENCE &

AUDIT PROCEDURES
NURUL AZIRAH BINTI MOHD WAZIR

Department of Accounting and Finance (DAF,FBMP)

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At the end of this topic, students should be able to:

q Differentiate several sources of audit evidence

q Describe numerous characteristics of good and
reliable audit evidence
q Discuss various steps of audit procedures
q Distinguish THREE (3) types of audit tests

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 OUTLINE:
Nature & source of audit evidence

Characteristics of good evidence

Characteristics of reliable evidence

Types of audit procedures

Types of audit test 3

 WHAT IS AUDIT
EVIDENCE?
Information used by the auditor in arriving
at the conclusions by which the audit
opinion is based

Information used by the auditor to

determine the validity of the mgt
assertions in order to form an opinion
whether the FS gives true & fair view
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SOURCES OF AUDIT
EVIDENCE

Evidence
created by
3rd party

Evidence
created by
the mgt

Auditor-originated
evidence

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CHARACTERISTICS OF GOOD
EVIDENCE

RELE SUFFI
VANC CIENC
E Y

RELIA TIMEL
BILITY INESS

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 CHARACTERISTICS OF GOOD
EVIDENCE (contd.)
• The appropriateness & suitability
of the evidence to the audit objective
that auditor plan to test
Relevance • Example : in order to test a sales
transaction, auditor need what
documents?

• Degree to which evidence can be

Reliability considered believable/worthy of trust
• Example: bank statement vs cash book

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 CHARACTERISTICS OF GOOD
EVIDENCE (contd.)

• The quantity of evidence in the form

of samples selected for test
Sufficiency • Whether it is adequate to achieve the
audit objective

• The timing of obtaining the evidence

• It also refers to when the evidence
Timeliness was accumulated at the period
covered by the audit
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 CHARACTERISTICS OF
RELIABLE EVIDENCE

Independence of provider
Example: confirmation from
External source > than
bank/debtor > reliable than info
internal source from mgt

Effectiveness of client’s IC
Evidence > reliable if the clients IC Example: Existence of segregation
is effective of duties

Auditor’s direct knowledge

Evidence obtained directly by the auditor
Example: observation, computation &
thru physical examination, > reliable than 9
inspection
the info obtained directly
 CHARACTERISTICS OF
RELIABLE EVIDENCE (contd.)

Degree of objectivity

An evidence is considered objective if different auditors who

examine the same evidence reach similar conclusion

Evidence in the form

Objective evidence is of documents &
> reliable than written representation
Depreciation vs PFDD
evidence that requires is considered > 10

considerable judgment reliable than oral

 WHAT IS AUDIT
PROCEDURES?

o Detailed instructions/steps
o For the accumulation of all types of audit
evidences
o in order to determine if specific audit
objectives are met

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 TYPES OF AUDIT
PROCEDURES
Checking &
Physical
Re- Observation
examination
performance

Inquiries of the
Confirmation Inspecting
client

Analytical
Documentation Other actions
procedure
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 AUDIT TEST

o Test performed to understand and

gather evidence about the existence
and functions of specific ICS

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 TYPES OF AUDIT TEST

Test of
Substantive Details
Test of
Test of
control
Transaction
of
(TOC) Balances
s (STT)
(TDB)

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 TEST OF CONTROL (TOC)

This test used to test on the

effectiveness of client’s ICS
2- Observe
whether there are
segregation of
1- examine
duties between 3- examine
payment voucher 4- check bank
the function of evidence of
to ensure reconciliation
authorization of approvals for the
payment were statements
cash payment, write-off of bad
duly approved by prepared
handling of debts
the officer
physical cash and
recording
transactions

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 SUBSTANTIVE TEST OF
TRANSACTIONS (STT)
Refers to AP testing for monetary errors &
irregularities by examining whether individual
transactions were correctly recorded
3- Obtain
1- Recalculate
2- Trace the credit supporting
amounts of sales
entries for documents such as
invoices and
expenses payment payment voucher to
tracing the
recorded in cash determine that the
amounts to the
book to the relevant payment is genuine
sales journal and
expenses accounts & the amount paid
sales ledger
is correct
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 TEST OF DETAILS OF
BALANCES

Refers to AP testing for monetary errors & the

ending GL balances for both BS and IS.

2- Confirm A/C
3- Confirm
receivables
1- Perform balances in
balances by
physical Acc.payable by
sending audit
examination of examining
confirmation
inventories supplier’s
letters to client’s
statements
debtors
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