1.

SUFFICIENT APPROPRIATE AUDIT EVIDENCE

Sufficiency relates to the quantity and appropriateness relates to the quality of audit evidence gathered.
When there is a high risk that an account will be misstated and the client's system of internal controls is not considered to be
effective at reducing that risk, DR is set as low and more high-quality evidence is gathered when conducting substantive tests
of that account.
When there is a low risk that an account will be misstated and the client's system of internal controls is considered to be
adequate for that account, DR is set as high and less high-quality evidence is gathered when conducting substantive tests of
that account.
The appropriateness of audit evidence is impacted by its source (internally generated, externally generated held by client,
externally generated sent directly to auditor) and the assertions at risk. Evidence is considered to be more appropriate if it
provides confirmation about an assertion most at risk of material misstatement. By identifying key risk areas for the client, an
auditor is able to focus on gathering more (sufficient) high-quality (appropriate) evidence where the risk of material
misstatement is believed to be most significant.

2. PERSUASIVENESS OF AUDIT EVIDENCE

Internally generated evidence
 Records of cheques sent, copies of invoices and statements send to customers, purchase orders, company documentation
regarding policies and procedures, contracts, minutes of meetings, journals, ledgers, trial balances, spreadsheets,
worksheets, reconciliations, calculations, computations…
 Held electronically (soft copy) or paper form (hard copy)
 Least persuasive as it can only be used to verify that a client has ACCURATELY CONVERTED this information into
the FR. As the clients generates and holds this evidence, it is possible that evidence may be manipulated or omitted
Externally generated evidence held by the client
 Supplier invoices, statements, customer orders, bank statements, contracts, lease agreements, tax assessments
 Quite persuasive as they are produced by third parties. However, it is possible that the client can manipulate these
documents, which reduces their reliability. Also if the client provides with photocopies of information from these
external sources, rather than originals, the reliability is reduced.
Externally generated evidence sent directly to the auditor
 Bank confirmations, debtors’ confirmations, correspondence with client’s lawyers (confirmations and representations),
expert valuations.
 Most reliable and best quality as they are independent of the client. This evidence is generated by third parties and set
directly to the auditor, the client does not have an opportunity to alter it. (the sources of that evidence is considered to
be reliable, trustworthy and independent of client).