AUDIT EVIDENCE (ISA 500)

 
The Audit Evidence is all the information used by the auditor in
arriving at the conclusions on which the audit opinion is based. It
includes all sort of information or documents obtained or verified
during the audit process.
 AUDIT EVIDENCE (ISA 500)
How much audit evidence should be obtained

Auditor should obtain sufficient appropriate audit evidence

Sufficient
Sufficient means right quantity of audit evidence

Right quantity depends on

Risk assessment of the financial statement item

 AUDIT EVIDENCE (ISA 500)
Materiality of the item

Auditor’s knowledge and experience of the business / client

Initial results of audit procedures

Source and reliability of the information

 AUDIT EVIDENCE (ISA 500)
Appropriate
Appropriate means right quality of audit evidence, i.e. the evidence
should be Relevant and Reliable
Reliability:

External / Independent evidence (is more reliable than internal)

Auditor evidence (evidence collected directly by auditor himself is
more reliable than collected indirectly thorough client, e.g.
observation of inv count)

Internal / Entity evidence (is more reliable if internal control

system is effective)
 AUDIT EVIDENCE (ISA 500)

Written / documented evidence (is more reliable than oral

evidence / representations)

Original document / evidence (is more reliable than photocopies

or faxes)
 TYPES OF AUDIT EVIDENCE WHICH CAN BE
OBTINEE

C A I 2 R2 O

Confirmation (obtaining independent confirmation from 3rd parties,

e.g. banks, customers, suppliers, lawyers)

Analytical procedures (Ratio analysis, comparing with budget and prior

year, investigate unusual variances)

Inspection of documents / assets (e.g. reviewing supplier invoices)

Inquiry (asking client how a particular process work)

 TYPES OF AUDIT EVIDENCE WHICH CAN BE
OBTINEE

C A I 2 R2 O

Recalculation (rechecking arithmetical calculations, e.g. on invoices)

Reperformance (reperforming process independently and then

comparing with system data, )

Observation (watching the client staff conducting physical inventory

count)
 SOURCES OF AUDIT EVIDENCE
 
A. Inspection of records or documents.
 
Records or documents for example. Invoice, purchase, journal, contracts,
minutes of meetings etc may be either internal to the entity purchase
order.
 
 
B. Inspection of tangible assets
 
Assets are physically verified. For example items of machinery are
physically checked with reference to their identification number and
location recorded in the assets register.
 SOURCES OF AUDIT EVIDENCE
Observation
 
When auditors look at a process or procedure being performed by
other’s it is called an observation.
 
Inquiry
 
Inquiry means asking for information from knowledgeable persons,
both financial and non-financial, throughout the entity or outside the
entity.
 SOURCES OF AUDIT EVIDENCE
External confirmation
Confirmation is the process of obtaining a written representation of
information or of an existing condition directly from a third party.
  
Recalculation
Recalculation involves checking the mathematical accuracy of
documents or records. It may be performed manually or through a
CAAT. For Instance

Depreciation calculations are checked by the auditor’s staff by

recalculating. This provides evidence for accuracy of the concerned
items.
 SOURCE OF AUDIT EVIDENCE
Re-performance
Re-performance consists of the auditor’s independent execution of
procedures or controls that were originally performed as part of the
entity’s internal control.

For instance
Ageing of receivables is provided by the client to the auditor. The
auditor re-performs the process and prepares an ageing analysis.

Analytical Procedures
Analytical procedures consist of studies of the relationships either
between the figures of financial statements or between financial and
non-financial information.