Audit Evidence

Is information obtained by the

auditor in arriving at the
conclusion on which the opinion
is based, sufficient and
appropriate
Sufficient appropriate audit evidence

 Sufficiency is a measure of quality of audit evidence

and appropriateness is a measure of timeliness and
quality
 The auditor’s judgment to what is appropriate
evidence if influence by the nature of accounting
and internal control systems, materiality of the item
being examined, experience gained in previous
audits, source and reliability of information
available
Nature and reliability of audit evidence

i) Source
ii)accuracy of info
iii)authenticity of the document being used
iv)nature of the information
v) the size of t he sample used
vi)timing of the information
Procedures for obtaining audit evidence

i) Physical examination (existence), non current assets

ii)Confirmation (double checking, matching)
iii)Inspection (physical checking) books of accounts, internal control procedures
iv)Vouching ( authentication of source credibility)
v) Tracing (follow through)
vi)Re-performance ( redoing a transaction)
vii)Scanning ( looking through)
viii)
Enquiry (investigation in anticipation of response)
ix)Observation (witnessing, scrutinizing)
x)Analytical procedures (use of previous information for analysis)
xi)Verification ( prove or establish if certain to satisfaction)
xii)
Recalculation
•Observation-For
example counting of
inventory by accounting
personnel
• Enquiry-Consists of seeking information
from knowledgeable persons both financial
and non financial
• NB responses to enquiry my provide an
auditor with information not previously
possessed
•Physical examination-
The inspection of
tangible assets
• Inspection
 Consist of examining records or documents, whether
internal or external in paper form, electronic from
and other media
 Inspection provides audit evidence of varying
degrees of reliability depending on their nature and
source
• Confirmation-It is the process of
obtaining a representation of information
of an existing condition directly from a
third part, for e.g. an auditor may confirm
the trade receivables by directly
contacting trade receivables
•Recalculation-Consists
of verifying the
mathematical accuracy of
documents or records
•Re-performance-It is the
auditor’s independent execution of
procedures or controls that were
originally perfumed as part of the
entity’s internal controls
• Analytical procedures

 Consist of evaluation of financial information made by a study of

plausible relationships amongst financial and non financial data
 Analytical procedure encompass the investigation of identified
fluctuations and relationships that are inconsistent with other
relevant information or deviate significantly from predicted amounts
 Are used for risk assessment tools or procedures to obtain an
understanding of the entity and its environment.
Nature and purpose of analytical procedures
 

Analytical procedures include the consideration of comparison of the entity` financial information with for
example; 
comparable information for prior periods.
anticipated results of the entity such as budgets of forecasts.
similar industry information such as a comparison f the entity’s ratio of sales to accounts receivable with industry
averages or with other entities of comparable size in the entity`s industry. 
Analytical procedures also include consideration of relationships:
Amongst elements of financial information that will be expected to conform to a predictable pattern based on the
entity’s experience such as gross margin percentage.
Between financial information and relevant non financial information such as payroll costs to number of
employees 
Analytical procedures are used for the following purposes:
As risk assessment procedures to obtain an understanding of the entity and it’s environment
As substantive procedures when their use can be more efficient and effective than tests of details in reducing the
risk of material misstatements at the assertion level to an acceptably low level.
As an overall review of the financial statements at the end of the audit.