Auditing standards suggest that the auditors should obtain evidence to support their opinions ifac, 2010 and it is also a argued that audit evidence is the substance of the audit process soltani, 2007. Comprehensive and uptodate, including discussion of new standards, codes, and concepts, auditing and assurance services. Audit evidence necessity to qualify a pertinent opinion. Standard on auditing sa 500 audit evidence summary notes pdf. Triangulation of audit evidence in fraud risk assessments practical implications. Anderson andersons audit express t odays audit staffs grew up with technology and rely on it to perform their jobs better. Audit evidence is much more reliable whenever it is got from independent sources outside the entity. Confirmations can be an effective tool for auditors working with accounts including payables and receivables, inventory, investment securities, lines of credit and other actual or contingent liabilities.
Audit evidence is the information used by the auditor in arriving at the conclusions on which the auditors opinion is based. Audit evidence would be relevant if it is capable of meeting the purpose of the audit procedure, which is normally that of verifying an assertion in respect of a financial statements item. In obtaining audit evidence from substantive testsprocedures, auditors should consider the extent of the evidence together with any evidence from tests of control to support the relevant financial statement assertions. The examining of records and documents or inspection of tangible assets reliability of these records and documents depend on the nature and effectiveness of internal control four major type of documentary evidence which provide different. The higher the assessment of inherent and control risk, the more audit evidence the auditor should obtain from the performance of substantive procedures. Audit evidence collection and documentation the basics of internal auditing october 9. The relevance of evidence produced by an audit procedure to a specific audit objective may also depend on the direction of testing. The purpose of this statement of auditing standards sas is to establish standards and to provide guidance on what constitutes audit evidence in an audit of financial statements, the quantity and quality of audit evidence to be obtained, and the audit procedures that. The auditor shall disclaim an opinion when, in extremely rare circumstances involving multiple. An auditors opinion, to be economically useful and profitable to the auditing firm needs to be formed within a reasonable time and based on evidence obtained that. Meaning the information obtained by the auditor in arriving at the conclusions on which the audit opinion is based. In the audit planning stage, auditors use to consider. Written representations contain necessary information that the auditor requires in connection with the audit of the entitys financial statements. Concept of audit evidence audit evidence is defined as all the information used by the auditor in arriving at the conclusions on which the audit opinion is based and can be classified as.
All audit techniques and procedures are derived from the concept of evidence. Introduction independent audit of company financial statements is a key component of the regulatory framework which supports capital markets. Reliability of audit evidence is influenced through its nature and its source and since it is dependent upon the specific circumstances, we can create some generalizations that. Armed with blackberrys, laptops, cellphones, ipods and other tech tools, most are pluggedin 24 hours a day, 7 days a week. Followings are the audit procedures that can be applied to obtain audit evidence i inspection inspection involve examining records or documents, weather internal or external, in paper form, electronic form, or other media or a physical examination of an asset. The crux of audit work is the collection and the evaluation of evidence abouseada and abdelkader, 2003. For audit evidence to be compelling to the auditor it must be sufficient and appropriate. Audit criteria means the set of policies, procedures or requirements used as a reference against which audit evidence is compared, i. Property and evidence room audit july 2010 page 4 of 14 this is a positive step in the right direction. Given the level of regulatory scrutiny surrounding auditor judgment and skepticism of audit evidence, the results indicate that when assessing the risk of fraud, there is a lack of reliance on third party evidence, particularly when management provides a. Physical examinationinspection inspection or count by the auditor of a tangible asset. Concerns are often expressed by regulators and other observers as to whether auditors are sufficiently independent and competent.
Audit evidence version 1, october 2015 page 3 conclusions which are capable of withstanding challenge and satisfy internal and external scrutiny. Answer a quality of audit evidence i evidence originated by the auditors this is in general the most reliable type of audit evidence because there is little risk that it. Tweet the auditor obtains evidence by performing compliance and substantive procedures by the following methods inspection. Auditors must assess whether financial statements present fairly the actual state of a firms affairs. An integrated approach presents an integrated concepts approach to auditing that details the process from start to finish. The nature of the audit evidence uses to vary with different stages of auditing. Chapter 6 audit evidence techniques the acca group. The objective of the auditor is to design and perform audit procedures in such a way as to enable the auditor to obtain sufficient appropriate audit evidence to be. For the core auditing course for accounting majors.
Is the inspection or count by the auditor of a tangible asset. When to perform the procedures timing about what evidence to gather and how much of it to accumulate. Internal evidence created and used and retained within the clients organization and without its generally going to outside party. The type and amount of the considered auditing evidence varies significantly on the basis of the type of. An integrated, uptodate approach to auditing and assurance services. Auditors should prepare audit procedures to confirms and verify the financial statements assertion as part of their materiality assessment in the financial statements and auditors could tailor the procedures to obtain the audit evidence to support their verification and confirmation of financial statements assertion. Sri lanka auditing standard 500 provides the definition of the audit evidence as all the information used by auditors in. Welldesigned audit confirmation practices provide valuable thirdparty evidence that sheds light on financial statement assertions made by management. Mock2 1school of business, the university of kansas, lawrence, kansas 66045 email. Explain why confirmations are normally more reliable evidence than inquiries. A critical part of the audit process is obtaining sufficient audit evidence, information used to establish and support audit findings, recommendations, and opinions. Just to achieve this objective, the auditor requires evidence. Which statement below is not correct regarding the appropriateness of audit evidence.
Audit evidence that is collected can be divided into the following categories. Different from examining documentation is that the asset has inherent value. Most often associated with inventory and cash, but it is also applicable to the verification of securities, notes receivable and tangible fixed assets. Audit evidence and specific considerations for certain. Auditors apply different procedures based on a company and the purpose of its audit.
The probative value of audit evidence the state of the art and avenues towards a general theory abstract. However, the security measures utilized by the police department to monitor the property and. This compilation was prepared on 4 january 2019 taking into account amendments made by asa. What sample size to select for a given procedure 3. It helps the auditor in perceiving the types of evidences available in an audit situation, collecting them through the various audit techniques and evaluating their sufficiency and. Pearson auditing and assurance services, global edition. The auditor needs to obtain sufficient enough and appropriate relevant and reliable evidence in order to draw a reasonable conclusion.
Prepared and issued by the auditing and assurance standards board. In the planning stage, you clarify the scope of the audit and how long the audit will last. The sufficiency of audit evidence auditors rely on evidence that is persuasive rather than convincing because. However, this state usually does not exist when the audit is carried out and can no. Concept of audit evidence the international standard on auditing isa 500 5 describe what constitutes audit evidence in an audit of financial statements, and promote the auditors responsibility to design and perform audit procedures to obtain sufficient appropriate audit. Concept of audit evidence the international standard on auditing isa 500 5 describe what constitutes audit evidence in an audit of financial statements, and promote the auditors responsibility to design and perform audit procedures to obtain sufficient appropriate audit evidence. It comprise source documents and accounting records underlying the financial statements.
Defines audit evidence defines relevant assertions and discusses their use in assessing risks and designing appropriate further audit procedures. The appropriateness of audit evidence evidence is considered appropriate. Auditors use audit procedures to verify facts, make conclusions and express opinions on how a company manages risk. Types of audit evidence examples physical examination examine fixed asset additions count petty cash on hand confirmation confirmation accounts receivable balances of a sample of client customers confirm clients cash balance with bank inspection examine copies of monthly bank statements examine vendors invoices. This standard on auditing sa explains what constitutes audit evidence in an audit of financial statements, and deals with the auditors responsibility to design and perform audit procedures to obtain sufficient appropriate audit evidence to be able to draw reasonable conclusions on which to base the auditors opinion. Audit evidence is a reflection of the realities found during the course of an audit. Similar to responses to inquiries, written representations are audit evidence. The internal audit charter is a formal document that defines the internal audit activitys purpose, authority, and responsibility. Chapter 7 list eight types of audit evidence and give two examples of each. Proceedings of the 2010 conference on belief functions, brest, france, april 12, 2010. The probative value of audit evidence the state of the. Audit evidence can be referred as the evidences, which are collected during various stages of an audit program and duly documented in the audit working papers. The following questions concern the reliability competence of that evidence.
The main objective of the work performed by the auditor in an audit engagement is that of obtaining reasonable assurance as to whether the financial statements, as a whole, are free from material misstatement, so that the auditor is able to express an opinion on the financial statements and report accordingly in the auditors report. Its an asset if has inherent value, otherwise its a document. Is the receipt of a direct written response from a third party verifying the accuracy of information that was requested by the auditor. The role of audit evidence source in enhancing the quality.