Audit evidence:
Audit plan -> Risk evaluation -> React on risk -> Audit procedures -> Get evidence -> Give an opinion
Every auditor has a duty to gather audit evidence to support their opinion on whether the assertions of the directors, embodied in the FS, are fairly
presented.
What is it?
All information used by the auditor
To make conclusions
On which audit evidence is based
Why?
Fundamental to audit function
Necessary to support the audit opinion regarding assertions management makes in the FS
How is it obtained?
Conducting of an audit procedure (eg: testing calculations on accounting records)
From other sources
Types
Source documents and accounting records
- Invoice, Cashbook, General Ledger, Reconciliations
Substantive information – Other sources
- Written, Oral, Mathematical, Physical, Electronic, Confirmations from 3 rd parties, Minutes, Reports of analysis
SUFFICIENT EVIDENCE: (how much?)
- Relates to the quantity gathered. The auditor must evaluate whether enough audit evidence has been gathered to support an
opinion.
- This is important because auditors perform procedures on samples of populations instead of testing every transaction. Evidence is
cumulative and many procedures need to be performed to gather a bit of evidence from each along the way.
- This is a very subjective decision requiring a lot of professional judgement.
- Relates to the extent of testing done (which is a component of the audit plan being the nature and timing of tests)
APPROPRIATE EVIDENCE: (how good?)
- Relates to the quality of the evidence gathered. This can be broken down into:
(1) Reliability (source and nature)
Most reliable = Developed by the auditor
Reasonably reliable = Provided by an independent, competent and reputable 3 rd party
Least reliable = From the client
Written evidence is more reliable than oral evidence
The auditor will have to rely on evidence from all of the above regardless of their source.
(2) Relevance (to the assertion that is being audited)
Substantive procedures
Influenced by?
- Risk evaluation (IR and CR)
- Materiality of the item being examined
- Previous experience of audits
- Results of audit procedures previously conducted
- Source and reliability of information available
- Persuasiveness of audit evidence
- Cost vs benefit
OBTAINING AUDIT EVIDENCE: (forms part of the Audit Procedures)
Risk assessment procedures (Knowledge of environment and internal controls)
Knowledge of Internal Control System
STEP 1: ID risks of material misstatement
STEP 2: Preliminary evaluation of risks
IC’s don’t work Weak IC’s No reliance More SP Less TOC
IC’s work Good IC’s Reliance Less SP More ToC
No IC’s No reliance Detail SP No TOC
Audit plan -> Risk evaluation -> React on risk -> Audit procedures -> Get evidence -> Give an opinion
Every auditor has a duty to gather audit evidence to support their opinion on whether the assertions of the directors, embodied in the FS, are fairly
presented.
What is it?
All information used by the auditor
To make conclusions
On which audit evidence is based
Why?
Fundamental to audit function
Necessary to support the audit opinion regarding assertions management makes in the FS
How is it obtained?
Conducting of an audit procedure (eg: testing calculations on accounting records)
From other sources
Types
Source documents and accounting records
- Invoice, Cashbook, General Ledger, Reconciliations
Substantive information – Other sources
- Written, Oral, Mathematical, Physical, Electronic, Confirmations from 3 rd parties, Minutes, Reports of analysis
SUFFICIENT EVIDENCE: (how much?)
- Relates to the quantity gathered. The auditor must evaluate whether enough audit evidence has been gathered to support an
opinion.
- This is important because auditors perform procedures on samples of populations instead of testing every transaction. Evidence is
cumulative and many procedures need to be performed to gather a bit of evidence from each along the way.
- This is a very subjective decision requiring a lot of professional judgement.
- Relates to the extent of testing done (which is a component of the audit plan being the nature and timing of tests)
APPROPRIATE EVIDENCE: (how good?)
- Relates to the quality of the evidence gathered. This can be broken down into:
(1) Reliability (source and nature)
Most reliable = Developed by the auditor
Reasonably reliable = Provided by an independent, competent and reputable 3 rd party
Least reliable = From the client
Written evidence is more reliable than oral evidence
The auditor will have to rely on evidence from all of the above regardless of their source.
(2) Relevance (to the assertion that is being audited)
Substantive procedures
Influenced by?
- Risk evaluation (IR and CR)
- Materiality of the item being examined
- Previous experience of audits
- Results of audit procedures previously conducted
- Source and reliability of information available
- Persuasiveness of audit evidence
- Cost vs benefit
OBTAINING AUDIT EVIDENCE: (forms part of the Audit Procedures)
Risk assessment procedures (Knowledge of environment and internal controls)
Knowledge of Internal Control System
STEP 1: ID risks of material misstatement
STEP 2: Preliminary evaluation of risks
IC’s don’t work Weak IC’s No reliance More SP Less TOC
IC’s work Good IC’s Reliance Less SP More ToC
No IC’s No reliance Detail SP No TOC
