Introduction to Audit Evidences

Introduction to Audit Evidences​

What is audit evidence?

Audit evidence is the data or information which the auditors would collect or use as part of their audit work to conclude if a company has prepared its financial statements (Also see Accounting – 4 Things about Financial Statements Every Business Owner Should Know) by adhering to the relevant financial structures.

When a company has an audit (Also see How to Ensure Your Company’s Audit Process Goes Smoothly?) , the auditors from the accounting service in Singapore will ensure that they have obtained enough evidence with appropriate quality before they can conclude their opinion on the financial statements of that company.

Adequate and suitable audit evidence is vital for the auditors to establish their audit opinions.

Audit risks which auditor may encounter also rely on the sufficient and appropriate audit evidence. 

An auditor may obtain audit evidence throughout all the stages of the audit process, which includes the planning stage, the execution stage, and lastly, the conclusion stage. As the auditors collect the evidence, they may implement a lot of different procedures that suit them. 

This article will focus on the types of evidence, the procedures that the auditors would use to collect those evidence and its quality.

Types of audit evidence:

Auditors may utilise audit evidence in various sources and forms. Those audit documentation could be information or data, physical or non-physical. Some examples of audit evidence (Also see Introduction to Audit Documentation) include:

– Accounting information

– Bank account

– Bank confirmation

– Bank statements

– Financial statements

– Invoices 

– Management accounts

– Payroll listings 

– Receipts

– Any other documents that a business utilise to support financial events or transactions in its financial statements.

Audit evidence could also be in the form of email, audio, videos, as well as verbal. 

Procedures Needed in Acquiring Audit Evidence: 

Auditors may use numerous procedures to collect audit evidence that supports their conclusions. The procedures are as follows: 

– Audit inquiry: An auditor inquires the management of a company on particular business events or transactions so that they may obtain a better understanding, or they can confirm some relevant assertion. 

– Audit observation: An auditor needs to observe the relationship between specific controls and the performance of financial reporting. 

– Audit inspection: An auditor inspects some evidence or documents which are related to the financial event or transaction.

– Analytical procedure: The auditor would usually use it to examine the amounts or the transactions in a firm’s financial statements (Also see Which is the Most Important Financial Statement?) by using other financial as well as non-financial data.

– Recalculation: For example, the auditor will sometimes recalculate the depreciation expenses that the management of a firm has prepared. 

– Reperformance: Occasionally, the auditor will reperform bank reconciliation that their customers have prepared.

Quality of Audit Evidence:

The quality of audit evidence is vital in ensuring that the auditor has made the right conclusion. 

If the audit evidence is weak or has low quality, there is a high possibility that the auditor would form an incorrect audit opinion. 

The source and the form of audit evidence have a great influence on its quality. 

– External Source: When collecting the audit evidence of a company, the evidence that an auditor gets from external parties, for example, banks, suppliers or banks, are more dependable than obtaining it from the company. As an instance, accounts receivable confirmation that an auditor acquires from the company’s client is more dependable than the records that it has prepared. 

– Prepared by the auditor: The evidence that the auditors have prepared has higher reliability when compared to those that the clients have prepared or provided. For instance, the bank reconciliation that the auditor has prepared is more dependable than that prepared by the accountant of the company. 

– Prepared by customer: The reliability of the internal control of the customer’s company is the crucial determining factor of how reliable the evidence it provides to the auditor is.

– Written form: The audit evidence in writing form is more dependable than that of in a verbal way. As an instance, the confirmation by the management by using email has higher reliability than what the management has spoken.

– Original form: Photocopied invoices are less preferred over the original invoices in terms of supporting the payment transactions


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