Professional Documents
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Isa 500
Isa 500
AUDIT EVIDENCE
INTERDOUCATION
The Auditor should obtain sufficient appropriate audit evidence to be
able to draw reasonable conclusions on which to base the audit opinion.
Auditor obtain most of the audit evidence from accounting records of the
entity, if accounting records do not provide sufficient audit evidence
(because accounting records are internally generated) the auditor obtain
other audit evidence.
Other information that the auditor may use as audit evidence includes
minutes of meetings, confirmations from third parties, analysis reports,
comparable data about competitors , information obtained by the auditor
from such audit procedures as inquiry, observations and inspection and other
information developed by or available to the auditor that permits auditor that
permits auditor to reach conclusions through valid reasoning.
SUFFICIENT APPROPRIATE AUDIT EVIDENCE
Sufficient;
The measure of quantity of audit evidence.
Appropriate;
The measure of quality i.e. relevance and reliability in providing support for
detecting misstatements in account balance, classes of transactions and
disclosures and relevant assertions.
The risk of misstatement ( the grater the risk, the more audit evidence is
likely to be required and;
The quality of such audit evidence ( the higher the quality, the less may
be required)
The auditor often obtain evidence about assertion from different sources of
different nature e.g. auditor may analyze the aging of account receivable
and subsequent collection of receivable to obtain audit evidence regarding
valuation of allowance for Doubtful Debts.
o Internal source
Through accounting system, management, employee underlying
documentations etc.
o External Source
Third parties, i.e. suppliers, customers, bankers, legal advisors and other
parties who have knowledge of the enterprise.
Auditor’s reliance increase when audit evidence obtained from one source
is consistent with another source; if it is inconsistent further procedures
may be performed.
Cost of obtaining the audit evidence is also considered when obtaining it.
While forming an audit opinion, the auditor does not have to examine all
the items or obtain all the evidence which might be available. He can reach
to a conclusion by examining a sample of such transactions. He also relies
on persuasive evidences However, if evidence is less than persuasive, he
should not consider it reliable.
Nature and timing of audit producer may be affected by the entity’s data
retention policies or their practices to convert source documents id not
computer images through scanning, meaning of communication being used
by the entity e.g. electronic messaging rather than written purchase orders.
The auditor uses one or more types of audit procedures described below.
Inspection of records or Documents
Inquiry
Confirmations
Recalculation
Reperformance
Analytical Procedures
It consists of evaluations of financial information made by a study of
relationship among both financial and non Financial data. It includes
investigation of significant fluctuations found and the relationship that are
inconsistent.