Audit Evidence

Question 1

What is audit evidence?

Answer 1

Audit evidence is defined as information that is collected or gathered by the auditor which is part of their work process that will assist them in concluding their opinion on whether the financial statements prepared by an entity are prepared in all material respect and in accordance with the applicable financial reporting framework.

Question 2

How types of audit evidence do you commonly have?

Name them

Answer 2

There are two types of audit evidence.

1. Sufficient
2. Appropriate

Question 3

What is sufficient audit evidence?

Answer 3

sufficient audit evidence relates to the quantity of the audit evidence collected or gathered by the auditor. The auditor should apply professional judgement in determining whether the audit evidence that he/she has collected is enough since he/she won’t go through every transaction that occurred in the entity’s books but rather perform procedures on the samples of populations.

Since there is no fast/hard way in which the quantity of audit evidence required can be precisely calculated, it lies in the hand of the auditor to apply his professional judgement on whether or not the audit evidence collected is sufficient enough.

Question 4

What further complicates the decision on determining whether the audit evidence collected or gathered is sufficient>

Answer 4

The question of sufficiency is further complicated by the fact that evidence about assertion is not gathered by performing a single procedure, but by performing a number of procedures each of which contributes some evidence.

Question 5

What is Appropriate Audit evidence?

Answer 5

The appropriateness of audit evidence relates to the quality of the audit evidence. this is further broken down into two components namely:

1. Reliability (source of nature)
2. Relevance of the evidence to the assertion which is being audited.

Question 6

Explain what is meant by reliable in the context of appropriate audit evidence.

Answer 6

Some evidence is more reliable than other evidence which means there is a hierarchy of reliability for audit evidence which can be expressed as follows:

1. Evidence developed by the auditor is the most reliable source.
2. Evidence provided directly by the third party to the auditor (as opposed to the client) is reasonably reliable evidence, provided that the third party is independent of the client, reputable, and competent.
3. Evidence was obtained from the third party but was passed through the client is less reliable as the client may have the opportunity to tamper with the evidence.
4. Evidence generated through the client’s system will be more reliable when related internal controls are effective.
5. Evidence provided by the client is least reliable as it lacks independence.
6. Written evidence whether is on paper or electronic is considered more reliable than oral evidence since oral evidence can be denied/ misinterpreted.
7. Evidence provided by the original document is more reliable than photocopied/duplicated evidence.

Question 7

Explain what is mean by relevant in the context of appropriate audit evidence.

Answer 7

The relevance of audit means its relevance to the assertion which is being audited. it is very important that the auditor understands exactly which assertion the evidence being gathered relates.

When conducting a test of controls which part of the “further” audit procedures done in order tp ensure that sufficient and appropriate audit evidence is collected/gathered, the auditor tries to determine whether the major objective of the accounting system and related to internal control to produce valid, accurate and complete information is being achieved. in doing so, the auditor obtains evidence relating to the occurrence, accuracy, cut-off, classification, and completeness assertions relating to transactions processed through the accounting system. The auditor must be quite sure as to which assertion the procedure being performed is relevant to.p

Question 8

What are the factors that influence whether audit evidence obtained is sufficient and Appropriate?

Answer 8

1. The significance of the potential misstatement in the assertion.
2. The materiality of the account heading being examined.
3. Experience gained during previous audits.
4. Results of the audit procedure already conducted.
5. Source and reliability of the information available.
6. The persuasiveness of the audite evidence