Risk Advisory
Audit Evidence: Types, Sources, and Characteristics
What is Audit Evidence?
The information collected by an auditor to determine the accuracy and conformity of a company’s financial statements is referred to as audit evidence. This audit evidence is essential to support the company’s claims in its financial statements as well as its compliance with accounting regulations and corporate governance standards. Examples of audit evidence include bank accounts, management accounts, payrolls, bank statements, invoices, and receipts.
Types of Audit Evidence
Depending Upon Nature
Visual
Oral
- Management confirmations
- Interviews with employees
Documentary Audit Evidence
- Rent agreements
- Purchase orders
- Sales invoices
- Fixed deposit certificates
Depending Upon Source: Internal Audit and External Audit Evidence
External Audit Evidence
- Quotations and confirmations from third parties
Internal Audit Evidence
- Goods received note (GRN)
- Debit Note
- Credit Note
Characteristics of Auditing Evidence
- Sufficiency: Evaluates whether the material presented is of sufficient quantity to allow auditors to make an appropriate judgement.
- Reliability: Establishes whether the content can be trusted and relied on to form an opinion. The source of the information is a key determinant of reliability.
- Source: Information can be obtained directly from the company or externally. Externally sourced information is generally more trustworthy.
- Nature: Refers to the type of information received, whether via legal documents, presentations, orally from employees, or physical confirmation.
- Relevance: How pertinent the information is relative to the type of audit being conducted and the overall analysis.