Auditing Evidence
dAn auditor must make
efforts to collect sufficient and appropriate audit evidence while
auditing. Sufficient refers to the quantum of audit evidence and
appropriateness relates to relevance and reliability. The audit
evidence collected must in totality enable the auditor to form and
opinion on the financial information subjected to audit. Audit evidence
is usually obtained on a selective basis by way of judgmental or
statistical sampling. Obtaining auditing evidence from compliance
procedures is to reasonable assuring the auditor about the existence of
effective internal control procedures.
The auditor obtains evidence in performing compliance and substantive
auditing procedures by one or more ways namely; Inspection,
Observation, Inquiry and confirmation, Computation and Analytical
review.
Inspection requires physical examination of records, documents, and
tangible assets in the course of auditing. Inspection of documents
usually provides evidence of varying degree of reliability depending
upon their nature and source of origination. Inspection of tangible
assets is one of the methods to obtain reliable auditing evidence with
respect to their existence but not necessarily of their ownership and
value.
Observations consist of witnessing a process or procedure being
performed by others. While auditing the behaviors of the employees must
be observed and in case some abnormal things are observed thorough
investigations may be done.
Inquiry consists of seeking appropriate information from knowledgeable
persons inside or outside the entity. Confirmation consists of the
response to an enquiry to corroborate information contained in the
accounting records.
Computations consist of checking the arithmetical accuracy of the
source documents and accounting records or performing independent
calculations. The auditor may perform his own calculation to cross
check calculations provided by the client
Analytical review consists studying the significant ratios and trends
and investigating unusual fluctuations and items. The review may
consisting may analyze the clients data with industry standards if
required and also with previous years where data is available so check
unusual movements.