ADVANCE AUDIT

Assignment no 4
Topic : Audit evidence
Section: A
Presented to: Prof IMRAN SHEHZAD

Presented by: ABEERA SAEED L1F18MCOM7024

 AUDIT EVIDENCE
Audit evidence is evidence obtained by auditors during a financial audit and recorded in
the audit working papers. Auditors need audit evidence to see if a company has the correct
information considering their financial transactions so a C.P.A. (Certified Public Accountant)
can confirm their financial statements. And in case of fraud that can occur in future

What are examples of audit evidence?

For an example of audit evidence:

 Financial statements.

 Accounting information.

 Bank accounts.

 Management Accounts.

 Fixed Assets Register.

 Payrolls Listing.

 Banks Statements.

 Bank confirmation.

What are the 6 types of audit evidence?

Physical examination: inspection or count or tangible assets

actually count cash, inventory; actually go to building

Observation: Observation is where the auditor of the company observes the various activities of
the clients and their employees before making any conclusion

Confirmation: receipt of written or oral repsonse from independent 3rd party, verifying
accuracy of info requested by auditor
3 types:
1) positive blank (most reliable)
2) positive w info already filled in
3) negative

Analytical review: Analytical procedure is normally used by the auditor to assess the
transactions or amounts in the financial statements through other financial and non-financial
data
Recalculation The auditor sometimes recalculates some depreciation expenses that prepare by
management e.g conduct math etc

Inquiry: written or oral response to questions - not usually done by itself

ex: ask client about A/R collection

Re performance: The auditor sometimes re-performs bank reconciliation that prepares by the
client.

Quality of Audit Evidence: If the information is not strong or low quality, the audit risks of
making incorrect audit opinions are high.

The quality of audit evidence is dependent mainly on the form and source of the evidence.
Here is the detail:

 External Source: The evidence that obtains directly from external parties like customers,
suppliers, or banks are more reliable than obtaining from clients. For example, accounts
receivable confirmations that obtain from client’s customers are more reliable than the
records that prepare by clients.

 Prepare by Auditor: The evidence that prepares by auditors themselves are more reliable
than the one that prepares by or obtains from the client. For example, the bank
reconciliation that prepares by the auditor is more reliable than the bank reconciliation
prepared by the accountant.

 Prepare by client: The level of reliability of evidence that obtains from clients are
depending on the reliability of client internal control.

 Written form: The audit evidence that forms in writing is more reliable than the one that
forms in verbal. For example, management confirmation in the form of email is more
reliable than the confirmation by verbal.

 Original Form: Original invoices that use to support the payments transactions are more
reliable than the copy invoices.

What are the qualities of good audit evidence?

Audit evidence is information needed by the auditor in order to reach the conclusion on whether
financial statements show a true and fair view. The qualities of good audit evidence are
determined in relation to its relevance, reliability, and Sufficiency.

Auditor is require to retain audit evidence for 6 years

Audit working papers are the documents which record during the course of audit audit
evidence obtained during financial statements auditing, internal management auditing,
information systems auditing, and investigations. .That the evidence is sufficient and appropriate
to support the audit opinion