AUDIT EVIDENCE

Audit evidence usually looks back to the information collected for reviewing the financial transactions of a company to their internal control practices and for the other essential factors that required for certification of their financial statements. The type and amount of the consideration auditing evidence varies significantly on the basis of the type of company being audited to the required scope of the audit. The audit evidence is important to be collected by an auditor during the process of his auditing work.

The first objective of every audit is to find the compliance of a company’s financial statements with the GAAP standards to the jurisdiction of entity. The publicly traded companies are usually had to present full audited financial statements to shareholders at regular intervals.

Sufficient competent evidential matter is to be obtained through inspection, observation, inquiries and confirmation. First of all, inspection is the easiest method of obtain the audit evidence. It refers to checking all documents, records, and physical assets. The reliability of these documents and records depends upon the nature and effectiveness of internal control.

Moreover, observation is another important method of obtaining audit evidence. This method involves the auditor to look at some steps of procedure being exam by others. This method could be exemplified by the auditors’ presence at the clients’ physical stock count. Apart from that, inquiries and confirmation include looking about the info from a knowledgeable person inside or outside the company, and responding to every inquiry to substantiate information in the accounting records. These responses could provide the auditor with info which is not previously possessed by them or even with corroborative evidence.

Refers to Generally Accepted Audit Standards (GAAS), the third standard of field work requires auditor to seek competent evidentiary matter. The evidence must be competence and sufficiency, both of these determine the persuasiveness of evidence. There are some factors affecting competence. Audit evidence must be relevance to the audit objective. Besides, the information received from outside the entity and the evidence from a client whose internal controls are effective is more trustworthy. Other than that, data prepared by someone inside the organization will not be reliable than the data discovered by the auditor. Quality of the individuals that provide information will be an important too because we have to make sure that information received is trusted and reliable and the person who delivered the information is qualified. Also, degree of objective makes the evidence persuasive because objective evidence is more reliable than evidence that is subjective. Lastly, timeliness, not all the data is useful in that period of time, audit report must be submitted on time, if not then it is useless.

In conclusion, audit evidences are important because it used to reach the audit opinion about the company’s financial statement. An audit engagement is carried out an opinion to a third-party, who interested in the company such as banks and investors. They rely on the audit opinion to make investment decisions in relation to the company. They trust the audit opinion because auditor giving out an assurance and quality work.