Which data gathering methods are available for use to provide sufficient and appropriate audit evidence?
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Audit Evidence and methods of collecting Audit Evidences
The outcome of an audit is a report, usually expressing an opinion.That report and opinion must be supportable by the auditor, if challenged.Therefore, the auditor will collect evidence on which to base his report and opinion. These evidences are called Audit Evidences. The auditor carries out procedures known as ‘audit tests’ in order to generate this evidence.These tests, the evidence and the
conclusions drawn must be documented. Auditor forum has already discussed Audit Evidence and Sufficient appropriate audit evidence through Sufficient Appropriate Audit Evidence and related Question and Answers. Physical Examination: Physical examination means physical verification of an asset, such as stocks, investment certificates and fixed assets, as an evidence of its existence and its condition. Third party confirmation: Confirmation of an amount or other information shown in the client’s records by an independent third party provides a reliable evidence of the existence of the amount and correctness of the information, as the case may be. For example, receivables, payable, contingent liabilities, stock with third parties etc. Examination of original records: Original records like ownership documents, bills, notices etc. provide a reliable and conclusive evidence of the legal claims, transactions, balances etc. Re-computation: Re computation technique is applied to prove arithmetical accuracy of a transaction and to verify that the computation is in accordance with the rules, procedures and acceptable practices. The areas where re-computation techniques are generally applied include depreciation computations, bonus calculations, provisions etc. Enquiry: Enquiry consists of seeking information from knowledgeable persons, both financial and non-financial, within the entity or outside the entity. The enquiry may not provide conclusive audit evidence but it may give some form of clue which may lead to further verification. Analytical Procedures: Analytical procedures consist of evaluations of financial information through analysis of plausible relationships among financial as well as non-financial data. Analytical procedures also encompass investigation of identified fluctuations or relationships that are inconsistent with other relevant information or that differ from expected values by a significant amount. For more information about this topic keep exploring auditorforum.com. We are keen to know your feedback in comments.
Audit Evidence TechniquesISA 500 Audit Evidence identifies eight types of evidence gathering procedure that the auditor can adopt to obtain audit evidence. Inspection of documents and records
Inspection of tangible assets
Observation
You need to remember that this is only evidence that the control was operating properly at the time of the observation, and the auditor's presence may have had an influence on the client's staff's behaviour. Observation of a one-off event, e.g. an inventory count, may well give good evidence that the procedure was carried out effectively. EnquiryWhilst a major source of evidence, the results of enquiries will usually need to be corroborated in some way through other audit procedures. This is because responses generated by the audit client are considered to be of a low quality due to their inherent bias. The answers to enquiries may themselves be corroborative evidence. In particular they may be used to corroborate the results of analytical procedures. Management representations are part of overall enquiries. These involve obtaining written responses from management to confirm oral enquiries. These are considered further in chapter on completion and review. Confirmation
RecalculationThis involves checking the arithmetical accuracy of the client's calculations, e.g. depreciation amounts. ReperformanceThis involves reperforming client procedures, e.g. test checking inventory counts. Analytical proceduresThese involve the comparisons of sets of data to identify trends and understand the relationships between the sets of data.
Which is the best method of gathering data for audit?Interviewing is a powerful data collection technique, which works well on its own and is often used to support other techniques, such as observation. The interviewee's insights can guide the Internal Auditor's decisions about what to observe.
What is sufficient appropriate audit evidence?To be appropriate, audit evidence must be both relevant and reliable in providing support for the conclusions on which the auditor's opinion is based.
What are the 4 types of audit evidence?Audit evidence is collected through audit procedures.. Physical examination. ... . Confirmations. ... . Documentary evidence. ... . Analytical procedures. ... . Oral evidence. ... . Accounting system. ... . Re-performance.. What is the most effective procedure in gathering evidences?Evidence obtained through the team's direct physical examination, observation, computation, and inspection is generally more reliable than evidence obtained indirectly. Evidence can also be obtained indirectly when information is gathered by internal audit, experts or third parties, such as that found in reports.
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