ISA 500 audit evidence sets out the standards and
guidelines as to what constitutes suitable audit evidence. It will be apparent
by now that the purpose of all the auditor’s planning and testing work is the
gathering of sufficient appropriate evidence which can be used to substantiate
the audit opinion.
guidelines as to what constitutes suitable audit evidence. It will be apparent
by now that the purpose of all the auditor’s planning and testing work is the
gathering of sufficient appropriate evidence which can be used to substantiate
the audit opinion.
It says:
The auditor should obtain sufficient appropriate
evidence to be able to draw reasonable conclusions on which to base the audit
opinion.
evidence to be able to draw reasonable conclusions on which to base the audit
opinion.
“audit evidence” is all the information used by the
auditor in arriving at the conclusions on which the audit opinion is based, and
includes all the information contained in the accounting records underlying the
financial statements and other information. Auditors are not expected to
address all the information that may exist.
auditor in arriving at the conclusions on which the audit opinion is based, and
includes all the information contained in the accounting records underlying the
financial statements and other information. Auditors are not expected to
address all the information that may exist.
This extract from the international standard tells
us two things:
us two things:
·
Evidence
has to be ‘sufficient’ and ‘appropriate;”
Evidence
has to be ‘sufficient’ and ‘appropriate;”
·
That
auditors do not have to look at everything.
That
auditors do not have to look at everything.
Sufficiency is the measure of the amount of
evidence gathered and appropriateness is a measure of its quality, its fitness
for purpose.
evidence gathered and appropriateness is a measure of its quality, its fitness
for purpose.
For example, an auditor looking at fixed assets
verification may go and inspect the relevant assets. This may be sufficient
evidence if the auditor can inspect a significant number of the relevant assets
and it may be appropriate-but only as far as existence of the assets are
concerned. An inspection of assets can prove they exist, but only as far as
existence of the assets are concerned. An inspection of assets can prove they
exist, but it doesn’t prove the client owns them- another test has to be done
for that.
verification may go and inspect the relevant assets. This may be sufficient
evidence if the auditor can inspect a significant number of the relevant assets
and it may be appropriate-but only as far as existence of the assets are
concerned. An inspection of assets can prove they exist, but only as far as
existence of the assets are concerned. An inspection of assets can prove they
exist, but it doesn’t prove the client owns them- another test has to be done
for that.
