Audit evidence is the information that the specialist received during the audit and on the basis of which issued the final conclusion to the business entity. Such documents may include primary accounting data, explanatory notes and explanations of the organization’s employees, results of inventory activities, financial statements of the client, data provided to the auditor by third parties.
All audit evidence must be reliable and reliable. And dubious information is either subject to additional verification, or is not considered at all as an argument. To directly obtain the required indicators, the auditor uses testing of controls on-farm activities and other verification procedures. Tests are grounds for a specialist to talk about the rationality of the organization of the accounting and control system. Inspections are essentially aimed at confirming the presence of errors or material misstatements.
The following types of audit evidence can be distinguished:
External evidence includes information and data that the auditor receives from third parties. Internal evidence comes to the specialist as a result of the words of the economic entity itself or company personnel. This information can be expressed both in written and oral form. A mixed view involves the provision of evidence by the client or company employees with the confirmation of third parties in writing.
In the case when the auditor uses documents from different sources that contradict each other, or the opinions of employees differ, it is advisable to apply additional audit procedures. And if the specialist conducting the audit did not receive full information about the audited object due to the refusal of the legal entity itself, then the auditor has every reason to issue a conclusion other than absolutely positive, or to supplement the report with a note about the lack of an information base.
The specialist receives audit evidence through the use of a special audit, which includes the main stages:
- Observation and study.
- Request and receive a response.
- Inventory.
- Recount.
- Analysis.
Studying or inspecting involves reconciling records in statements with actual transactions. The level of reliability and reliability of indicators in this case depends on the present and the effectiveness of internal controls.
Supervision includes systematic monitoring of the work performed by employees of a particular department. The procedure for sending a request and receiving a response is to determine the specific information necessary for conducting a quality audit. That is, the auditor sends a request for access to this data and waits for a positive or negative response.
Inventory and recount allow the specialist to verify the actual compliance of the indicators reflected in the documents and actually existing. Analytical analysis is carried out in order to detect distortions and determine the specific cause of this situation.
Before choosing a specific method, the auditor must determine the size of the sample, that is, the individual areas of application of the methods and techniques of control, or express an opinion on the need for a thorough audit at the enterprise. In this case, the specialist must comply with federal audit standards, which include two basic obligations:
- The individual areas of the accounting report selected by the sample should be an integral part of the general population, that is, correspond to the aspect in which the specialist will make the final conclusion.
- The sample should be a small copy of the population.
Thus, we can say that audit evidence is the most important element confirming the reliability and accuracy of expert conclusions.