AUDIT EVIDENCE
Audit programs should take into consideration the audit evidence required/desired as well as the various data gathering techniques.
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The rules/standards of audit evidence dictate that the evidence gathered during the audit be:
· Sufficient, persuasive. This requires the exercise of good professional judgement. Audit evidence from the most to least persuasive include: physical examination; externally prepared; observations; inquiries/testimonial.
· Competent. Obtaining the best quality of evidence available.
· Useful. Evidence supporting goals and objectives.
· Relevant. Evidence needs to be logical and sensible relative to the audit finding.
The types of audit evidence include:
· Analytical. Review of relationships.
· Documentary. Evidence exists in some permanent form.
· Physical. Evidence is obtained via direct observations.
· Testimonial. Statements made by customers/management; typically needs to be corroborated.
Audit programs should also consider the source of information/evidence (has it been "tainted"?):
· Internal (bank account reconciliation, for example)
· Internal - External - Internal (check)
· External - Internal (bank statement)
· External (bank account confirmation returned directly to the auditor)
Various techniques are used to gather audit evidence:
· Physical Examination
· Confirmation
· Observation
· Recalculating
· Reconciliation
· Inquiry
· Inspecting
· Analytical Procedures
· Detail Testing
When designing detailed audit tests a distinction should be made between "tracing" and "vouching" for two important reasons:
· Tracing (going from the source document) is a completeness test; vouching is not.
· Tracing detects inappropriate exclusion; vouching may not. Therefore, for example, when looking for fraud tracing and not vouching tests are necessary.
The overall development of the audit program should demonstrate appropriate "linkage" between:
Organization/auditable entity objectives
Audit objectives
Management assertions - financial, operational, compliance, specific
Controls
Risks
Types of audit evidence desired
Data gathering technique
Audit test
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