What is auditing evidence and define types of audit evidences available to an auditor in the course of audit examination
The role of the
auditor is that of an independent professional critic who investigates,
analyses and evaluates the information underlying the statements as a means of
reaching a conclusion as to their fairness. Before an auditor can express an
opinion on financial statements, he must have sufficient Evidence that –
a) The items in
the financial statements are supported by the balances in the ledger accounts;
b) The balances
in the ledger accounts summarize correctly the numerous debit and credit
entries;
c) The debit and
credit entries in the accounts represent proper accounting interpretation of
all the transactions entered into by the business.
In the audit of
a company, this chain of evidence extends from documents describing individual
transactions through the books of original entry to ledger accounts, and from
ledger accounts to financial statements. The making of an audit may be thought
of as the process of gathering and evaluating sufficient evidence to provide an
adequate basis for expression of an opinion on financial statements.
The auditor
makes tests of the accounting records for the purpose of gathering evidences.
We need evidence that transactions have been properly analyzed and recorded,
evidence of arithmetical accuracy in the records, and evidence that the work of
summarizing the accounts and preparing the statements has been performed
accurately in accordance with generally accepted accounting principles. Other
auditing procedures are also carried out for the purpose of collecting
evidences. We need evidence by physical inspection that the assets listed on
the balance sheet actually exist and owned by the client, evidence that all
liabilities owed by the client are included in the financial statements, and
evidence from banks, customers, and other sources outside the business that
will tend to substantiate the evidence gathered from the accounting records.
Types of
Evidence
As a basis for
his opinion the auditor gathers various types of evidences which are as under:
1) Internal
control
2) Physical
evidence
3) Documentary
evidence
(a) Documentary evidence created outside the organization and
transmitted to auditor;
(b) Documentary evidence created outside the organization and held
by the client;
(c) Documentary evidence created within the organization;
4) Ledgers and
Journals
5) Comparisons
and Ratios
6) Computations
7) Oral evidence
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