Types of audit evidence

Audit Evidence are the data collected and recorded by the auditor during the course of their audit to review and verify the various financial transactions of the firm.

Audit evidence many be collected according to the type of audit performed in the company. They are one of the most reliable sources to make judgements on the financial credibility of the company.

Audit evidence are broadly categorized in major heads, data or information, physical or non- physical, video, audio, email or verbal, auditor may use in any form and source.

  • Physical Evidence– Physical evidence is the type of inspection when the auditor actually verifies the tangible assets of the company. Tangible assets include plant and machinery, furniture and fixture, land and other such assets. It is also applicable on the verification of securities.
  • Testimonial Evidence– The most important type of evidence required while auditing is documentary evidence. Documentations are in the form of third-party confirmation statements, vouchers, invoices, pictures, policy, memo etc. It is one most reliable source than verbal or interview evidences.
  • Journals and ledgers– Books of accounts includes journals and ledgers which are supported by different ledger accounts and statements. A company’s profit and loss account, balance sheet is finalised by ledgers and journals.
  • Oral Evidence– Auditor confirms many their doubts after inquiring from the concerned employee of the company. The answers obtained by the person of the company are recorded/noted by the auditor as part of their evidence.
  • Observations– Some events performed just after finalization of balance sheet are important, as withdrawal after the date of balance sheet, any deposit of larger amount etc.

They are to be carefully observed and taken care of by the auditor.

  • Analysis of information– Trend analysis, like if the company has not been outperforming for last two years and if well performed this year, it has to be analysed by the auditor. This includes calculations on various data of the company. It comes up with coherent narrative and helps the auditor to identify areas of concern which the auditor communicates to the personnel of the company.
  • Ratio– Ratio analysis is the most common analysis an auditor does. They compare financial ratio of the company for different periods or for two similar organization. It helps to identify the lacking of the company, if any.
  • Computer Assisted Audit– Where a company maintains a computerised accounting system, evidences of the same are taken as back up by the auditor, so that even in case of any mis-happening, data can be procured through the computer records.

Audit evidence thus helps in accuracy and authenticity of information furnished by the client. It helps to define a specific outcome of a company’s overall financial position.


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