Audit evidence comprises various types, primarily categorized by source and method: Physical Examination (tangible assets), Inspection (documents/records), Confirmation (third-party verification), Inquiry/Testimony (oral/written statements), Recalculation/Reperformance (checking math/processes), Analytical Procedures (ratios/trends), and Observation (watching procedures), all used to support an auditor's opinion on financial statements, with reliability varying by source (external/third-party often more reliable).
The eight primary types of audit evidence include physical examination, confirmations, documentary evidence, analytical procedures, oral evidence, the accounting system, reperformance, and observatory evidence.
What Are the Types of Audit Evidence?
Audit evidence is critical for verifying the accuracy of financial statements and supporting auditors' opinions. Different types of audit evidence include physical examination, documentation, observations, inquiries, confirmations, analytical procedures, and reperformance.
What are audit procedures?
A successful internal audit function relies on four fundamental pillars, often referred to as the “4 C's”: Competence, Confidentiality, Communication, and Collaboration. These principles guide auditors in delivering meaningful and impactful results. Let's explore each of these elements in detail.
Physical Evidence
This type of evidence is tangible and as a result, it is the most reliable and persuasive form of evidence that can be used in any internal and external audit. Such evidence can be: Counted. Inspected.
Internal Audit Reports: The 5 Cs
Criteria: What needs to be audited and why? Condition: What are the observed circumstances surrounding any issues? Consequence: How do the issues found affect the company? This might include financial, regulatory, security, publicity, or other effects.
5 Common Sources Of Substantive Audit Evidence
The three main types of audits, focusing on who performs them, are Internal Audits (by employees for improvement), External Audits (by independent CPAs for stakeholders), and Government Audits/IRS Audits (by tax authorities). Alternatively, focusing on the purpose, they can be categorized as Financial Audits (financial statements), Compliance Audits (rules/regulations), and Operational Audits (efficiency/effectiveness).
a) Primary audit evidence
This is the type of evidence which the auditor gathers from within the company, basically from accounting records and source documents.
Types of audit evidence
Let's take a closer look at each of the different assertion types and how they work.
The four common types of auditors are Internal Auditors (evaluating internal controls), External Auditors (independent financial statement reviews), Government Auditors (public sector compliance and performance), and Forensic Auditors (investigating fraud and financial crime). Other important types include IT auditors, compliance auditors, and tax auditors, all focused on different areas of an organization's operations and financial health.
Objectivity is the cornerstone of the internal audit golden rule. Auditors must approach their work without bias, ensuring their evaluations are fair, impartial, and based solely on evidence.
Fundamental Principles Governing an Audit:
The Big 4 are the largest accounting and auditing firms in the world: Deloitte LLP (Deloitte), PricewaterhouseCoopers (PwC), Ernst & Young (EY) and Klynveld Peat Marwick Goerdeler (KPMG).
Audit procedures to obtain audit evidence can include inspection, observation, confirmation, recalculation, reperformance and analytical procedures, often in some combination, in addition to inquiry.
Examples of audit documentation include memoranda, confirmations, correspondence, schedules, audit programs, and letters of representation. Audit documentation may be in the form of paper, electronic files, or other media.
The Audit Bureau of Circulations (ABC) of India is a non-profit circulation-audit organisation. It certifies and audits the circulations of major publications, including newspapers and magazines in India.
The SMETA 4 pillar audit is a comprehensive assessment framework designed to assess and improve a company's ethical performance and evaluate its compliance with ethical trade practices across all four key areas discussed above.
What happens during an audit? Internal audit conducts assurance audits through a five-phase process which includes selection, planning, conducting fieldwork, reporting results, and following up on corrective action plans.