Concept of Audit EvidenceConcept of Audit Evidence

Concept of Audit Evidence

6 “Audit evidence” means all the information used by the auditor in arriving at the conclusions on which the auditor’s opinion is based, and includes the information contained in the accounting records underlying the financial report and other information. Auditors are not expected to address all information that may exist, see paragraph 18. Audit evidence, which is cumulative in nature, includes audit evidence obtained from audit procedures performed during the course of the audit and may include audit evidence obtained from other sources such as previous audits and a firm’s quality control procedures for client acceptance and continuance.

7 Accounting records generally include the records of initial entries and supporting records, such as cheques and records of electronic fund transfers, invoices, contracts, the general and subsidiary ledgers, journal entries and other adjustments to the financial report that are not reflected in formal journal entries, and records such as work sheets and spreadsheets supporting cost allocations, computations, reconciliations and disclosures. The entries in the accounting records are often initiated, recorded, processed and reported in electronic form. In addition, the accounting records may be part of integrated systems that share data and support all aspects of the entity’s financial reporting, operations and compliance objectives.

8 Those charged with governance are responsible for the preparation of the financial report based upon the accounting records of the entity. Under paragraph 5 of this Auditing Standard, the auditor needs to obtain some audit evidence by testing the accounting records, for example, through analysis and review, reperforming procedures followed in the financial reporting process, and reconciling related types and applications of the same information. Through the performance of such audit procedures, the auditor may determine that the accounting records are internally consistent and agree to the financial report. However, because accounting records alone do not provide sufficient audit evidence on which to base an auditor’s opinion on the financial report, the auditor, under paragraph 5 of this standard, needs to obtain other audit evidence.

9 Other information that the auditor may use as audit evidence includes minutes of meetings, confirmations from third parties, analysts’ reports, comparable data about competitors (benchmarking), controls manuals, information obtained by the auditor from such audit procedures as enquiry, observation, and inspection, and other information developed by, or available to, the auditor that permits the auditor to reach conclusions through valid reasoning.