Session overview

• Session objective
• Purpose , significance & requirement
• Key points
• Discussion & Exercise
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 Objective

At the end of the session you will be able to

demonstrate the understanding of the evidence
collection at various stages of audit and
significance of evidence as evaluated by the Peer

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 Audit Evidence

• Information collected and used to support audit findings;

• Gives auditors a rational basis for forming opinion and judgments;

• Support the contents of an audit report including all observations and

conclusions leading to recommendations;

• Foundation of good audit is effective evidence gathering and data

collection;

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 Types of Audit Evidence
• Documentary evidence

• Oral evidence

• Physical evidence

• Analytical evidence

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 Characteristics of Audit Evidence
– Sufficient
 Matching the level of risk to the level of evidence

– Appropriate
 Relevant
 Valid
 Reliable

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 Identify the type of evidence

1. Photographs, charts, maps, graphs or other pictorial

representations.
2. Statements that are made in response to inquiries or
interviews.
3. Letters or memoranda received by the auditee, suppliers’
invoice, leases, contracts, external and internal audits and
other reports, third party confirmations, accounting records,
copies of outgoing correspondence, job descriptions, plans,
budgets.
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 Types of evidence

1. Photographs, charts, maps, graphs or other pictorial

representations. (Physical Evidence)
2. Statements that are made in response to inquiries or
interviews.(Oral Evidence)
3. Letters or memoranda received by the auditee, suppliers’
invoice, leases, contracts, external and internal audits and
other reports, third party confirmations, accounting records,
copies of outgoing correspondence, job descriptions, plans,
budgets. (Documentary Evidence)
4. Computations, ratios, trends and patterns of data. (Analytical
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 Characteristics of Audit Evidence
Sufficiency of evidence (quantity)

– Greater Audit risk, greater quantity of evidence

– Stronger evidence may allow use of less evidence

– Large volume of evidence does not compensate for lack of relevance,

validity or reliability

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 Characteristics of Audit Evidence

Appropriateness of evidence (quality)

– Is it logically related and important to the issue being considered?

– Does it result from sound reasoning?

– Is it consistent, verifiable?

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 Reliability of audit evidence

– Audit evidence generated internally is reliable

– Audit evidence obtained directly by the auditor is more reliable then audit
evidence obtained indirectly or by inference;
– Audit evidence in documentary form, whether paper, electronic is more reliable
than evidence obtained orally;
– Audit evidence obtained from original documents is more reliable than that
obtained from photocopies, facsimiles or filmed/digitised documents or others
transformed into electronic form, the reliability of which may depend on the
controls over their preparation and maintenance.
– Reliability of audit evidence is increased when it is obtained from independent
sources outside the entity

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 Sources of Evidence
1. Policy Statements and legislation
2. Published programme performance data
3. Interviews
4. File Examination
5. Management reports and reviews
6. Databases
7. External Sources
8. Observation

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 Evidence gathering and Evaluation
This is a simultaneous, systematic and an iterative process and involves:
• Gathering evidence by performing appropriate audit procedures
• Evaluating the evidence obtained as to its sufficiency (quantity) and
appropriateness (quality)
• Re-assessing risk and gathering further evidence as necessary

The evidence gathering and evaluation process should continue until the
auditor is satisfied that sufficient and appropriate evidence exists to
provide a basis for the auditors’ conclusion.

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 Evidence gathering techniques
 Observation  interviews
 Photographs  surveys
 Walkthroughs  Computation
 Inspection  Re-performance
 Inquiry & Confirmation  Benchmarking
 Written Management Representation  Flowcharting
 Review of program/entity database &  Internet searches
files  Analytical procedures

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 Potential weaknesses in audit evidence
• Evidence based on a single source (reliability, validity, sufficiency);
• Oral evidence not supported by documentation or observation (reliability);
• Evidence that is not time-sensitive, i.e. too old and does not reflect changes
(relevance);
• Source of evidence has a vested interest in outcome (reliability);
• Samples collected are not representative (relevance, validity, sufficiency);
• Evidence may be related to an isolated occurrence (validity, sufficiency);
• Evidence is incomplete, i.e. does not demonstrate a cause or effect (reliability,
sufficiency); and
• Evidence is conflicting (reliability).
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 Evidence Analysis
 Getting the data

 Validating the data

 Analysing the data

 Drawing conclusions from the data

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 Evidence Evaluation
• Audit evidence is to be evaluated against the relevant, already identified
criteria.
• Evidence is evaluated in relation to materiality levels to identify instances of
deviations.

• The factors for evaluation may include:

– Importance of amount involved,
– circumstances,
– cause leading to non-compliance,
– possible effects and consequences non-compliances may have,
– Visibility and sensitivity of the programme,
– Needs and expectations of the legislature and public.
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 Drawing Conclusions

 Significance (Materiality)
 Reasonableness
 Further evaluation needed
 Future audit areas

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 Stages in Audit
Development and execution of an audit programme;
Collection and documentation of sufficient, relevant
and reliable evidence, including quantitative and qualitative
analysis;
Development of audit findings, conclusions and
recommendations; and
Development of discussion papers/draft field audit reports and
confirmation of audit findings at exit conference.

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 Audit Documentation
Define
What is it?

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 Audit Documentation

• Audit documentation is the principal record of the basis

for the auditor’s conclusions and provides the principal
support for the representations in the auditor’s report.

• Documentation means the material (working papers)

prepared by and for, or obtained and retained by the
auditor in connection with the performance of the
audit.

• Working papers may be in the form of data stored on

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In-house training media.”
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 Audit Documentation
• Audit documentation includes records
on the planning and performance of the
work, the procedures performed,
evidence obtained, and conclusions
reached by the auditor

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 Purposes of Audit Documentation
• Integral part of audit quality
• Documents the nature, timing and extent of
work performed
• Evidence of due care
• Basis for conclusion
• Facilitates planning, performance and
supervision
• Provides basis for review

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 Key points
All relevant fact and supporting evidence to be included - “No
more, no less”
• All aspects of the addressed audit objectives covered by facts
• All facts included are relevant to the audit objectives
concerned.
• All facts are complemented with supporting evidence or
statements

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 Key points
• All supporting evidence referred to has actually
been included.
• All included evidence is actually referred to and
used
• Reasons for collecting and evaluating evidence are
to ensure whether audit objectives are met and
audit observations/opinions are based on facts
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 "Vision without action is a daydream.
Action without vision is a nightmare.”

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 THANK YOU

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