Types of evidence in the external audit

There are many types of evidence that help the auditors and business owners make appropriate decisions for the company

Amer Ibrahim - • External audit and audit


Companies need a continuous audit to determine the percentage of profits and expenses and ensure no embezzlement or fraud. Therefore, they need a professional auditor to evaluate their lists and books using many types of evidence.

Evidence is facts, information and documents used by the auditor to form an opinion or decision on the truthfulness of the values mentioned in the financial statements.

Getting an accurate opinion of a professional auditor can only be achieved by using types of evidence in the audit accurately for each point within the financial statements. Business owners will make many decisions depending on the auditor’s opinion.

Therefore, the auditor’s profession is complex and needs careful focus on each important financial statement during the auditing to obtain the types of evidence, which can be obtained by following several sequential steps

Steps for getting types of evidence

Each entry recorded in the company’s books is called the statement, and the auditor needs to review all statements which affect the audit report. This is done by the following

The auditor determines the type of statement he wants to audit

Determines how important it is in the audit

The auditor collects all the information about the statement and possible evidence.

The auditor decides whether the types of evidence collected are sufficient or if there is a need for more? And the extent to which evidence relating to the subject are being audited.

The auditor issues a report and opinion on the subject of an audit to determine whether it is correct or manipulative

What are the characteristics of the types of evidence

Many features must be available in the types of evidence external audit  which can be limited to two characteristics.

The first feature

The decisive argument to support the auditor’s decision and opinion on the validity of the financial statements

The second feature

Evidence should be valid and related to the subject of the audit

As we can see, types of evidence play a vital role in determining the auditor’s report. Of course, there are different types of evidence whose importance to the audit subject is determined according to the auditor’s opinion. These types can be limited to As we can see, types of evidence play a vital role in determining the auditor’s report. Different types of evidence have different levels of importance to the subject of an audit, determined by the auditor’s opinion.

Types of evidence

The actual presence of the audit topic

Internal and external books and documents related to the statement

Written or oral statements and certificates provided to the auditor from the company’s management

What auditor receive from third parties

internal system of supervision

Processes performed after submitting lists for audit

Interrelation between data and audit topic

The results of calculations that the auditor had conducted himself

What should be considered when getting types of evidence in the audit?

There are several considerations to keep in mind when collecting evidence for an audit. Such as the relative importance of the evidence and the degree of risk that surrounds whatever will be audited

The types of evidence an auditor tries to obtain are not hard to find. They are normal, and the strength of their argument varies according to their different types. For example, when examining assets, actual existence is considered solid proof, and its argument is greater than using documents proving its existence and so on.

The urgency of getting this complex guide depends on the estimation of the auditor, who determines whether the evidence is very important or irreplaceable. Some types of evidence are pretty challenging to obtain, such as getting documents or statements from third parties or inventing goods at company branches in distant places. Therefore, the auditor should consider the cost they will pay for obtaining evidence, whether it is the cost of time or effort.

The auditor issued his report and expressed his opinion based on the lists and documents he could obtain. The auditor does not guarantee that the financial statements are entirely free of errors when issuing the report. Sometimes the types of evidence he used are insufficient and adequate to make the decision and cannot obtain more substantial evidence and makes his decision based only on the available evidence

Explain the types of evidence in the audit

Internal and external books and documents related to the statement

Of course, books and documents are the most commonly used types of evidence among auditors. They are considered the actual proof in the audit. The final auditor’s report is based on more than 80% of the books and documents that belong to the audited statement. This is perhaps the main reason why all merchants and business owners maintain books for transactions received and issued by their trade. Examples of such documents include buying and selling invoices, records of checking and receiving goods, records of meetings between board members, contracts and credit invoices. These documents can be internal by project personnel or external documents made by customers. External documents are considered stronger and better in argument than internal documents, which are likely to carry out fraud and forgery efficiently

The actual existence of the audit topic

The actual presence of the subject under review is considered to be the strongest and best type of evidence. The auditor can quickly inspect the object, ensure that it is valid, and ensure that it is appropriately proven in the lists. Its ownership papers must be verified. However, this guide cannot be applied to all listing data but only actual data. Examples of assets to which evidence of actual presence can be applied are land, goods, cash and investments, while it cannot be used for intangible assets such as shop fame. The auditor must also physically inventory assets by proving the asset’s status. For example, the asset may be unusable or has signs of progress and has not been used for a while, or its quality has been said. The auditor should be interested in proving all these cases as they significantly affect the auditor’s final opinion

Internal control system

Large businesses set up an internal control system to monitor work and ensure that the books and documents are accurate. The auditor should check if it is working correctly before relying on its information.

Written or oral statements and certificates provided to the auditor from the company’s management

Sometimes the auditor may rely on statements and certificates provided by managers or company employees. Still, the auditor should consider this evidence unsupported as it is highly likely to lie and cheat. In some cases, project managers or employees deceive the auditors with fake statements and certificates. Therefore, care should be taken when dealing with this type of evidence and reduce its use. However, when no other evidence is available, the professional auditor performs tests and ensures their safety. Sometimes the auditor’s experience and skill play in detecting this forgery without performing tests. Statements and certificates are divided into written statements such as a certificate of valuation of the goods and inventory or oral statements such as answers to some of the questions he gets himself from the company’s employees, such as asking them about the fact of the items recorded in the books or his queries about assets

Processes carried out after submitting lists for auditing

The audit process takes a long time to issue its final report. During this period, the company may implement new processes that have not been recorded in the books delivered to the auditor. The auditor must follow these processes and consider them appropriate evidence. For example, the auditor can track the payment of one of the debts owed by the company that is required to be paid during the audit period and confirm whether it has been paid or not

Statements provided to the auditor from third parties

Statements from third parties are one of the most vital types of evidence in the audit The auditor uses statements from a person who is not work in the company and has no interest in counterfeiting For example, a customer’s acknowledgement of the accuracy of his account owed within the company’s books or bank statements regarding their cash account owned by the company The auditor’s responsibility is to obtain these declarations by himself or by his assistants without company interference

Interrelation between data and audit topic

The professional auditor sees the correlation and consistency between the data obtained and considers it good evidence. For example, there must be a correlation between the value of loans and the value of interest accrued or between the inventory of goods and goods sold

The results of calculations conducted by the auditor himself

To confirm the validity of the financial statements, the auditor performs calculations to confirm the validity of the values and totals he wrote. The auditor must also ascertain the value of the commissions calculated, but it can be facilitated using electronic accounting programs issued Unquestionable results. A professional auditor should use everything available to conduct a professional audit and issue an accurate report to help business owners make appropriate decisions for the company. This is what different types types of evidence achieve, which we explained in detail in today’s article at ECPA

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