A file can contain hundreds of invoices without answering whether liabilities that should have been recorded were omitted. The auditor evaluates evidence against an assertion, a management claim embodied in financial statement amounts or disclosures.
Audit evidence is information the auditor uses to support audit conclusions, including information that challenges management's accounting or explanations. Appropriateness describes evidence quality through relevance and reliability, requiring both a connection to the objective and dependable information.
- Sufficiency: The quantity of evidence needed, considering the assessed risk of material misstatement and the quality of available evidence.
- Relevance: The connection between information, the assertion addressed, and the particular objective of the audit procedure.
- Reliability: The dependability of information, considering its source, nature, preparation, and the circumstances under which the auditor obtains it.
Higher risk ordinarily requires more evidence and greater persuasiveness because vulnerable assertions require stronger support for an audit conclusion. Better quality can reduce the quantity needed, but repeating an irrelevant procedure cannot establish an untested assertion.
Common mistakes
- Reconciliation becomes proof. The matching $480,000 schedule in Example 2 leaves year-end receipt of Transfer 184 unresolved.
- External origin decides everything. The known clerk's January 2 message requires investigation of its information basis, despite its dependable delivery channel.
- Specialist credentials replace evaluation. An appraiser's license does not resolve the industrial-use assumption contradicted by the zoning record.
Bottom line
- Sufficiency concerns quantity; appropriateness concerns relevance and reliability.
- Evidence selection connects the assertion to suitable sources, testing direction, timing, and detail.
- External information, management specialist work, and auditor-developed evidence require evaluation of their underlying reliability.
- Independence, direct access, documentary form, and effective controls are qualified reliability tendencies.
Exam shortcut
Write the missing fact beside the assertion: receipt date, ownership, omitted transaction, or recoverable amount. Select the procedure that can establish that fact. Mark each exhibit's source, date, scope, and route to the auditor before deciding whether it deserves reliance. When records conflict, distinguish different meanings or processing dates from incompatible facts. Look for a supported resolution in the file.
The full lesson (about 4,844 words, 32 min read) adds 2 worked examples, all 5 common mistakes, a self-check, free in the app.
Learning objectives
- III.B1
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