Audit Evidence and Procedures
Sufficiency and appropriateness
Audit evidence must be sufficient (quantity) and appropriate (relevance and reliability). Reliability depends on source and nature: external evidence is generally more reliable than internal; original documents more than copies; auditor-obtained evidence more than client-provided; documentary more than oral. Understand the assertions: existence, rights and obligations, completeness, valuation and allocation, presentation and disclosure, and for classes of transactions, occurrence, completeness, accuracy, cutoff, classification.
Procedures
Know the main procedures: inspection, observation, external confirmation, recalculation, reperformance, analytical procedures, and inquiry. Understand direction of testing: testing from source documents to records tests completeness; testing from records to source documents tests existence. Analytical procedures are used in planning, as substantive procedures, and in overall review.
Traps in questions
Distractors suggest that more evidence compensates for poor quality, or that internal evidence is as reliable as external. Another trap confuses the assertion tested by a given direction of testing. Watch for questions implying analytical procedures alone are sufficient for all assertions.
Rule of thumb
When evidence is less reliable, obtain more of it or corroborate with a more reliable source. Vouching from ledger to document tests existence; tracing from document to ledger tests completeness.
Worked example
To test completeness of recorded sales, the auditor selects from shipping documents and traces to sales invoices and the sales ledger. Selecting from the ledger and vouching to shipping documents would test occurrence, not completeness.