Audit Evidence
Domain 2 tests whether evidence is sufficient (quantity) and appropriate (relevance and reliability) to support the opinion.
Reliability hierarchy
- Evidence from independent external sources is generally more reliable than internal evidence.
- Direct auditor evidence beats indirect evidence; original documents beat copies; oral evidence is weakest and needs corroboration.
- Procedures include inspection, observation, inquiry, external confirmation, recalculation, re-performance and analytical procedures.
Key SAs
SA 500 sets the framework; SA 501 covers inventory and litigation; SA 505 external confirmations; SA 540 estimates; SA 550 related parties. Inquiry alone is never enough for a material assertion.
Worked example
Trade receivables include a ₹2 crore balance. A positive confirmation is sent and no reply is received. The auditor performs alternative procedures: checks subsequent receipts, sales invoice, dispatch documents and credit notes. If those corroborate the balance, evidence may be sufficient; if not, the auditor considers a scope limitation and its effect on the opinion. The reasoning is that confirmation is strong external evidence, but non-response does not automatically mean misstatement.
Traps
Treating a management representation letter as a substitute for other evidence; relying on a client-generated debtor ageing without testing completeness; using inquiry alone; and accepting photocopies where originals are available.