Audit Evidence: Meaning, Types, Properties, Characteristics & Examples

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The term audit is certainly familiar to our ears. Process auditing dilakukan oleh seorang auditor dan ia membutuhkan sebuah bukti audit yang berfungsi sebagai pendahuluan untuk opini berkualitas tinggi.

Auditing itself is defined as the process of collecting evidence from economic activities and aims to harmonize reports.

This evidence can be obtained in several ways, namely examination, observation, and confirmation from the party concerned regarding reports previously submitted to the auditor.

In other words, audit evidence is one of the most important aspects of the process auditing because it concerns the reports produced.

However, there are still some people who underestimate the evidence auditing. In fact, this is the most basic aspect of conducting an audit.

Therefore, this article will discuss audit evidence in full to increase your understanding. The following is the meaning, types and examples of evidence auditing what you must know!

What is Audit Evidence?

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Illustration of the audit process (Freepik.com)

Audit evidence is data or information collected by an auditor to review and analyze financial reports and company transactions.

All company reports must be verified to prove their authenticity. This verification is carried out by an auditor or public accountant.

The authenticity of the evidence is considered sufficient if the results of the report are in accordance with statutory and state law compliance.

The purpose of audit evidence is to support a company's decision making. Apart from that, it also aims to help determine accurate audit procedures in the future.

This evidence is needed so that the auditor can carry out the audit process to produce a competent report. There are several ways to obtain audit evidence that needs to be carried out.

Starting from an inspection which includes a thorough examination of records or documents. Then, continue the observation process regarding company performance.

Next, ask for information from the results of previous observations. After that, calculate the correctness of the data or information and review it analytically.

Types of Audit Evidence

The accuracy of the evidence is the main basis of the process auditing. This is because it refers to the quantity and quality of an audit.

Therefore, there are several types of audit evidence that an auditor usually collects during the process auditing.

Below, we provide an explanation regarding the types:

1. Physical examination

First, an auditor must physically check the existence of assets or property to verify. Not only carrying out verification, but also checking the condition of existing assets.

The purpose of carrying out this examination is as primary evidence of the available assets and the auditor will carry out calculations on these assets. For example, securities, inventory items, cash, and so on.

2. Confirm

Confirmation is a type of audit evidence obtained by the auditor through third party confirmation. This evidence is in the form of answers to requests for information related to the audit objectives.

In this case, the auditor must ensure that the information obtained is truly accurate and precise. Because, this will be used to audit cash, bank balances, accounts payable and receivables.

3. Documentary evidence

Next, the auditor will examine or investigate documents from the client to support previously available information. This process is called documentary evidence.

4. Interview

The process of obtaining audit evidence also includes an interview with the client to obtain information verbally or in writing. The aim is to obtain more accurate evidence from the auditor's questions.

5. Analytical procedures

An auditor will carry out comparisons to assess whether the available data appears reasonable and appropriate. 

For example, making a comparison between the total salary expenses that the company must incur and the number of workers. This is to see whether there are salary payments that are not made properly.

6. Recalculation

If the auditor has obtained all the information from the client, the next step is to recalculate.

This calculation aims to test the accuracy of the client's results. This will later affect the results of the process auditing-it

7. Observation

The last type of audit evidence is observation. Usually, an auditor will make observations at the client company.

The aim is to carry out internal controls and help identify risks that may occur.

Nature of Audit Evidence

Apart from the types above, audit evidence also has characteristics that you need to understand when carrying out the process auditing. The nature of audit evidence is divided into two, namely as follows:

1. Direct evidence

First, direct evidence, which means that audit evidence can be directly relevant to the company management statement to be tested.

For example, an auditor will carry out a physical inspection of company assets. The evidence is in the form of inspection reports which apparently provide direct evidence of the existence of the client's fixed assets.

2. Indirect evidence

Almost the same as the previous nature, this evidence can be said to be relevant to management's statements, but not directly.

For example, if the auditor carries out a control test of the client's fixed assets and determines that everything is running effectively, then this becomes direct evidence.

However, this evidence can also be indirect evidence because there is most likely no material misstatement of the client's fixed assets.

Characteristics of Audit Evidence

In carrying out the audit process, the characteristics of evidence also play an important role. Because, this is related to the accuracy and relevance of evidence.

So, to be clearer, here are some characteristics of audit evidence that you need to know:

1. Accuracy of evidence

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Illustration of audit evidence (Freepik.com)

The first characteristic is the accuracy of the evidence, which means a measure of the quality of audit evidence. This means the relevance and reliability of all company assets.

If the evidence is very precise, it will really help the auditor that the report presented is reasonable and true.

2. Relevance of evidence

Furthermore, evidence must be relevant to the audit objectives before the auditor tests. Because, there may be evidence that is relevant and not for the purpose of the audit, so it will become a problem because it is not transparent.

3. Reliability of evidence

This reliability states how far the evidence can be trusted. This is because it can affect the transparency of documents provided by the company to auditors.

If the reliability is high, it means that the report or document presented is correct and reasonable.

4. Sufficiency of evidence

Next, the auditor needs sufficient evidence to see the extent to which the evidence collected can help make a decision or opinion.

Sufficiency of evidence means that it is closely related to the quantity or amount of evidence that must be obtained. Because, this adequacy is influenced by the auditor's assessment of the risk of errors in presenting documents by the company.

5. Competent

Finally, in the form of evidence competency which is related to the strength of audit evidence. This competency also ensures that evidence from the audit process can be fully trusted.

Example of Audit Evidence

Maybe you are wondering, what are some examples of audit evidence? Relax, here we provide several examples of audit evidence that you should know:

1. Third party documents

This document means it is obtained from a third party in a business. These parties include customers, banks, suppliers, leasing companies, governments, and so on.

2. Internal company documents

Then, the company also internally produces documents as audit evidence. For example, internal memos, registers, internal emails, and so on.

3. Documents prepared by the auditor

The final example is an auditor-prepared document that is systematically compiled to verify the accuracy of the balance. In this case, the auditor will recalculate depreciation, deferred taxes, estimates, and other items.

So, that's a complete discussion of audit evidence that you need to understand. In simple terms, audit evidence is data collected by auditors to review and analyze financial reports and company transactions.

Through this discussion, it can be concluded that the audit process cannot be carried out carelessly by everyone. Because it is closely related to the sustainability of a business.

Therefore, it is best for you to entrust the audit process from Audithink because it provides ease of planning and efficiency of the audit process.

Audithink offer Internal Audit Software which will help your company to carry out the audit process more easily, precisely and accurately, and can be done monitoring in a way real time. If you are interested in using it, you can do it immediately Request Demo and consult all your company's audit needs.

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