Audit evidence (also referred to as evidential matter) refers to
the necessary information that an auditor gathers in order to form
a credible opinion on the assertions
the client's management that are inherent in the financial
statements. This evidence will therefore often include information
relating to the completeness, validity and accuracy of the recorded
value of assets, liabilities and equity of the client entity. Some
examples of audit evidence follow.
- In the client acceptance/retention stage, audit evidence
includes information that enables the auditor to determine
whether to accept or reject an entity as a client, such as
information relating to the prospective client's industry, Board of
Directors, products manufactured, etc..
- In the audit planning stage, audit evidence includes
information that enables the auditor to determine the audit
approach, such as information relating to the likely effectiveness
of particular internal control procedures.
- In the control testing stage, audit evidence includes
information that assists the auditor in determining whether or
not internal controls are effective in their operation, such as
information as to whether a particular control procedure is or is
- In the substantive testing stage, audit evidence includes
information as to whether a particular account balance is complete,
valid and accurate, such as evidence that an asset actually
- In the opinion formulation stage, audit evidence includes
information relating to the completeness, validity and accuracy of
the financial statements as a whole, such as information relating
to the consistency of the financial statements with the auditor's
knowledge of the business.
Auditors gather evidence of sufficient quantity and appropriate quality to form
their opinion on the financial statements. However, see
Journal of Accountancy article
Audit Deficiencies which indicates that 80% of audit deficiencies in SEC enforcement actions over a 10 year period related to the auditor's failure to gather sufficient audit evidence.
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