Internal Audit Evidence

CA. Heet Shah | Last updated: 01 December 2021

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Quick Summary

Internal audit evidence is crucial for forming an auditor's opinion. It's gathered from company records, systems, processes, and through various audit activities like testing. Evidence must be both sufficient (in quantity) and appropriate (relevant and reliable) to be persuasive and conclusive. Auditors must know how to collect, retain, and review this evidence, modifying procedures if reliability is in doubt.

Information collected from underlying entity records and processes, as well as information from the performance of various audit activities and testing procedures forms part of "Internal Audit Evidence" based on which auditor forms his opinion. Therefore it is critical for an auditor to gather appropriate and reliable audit evidence. So let’s try to understand collection, retention and subsequent review of internal audit evidence.

Evidence is collected either from the underlying company’s books, records, systems and processes or through the performance of audit activities and testing procedures. Documents supporting transactions (e.g., bills/invoices) or business arrangements (e.g., contracts/agreements) are evidences in the nature of the former.

Internal Audit Evidence: Collection and Retention Guide

Evidences are collected by performing one or more of the following audit procedures, i.e., checking, inspection, observation, inquiry, confirmation, computation, re-performance, analytical review and using the help of experts.

Sufficiency and appropriateness are inter-related and apply to evidence obtained. Sufficiency refers to the quantum of evidence gathered while appropriateness relates to its quality or relevance and reliability. Normally, the internal audit evidence is persuasive on its own and a number of evidential matters in aggregate, help make it conclusive. Hence, they are persuasive & conclusive in nature. On having the doubt over the reliability of the evidence shall evaluate how the audit procedures need to be modified or expanded to resolve the doubt or conflict. It shall be recoded in a manner which can be reproduced and reviewed independently

Ref: STANDARD ON INTERNAL AUDIT (SIA) 320 INTERNAL AUDIT EVIDENCE

FAQ :

Internal audit evidence includes information from the entity's records, systems, and processes, as well as data obtained from performing audit activities and testing procedures.

Evidence is collected from the company's books, records, systems, and processes, or by performing audit procedures such as checking, inspection, observation, inquiry, confirmation, computation, re-performance, analytical review, and using expert assistance.

Audit evidence must be sufficient, meaning there is enough of it, and appropriate, meaning it is relevant and reliable in quality.

Evidence is persuasive when it's convincing on its own, and conclusive when a collection of evidential matters collectively supports a conclusion.

If an auditor doubts the reliability of evidence, they should evaluate how to modify or expand audit procedures to resolve the doubt or conflict.