Question

explain substansive evidence, internal control evidence and analytical procedure evidence

Answer 1

Answer

substansive evidence:-

Substantive Evidence is the evidence offered to support a fact in issue, as opposed to impeachment or corroborating evidence.

Substantial evidence means "more than a mere scintilla. It means such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.where there is such relevant evidence as reasonable minds might accept as adequate to support a conclusion even if it is possible to draw two inconsistent conclusions from the evidence.

'Substantial' evidence is not synonymous with 'any' evidence. To constitute sufficient substantiality to support the verdict, the evidence must be 'reasonable in nature, credible, and of solid value; it must actually be "substantial" proof of the essentials which the law requires in a particular case

It means such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.

"'Improbable conclusions drawn in favor of a party litigant through the sanction of a jury's verdict will not be sustained where testimony is at variance with physical facts and repugnance is material and self evident.

"While substantial evidence may consist of inferences, such inferences must be 'a product of logic and reason' and 'must rest on the evidence' ; inferences that are the result of mere speculation or conjecture cannot support a finding .

Example-" (Kuhn v. Department of General Services (1994) 22 Cal.App.4th 1627, 1633.)

internal control evidence

The quantity of audit evidence needed is affected by the following: Risk of material misstatement (in the audit of financial statements) or the risk associated with thecontrol (in the audit of internal control over financial reporting). ... For example, ordinarily more evidence is needed to respond to significant risks.

Previous studies generally suggest that internal control and external auditing can substitute for each other, so that better internal control will be associated with lower audit fees. However, their empirical results do not support this view. In contrast, previous studies of the interaction between corporate governance and external audit services often assume that they are complementary, and that improved governance is associated with higher audit fees, although the evidence about this issue is also mixed. We examine whether the ‘substitution’ or ‘complementary controls’ views apply. We find that measures of internal auditing, corporate governance, and concentration of ownership are all positively related to audit fees, consistent with the explanation that controls are complementary. The study makes a contribution by assisting regulators in understanding the effects of regulation of corporate governance, and by showing auditors and auditing standard setters that the view that internal controls can substitute for external auditing may not be helpful. We also find that these relationships hold only in a relatively less-regulated environment.

analytical procedure evidence

Analytical procedures are one of many financial audit processes which help an auditor understand the client's business and changes in the business, and to identify potential risk areas to plan other auditprocedures. Analytical procedures include comparison of financial information (data in financial statement) with.

Analytical procedures consist of ‘evaluations of financial information through analysis of plausible relationships among both financial and non-financial data’. They also encompass ‘such investigation as is necessary of identified fluctuations or relationships that are inconsistent with other relevant information or that differ from expected values by a significant amount’ (ISA 520). A basic premise underlying the application of analytical procedures is that plausible relationships among data may reasonably be expected to exist and continue in the absence of conditions to the contrary.