Question

How does the auditor know that sufficient evidentiary material has been collected and properly documented?

Answer 1

Audit Evidence

An auditor applies various audit procedure to obtain audit evidence which enables him to form an opinion whether the financial statements of an entity are free from material misstatement and state a true and fair view or not.

Audit Evidence is the information that the auditor uses in arriving at a conclusion on the basis of which he forms his opinion

Sufficient: Sufficiency is the measure of quantity. Audit evidence is sufficient when they are available in adequate quantity. An auditor applies different audit procedures to obtain sufficient audit evidence like test checking. ... Reliability of audit evidence depends on its source and nature of such evidence.

There are some thumb rules which helps in identifying the appropriateness of evidence

-Written (documentary) evidence is better than testimonial evidence.

-Evidence from external sources is more reliable.

-Original documents are preferable over their photocopies.

-The auditor should have a good understanding of internal control of the organization as it enables him to obtain relevant evidence.

-Evidence obtained by auditor through direct observation, inspection, physical verification, and computations are better than the evidence obtained indirectly