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SAS
No. 04 Audit Evidence |
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 Status |
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Revised by Auditing Standards Committee in Taiwan on 31 December,
1985. |
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Summary |
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“Audit evidence” is all the information used by the auditor in
arriving at the conclusions on which the audit opinion is based, and
includes the information contained in the accounting records
underlying the financial statements and other information. Auditors
are not expected to address all information that may exist. |
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The reliability of audit evidence is influenced by its source and by
its nature and is dependent on the individual circumstances under
which it is obtained. The following generalizations about the
reliability of audit evidence are useful:
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Audit evidence is more reliable when it is obtained from
knowledgeable independent sources outside the entity.
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Audit evidence that is generated internally is more reliable
when the related controls imposed by the entity are effective.
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Audit evidence obtained directly by the auditor is more
reliable than audit evidence obtained indirectly or by inference.
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Audit evidence is more reliable when it exists in documentary
form, whether paper, electronic, or other medium.
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Audit evidence provided by original documents is more
reliable than audit evidence provided by photocopies or facsimiles. |
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When information produced by the entity is used by the auditor to
perform audit procedures, the auditor should obtain audit evidence
about the accuracy and completeness of the information. |
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The auditor should use assertions for classes of transactions,
account balances, and presentation and disclosures in sufficient
detail to form a basis for the assessment of risks of material
misstatement and the design and performance of further audit
procedures. |
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The auditor obtains audit evidence to draw reasonable conclusions on
which to base the audit opinion by performing audit procedures to:
(a)
Obtain an understanding of the entity and its environment, including
its internal control, to assess the risks of material misstatement
at the financial statement and assertion levels;
(b) When necessary or when the auditor has determined to do so,
test the operating effectiveness of controls in preventing, or
detecting and correcting, material misstatements at the assertion
level; and
(c) Detect material misstatements at the assertion level. |
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The auditor uses one or more types of audit procedures below in
order to obtain audit evidence. These audit procedures, or
combinations thereof, may be used as risk assessment procedures,
tests of controls or substantive procedures, depending on the
context in which they are applied by the auditor. |
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Inspection |
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Inspection of records and documents provides audit evidence of
varying degrees of reliability, depending on their nature and source
and, in the case of internal records and documents, on the
effectiveness of the controls over their production. Inspection of
tangible assets may provide reliable audit evidence with respect to
their existence, but not necessarily about the entity’s rights and
obligations or the valuation of the assets. |
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Observation |
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Observation provides audit evidence about the performance of a
process or procedure, but is limited to the point in time at which
the observation takes place and by the fact that the act of being
observed may affect how the process or procedure is performed. |
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Inquiry |
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Inquiry is an audit procedure that is used extensively throughout
the audit and often is complementary to performing other audit
procedures. Inquiries may range from formal written inquiries to
informal oral inquiries. Evaluating responses to inquiries is an
integral part of the inquiry process. |
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Confirmation |
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Confirmation, which is a specific type of inquiry, is the process of
obtaining a representation of information or of an existing
condition directly from a third party. Confirmations are frequently
used in relation to account balances and their components, but need
not be restricted to these items. |
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Recalculation |
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Recalculation consists of checking the mathematical accuracy of
documents or records. |
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Reperformance |
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Reperformance is the auditor’s independent execution of procedures
or controls that were originally performed as part of the entity’s
internal control. |
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Analytical Procedures |
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Analytical procedures consist of evaluations of financial
information made by a study of plausible relationships among both
financial and non-financial data. Analytical procedures also
encompass the investigation of identified fluctuations and
relationships that are inconsistent with other relevant information
or deviate significantly from predicted amounts. |
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 Effective
date
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This Statement is effective from
1
October, 1984. |
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