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CA Intermediate · Auditing and Ethics

Audit Evidence for CA Intermediate Auditing and Ethics

Audit evidence is all the information an auditor uses to reach conclusions on which the audit opinion is based. It must be sufficient and appropriate (relevant and reliable). To solve questions, identify the assertion at risk, pick the right procedure, and state which SA applies and why.

What this chapter covers

This chapter explains how an auditor collects proof to support the opinion. It starts with the meaning of audit evidence and SA 500, then moves to assertions and the procedures used to test them: inspection, observation, external confirmation, recalculation, reperformance, analytical procedures and inquiry.

The rest of the chapter deals with specific standards. SA 230 covers documentation. SA 530 covers sampling. SA 520 covers analytical procedures. Then come confirmations, written representations, experts, and accounting estimates. The chapter ends with reliance on the work of others: other auditors, internal auditors and service organisations.

This chapter connects to almost every other part of the Auditing paper. Risk assessment decides what evidence you need. Internal control decides how much testing you do. Vouching, verification, completion and the audit report all depend on evidence. If you understand this chapter well, those chapters become easier.

Audit evidence is a core chapter, and it feeds both MCQs and descriptive answers. MCQs test definitions, which procedure suits which assertion, and which SA deals with which situation. Descriptive questions usually give a short scenario and ask what the auditor should do, so you must apply the standard rather than recite it. Many of these answers follow a clear pattern: provision, facts, conclusion. Because the chapter has many small standards, steady effort pays off. Each one is easy to learn and easy to score on if you know the key terms.

Audit Evidence: topics in the order to study them

  1. 1Audit Evidence: Meaning, Nature and SA 500Start here. It defines sufficient, appropriate, relevance and reliability, which every later topic uses.
  2. 2Assertions and Audit ProceduresNext, learn what the auditor tests and how. Most scenario questions are built on matching an assertion with a procedure.
  3. 3Audit Documentation under SA 230Documentation is short and easy. Learn it early to build confidence and because it applies to every procedure.
  4. 4Audit Sampling (SA 530)Sampling shows how procedures are applied to part of a population. Learn it before analytical procedures, as both are techniques for obtaining evidence.
  5. 5Analytical Procedures (SA 520)This is another procedure type. Analytical procedures are used as risk assessment procedures (required by SA 315 (Revised)), and SA 520 itself deals with their use as substantive procedures and in the overall review near the end of the audit. Studying it after sampling lets you compare the two.
  6. 6Specific Evidence: Confirmations, Representations, Experts, EstimatesThese topics apply the general principles of SA 500 to particular sources of evidence, so they come after the basics.
  7. 7Using Other Auditors, Internal Audit and Service OrganisationsStudy this last. It asks how much you can rely on others' work, which needs everything above.

How to prepare Audit Evidence

Treat this chapter as a set of linked standards. Learn the idea behind each one first, then the details. Keep one page for the SA numbers.

  1. Read the SA 500 definitions and write sufficient, appropriate, relevance and reliability in your own words. Remember that quantity depends on risk and quality, and more evidence cannot make up for poor quality.
  2. Build a table of assertions against procedures. For each assertion, write one test. Practise this on small examples such as inventory, debtors and fixed assets.
  3. Learn the reliability principles. Evidence from external sources, obtained directly by the auditor, in documentary form and from original documents is generally more reliable. Use these when a question asks which evidence is better.
  4. For each SA (230, 530, 520, and the ones on confirmations, representations, experts, estimates and reliance on others), note its purpose, one or two key requirements, and the situation that triggers it.
  5. Solve MCQs by SA number and by scenario. With no negative marking, always attempt every MCQ. Eliminate options that overstate, such as those saying the auditor is relieved of responsibility.
  6. For written answers, use the format: relevant SA or principle, the facts from the question, then a clear conclusion on what the auditor should do. Keep each point short so each earns a step mark.
  7. Revise by writing the one-line purpose of each standard from memory, then check yourself against your notes.

Common mistakes in Audit Evidence

  • Treating sufficient and appropriate as the same thing.

    Fix: Link sufficient to quantity and appropriate to quality (relevance and reliability). Write this pairing at the start of any answer on evidence.

  • Naming a procedure without linking it to an assertion.

    Fix: For each procedure in an answer, state which assertion it tests, for example confirmation of debtors for existence, and give one reason.

  • Confusing sampling risk with non-sampling risk, or mixing up statistical and non-statistical sampling.

    Fix: Make a two-column note for each pair. Remember that non-sampling risk arises even if the whole population is tested, for example from using an inappropriate procedure.

  • Writing that the auditor can shift responsibility when relying on experts, other auditors or internal audit.

    Fix: State clearly that the auditor remains responsible for the opinion, then explain the evaluation of competence, objectivity and the work done. For component auditors under SA 600 (Revised), the group engagement partner and the group auditor remain responsible for the group opinion, and the report does not refer to the component auditor unless law or regulation requires it. If the report does refer to the component auditor, it must state that the reference does not reduce the group auditor's responsibility for the group audit opinion.

  • Writing long theory without applying it to the facts in a scenario question.

    Fix: Use the provision-facts-conclusion pattern. Quote the facts of the question in the middle step and end with a clear action or conclusion.

  • Leaving MCQs blank or picking extreme options.

    Fix: There is no negative marking, so answer every MCQ. Remove options that use absolute words or that say a procedure is enough on its own, then choose from the rest.

Last-day revision: Audit Evidence

  • Audit evidence is the information the auditor uses to reach conclusions that support the opinion; it includes information from accounting records and from other sources.
  • Sufficiency measures the quantity of evidence; appropriateness measures its quality, meaning relevance and reliability.
  • Higher assessed risk means more evidence is needed; better quality evidence reduces the quantity needed but does not remove it.
  • Procedures include inspection, observation, external confirmation, recalculation, reperformance, analytical procedures and inquiry.
  • Inquiry alone is not enough to support an assertion or to test control operation.
  • SA 230 requires documentation sufficient for an experienced auditor with no prior link to the audit to understand the work done, results and significant judgements.
  • Sampling risk is the risk that the conclusion from a sample differs from the conclusion on the whole population; non-sampling risk is the risk of reaching an erroneous conclusion for any reason not related to sampling risk, for example using an inappropriate procedure or misinterpreting evidence.
  • Statistical and non-statistical sampling can both be valid if properly designed. Statistical sampling has both random selection of the sample and use of probability theory to evaluate results; an approach that lacks either element is considered non-statistical sampling. Non-statistical sampling can still use random selection.
  • SA 520 deals with analytical procedures used as substantive procedures and in the overall review near the end of the audit; their use as risk assessment procedures is required by SA 315 (Revised).
  • Written representations are evidence but cannot replace other evidence; if management refuses them, the auditor considers the effect on the opinion.
  • An auditor's expert is an individual or organisation with expertise in a field other than accounting or auditing whose work the auditor uses. The auditor has sole responsibility for the opinion, and that responsibility is not reduced by use of an expert. The auditor evaluates the expert's competence, capabilities and objectivity, and also evaluates the adequacy of the expert's work for the audit's purposes. The auditor does not refer to the expert in an unmodified report unless required by law or regulation; in a modified report, reference may be made if it helps understand the modification, and the report then states that this does not reduce the auditor's responsibility.
  • Using an internal auditor's work does not reduce the auditor's responsibility for the opinion.

Audit Evidence practice questions

Audit Evidence in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Audit Evidence: frequently asked questions

What is the most important standard in the Audit Evidence chapter?

SA 500 is the base, because it defines sufficient and appropriate audit evidence and lists the procedures. The other standards in the chapter apply its ideas to specific areas. Learn it first and well.

How should I prepare Audit Evidence for MCQs?

Know the definitions, the assertion-to-procedure links, and what each SA is about. Practise scenario MCQs and eliminate options that overstate. Since wrong answers carry no penalty, attempt every question.

Do I need to memorise SA numbers?

Yes, for the main ones in this chapter such as SA 500, SA 230, SA 530 and SA 520. Knowing the number helps you cite the right provision in written answers. Pair each number with its one-line purpose.

How do I write a scoring answer on audit evidence?

Start with the relevant principle or standard, apply it to the facts given, and finish with a conclusion on what the auditor should do. Use short points so that each one can earn a step mark.