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types of audit evidence

In deciding wich audit procedures to use, the auditor can choose from eight broad categories of evidence, which are called types of evidence. Every audit procedure obtainsone or more of the following types of evidence:
1. Physical examination
2. Confirmation
3. Documentation
4. Analytical procedures
5. Inquiries of the client
6. Recalculation
7. Reperformance8. Observation

Before beginning the study of types of evidence, it is useful to review the three categories of auditing standars addressed in chapter 2, and show how those relate to types ofevidence, and the four evidence decisions we just discussed. These relationships are shown in figure 7-1
Remember that the standars are general, whereas audit procedures are specific.
Comparatively,types of evidence are broader than procedures and narrower than the standards.

Physical examination: is the inspection or count by the auditor of a tangible asset. This type of evidence is most oftenassociated with inventory and cash, but it is also applicable to the verification of securities, notes receivable, and tangible fixed assets. There is a distinction in auditing between the physicalexamination of assets, such as marketable securities and cash, and the examination of documents, such as cancelled checks and sales documents. If the object being examined, such as a sales invoice, hasno inherent value, the evidence is called documentation. For example, before a check is signed, it is a document; after it is signed, it becomes an asset; and when it is cancelled, it becomes adocument again. For correct auditing terminology, physical examination of the check can occur only while the check is an asset.

Physical examination is a direct means of verifying that an asset actuallyexists (existence objective), and to a lesser extent whether existing assets are recorded (completeness objective). It is considered one of the most reliable and useful types of audit...