Summary of What are the requirements for AUDIT EVIDENCE? Explore ASA/ISA500

00:00:00 - 00:15:00

This video explains the requirements for collecting audit evidence in the audit of financial reports as outlined by ASA/ISA 500. The objective is to design procedures that result in sufficient and appropriate evidence, obtained through the right mix of procedures. The video highlights the importance of using reliable, accurate, complete, precise, and detailed information and considering inconsistencies or doubts in evidence from different sources. The four full rules for audit procedures are outlined and the importance of tailoring procedures to the purpose of the testing is emphasized. Various methods for collecting audit evidence, such as inspection, observation and external confirmation, are also explained.

• 00:00:00 In this section, Dr. Amanda discusses the overarching standard, ASA/ISA 500, which outlines the requirements for collecting audit evidence in the audit of financial reports. The standard applies to all evidence obtained during the audit, and the objective is to design procedures that result in sufficient and appropriate evidence. Dr. Amanda explains that auditors use various methods to determine whether they have collected enough evidence, including setting a specific number of items, using a checklist, or using a mental model approach where they evaluate whether the evidence makes sense with what they know about the company. Dr. Amanda's PhD research found that the mental model approach was the most effective.
• 00:05:00 In this section, the importance of using sufficient and appropriate levels of audit evidence is highlighted. Sufficient evidence is based on the risks of material misstatements expected within the client, while appropriate evidence is relevant, reliable, and the right quality, obtained through the right mix of procedures. Designing the right procedures takes experience and professional judgement. The auditor shall perform procedures appropriate for the situation and consider the relevance and reliability of the information, evaluating whether it is sufficiently reliable, accurate, complete, precise, and detailed. The systems of internal control of the client capture valuable information, but if the control risk is high, information used should be minimized, and efforts should be made to confirm it with someone else. When selecting evidence, it is essential to choose effective items to meet the purpose of that audit procedure. If information is inconsistent, the reliability of evidence is in doubt, and auditors must consider its adequacy.
• 00:10:00 In this section, the requirements for audit evidence are discussed with reference to the ASA/ISA500. The importance of considering inconsistencies or doubts in evidence from different sources, and the need to resolve any anomalies, is highlighted. The methods for collecting audit evidence are also explained, with additional insight provided into inspection, observation, external confirmation, recalculation, read performance, analytical procedures, and inquiry. Vouching and tracing are described as procedures for specific types of inspection, while the four full rules for audit procedures are outlined including using the correct audit term, testing all assertions, understanding the client's business, and exercising professional judgment.
• 00:15:00 In this section, the speaker discusses four basic rules for audit evidence, starting with understanding the requirements of the evidence and making sure it is relevant and reliable. The speaker emphasizes the importance of using client names and being specific in audit procedures to ensure that others can follow them. Additionally, the speaker reiterates the need for procedures to be tailored to the purpose of the testing, whether it be internal controls or sales occurrences. Several examples and resources are provided for further learning.