Difference of Audit Evidence and Legal EvidenceDifference of Audit Evidence and Legal EvidenceEvidence is the information helpful in forming a conclusion or judgments. Evidence is the ground for belief or disbelief. From this point of view, audit evidence and legal evidence serve the same object as to base proof and establish truth or falsehood.
For auditing work, audit evidence is obtained during the financial audit and recorded in the audit working paper. In the audit engagement acceptance or reappointment stage, audit evidence is the information that the auditor is to consider for the appointment, such as the change of entity control environment, or inherent risk and nature of the entity business, etc. In the audit planning stage, audit evidence is the information that the auditor is to consider for the most effective and efficient audit approach. For examples, reliability of internal control procedures, and analytical system. In the control testing stage, audit evidence is the information that the auditor is to consider audit test of control and audit substantial test. In the substantive testing stage, audit evidence is the information that the auditor is to make sure the appropriation of financial statement assertion, such as existence, right and obligations, or disclosure of a particular transaction, etc. In the conclusion and opinion formulation stage, audit evidence is information that the auditor is to consider whether the financial statements as a whole presents with completeness, validity, accuracy and consistency with the auditors understanding of the entity.
SAS 31 and SAS 106 provide guidance the use of management assertions in obtaining audit evidence. The measure of the validity of such evidence lies in auditors judgment. For example, as an auditor, if you document and assess the system of internal control, and perform a walkthrough of the cycle you select, e.g. the sales and AR cycle, or the purchases and AP cycle. Having seen the controls in force, you identify the key controls, and then you decide whether you wish to perform tests of these controls, or whether youd rather do substantive tests. If youre confident that the system is working very well, you may decide to cut down on substantive tests. Sometimes, even when your test of controls shows that internal control system is strong, you can still opt to perform substantive
SAS 9 and SAS 13 provide advice that youandothers that you may be able to use as a basis for performing audits. The measures you take during the audits of a control are often not sufficiently extensive, but they are generally justified in using them. For example, if the company is doing business as a supplier of chemicals for a variety of supply chains, or for certain categories of specialty products, including inorganic fertilizers, they may consider using a control that shows the control is used to identify problems in a particular industrial supply chain or to identify a particular problem for which there are specific control problems to overcome.
The SIA has a review report to support the use of SIA standards.
In general, when an audit is conducted for an external service provider, it is also intended to be considered in the context of the service provider’s own internal operating procedure. This means that the SIA review report should be viewed in its entirety in a way that allows the service provider the ability to identify and measure the effectiveness of any changes, controls, and processes of the internal system during such a review. However, SIA standards should still be based on an independent review group.
SAR 6
If your audit of the system for or accounting of a large amount of payments involved in the acquisition of the company or in the handling of financial reporting involves a large amount of administrative and accounting and management activities (e.g., the carrying costs of acquisitions and management fees), the auditor (or independent group of investigators) should conduct thorough or comparable accounting and management reviews of your audit for compliance with the standards adopted by SAR. These reviews will identify problems that are important to the business of the company. In this case, you should ensure that all of your accounting and management processes and financial records are auditable.
SAR 10 provides a standard to allow auditors to evaluate your audit, and the standard specifies that audit of all other issues that are involved in the acquisition have a reasonable impact on the financial statements for the business of the entity. These audits are not designed to evaluate the activities and resources of the company to ensure that the acquisition is successful, as some audit of SAR procedures may be subject to certain special requirements imposed by the board or SAR, and SAR 10 does not identify procedures that could be required due to special reasons. The standard also sets forth specific measures to be taken by financial managers in order to identify these special factors that may be needed to detect fraud or other fraud risks for the purpose of auditing acquisitions. You should ensure that audit of all matters that are not involved in the acquisition of the company, whether or not they are in part directly funded by or in connection with the acquisition, are conducted a high level of audit.
SAS 13
The standard also sets forth the criteria for a compliance audit for the purpose of determining the effectiveness of an assessment or examination within the scope of any SAC/ACRA or SADPA. If you have any questions about the validity of your audit under SAR 10, please discuss with an auditor