Types of audit evidence and how auditors obtain them

An audit procedure is what the auditor does. Audit evidence is the information the procedure produces. For example, sending a confirmation request is the procedure. The customer’s direct written reply is the evidence. ISA 500 groups physical examination and examination of documents under inspection. They are shown separately below because students use them differently in practice. mia.org.my

Procedure	What the auditor does	Practical example
1. Physical examination	Inspects a tangible asset to obtain evidence about its existence or condition.	Select 15 tables from the inventory list, locate them in the warehouse and inspect them for damage.
2. Inspection of documents and records	Examines paper or electronic records for information relevant to an assertion.	For a December sale, inspect the contract and signed delivery note to determine whether the company recorded revenue in the correct period.
3. External confirmation	Obtains a direct written response from an external party.	Ask a customer to confirm the amount owed at 31 December and arrange for the reply to come directly to the auditor.
4. Observation	Watches another person perform a process or control. The evidence relates to what happened while the auditor was present.	Watch warehouse staff count inventory and observe how they mark items already counted to avoid double counting.
5. Enquiry	Asks knowledgeable people for information and follows up important explanations with supporting evidence.	Ask why damaged tables are still recorded at full cost, then check recent selling prices and repair estimates.
6. Recalculation	Independently checks mathematical accuracy.	Recalculate an invoice for 20 tables at RM500 each and compare the result of RM10,000 with the recorded amount.
7. Reperformance	Independently carries out a procedure or control that the client originally performed.	Repeat the supervisor’s weekly matching of delivery notes to invoices and compare the missing invoices identified with the supervisor’s findings.
8. Analytical procedures	Develops an expectation using relationships between figures, compares it with the recorded result and investigates significant differences.	Gross profit margin rose from 25% to 38% while timber costs increased and selling prices remained stable. Investigate whether product mix changed, costs were omitted or sales were recorded too early.

Exam application: If the question asks for an audit procedure, name the action, the item or document and the purpose. For example: “Select signed delivery notes issued before 31 December and trace them to the sales ledger to test whether all completed deliveries that qualified as sales were recorded.” This identifies the starting point, the direction of testing and the completeness assertion.