Auditing Types of Evidence – tryspring

By | December 9, 2018

Auditing – Types of Evidence

In this chapter, let us understand the different types of
evidence used in Auditing.

Accounting System

Accounting System of an organization must be reliable. On the
basis of flow chart, the Auditor may come to know about the
documents which originate at each state of transaction.
Reliability of the internal control system in organization will
decide the acceptability of evidence originating from the
accounting system.

Physical Evidence

Physical Evidence is important in case of tangible assets.
Physical verification can prove the actual existence of tangible
assets like, land, building, plant and machinery, furniture and
fixture, cash-in hand and stocks, etc.

Documentary Evidence

Documentary Evidence is very important and most of the evidence
is in the form of documents. The following are the different
types of documentary evidence −

  • Documents that originated outside the organization but have
    been held by the client; for example, fixed deposit
    certificate is an evidence of deposit in bank.

  • Cheques issued by the client is the second type of evidence
    which originated from within the organization but circulated
    to outsiders.

  • Salary paid to employees is supported by salary sheet, time
    card, etc. This type of evidence is availed from within the
    organization and supported by internal control system.

Journals and Ledgers

Basic entries in journals are booked and supported by source
documents like sale invoices, purchase invoice, payment advice,

Ledger are books of final entry supported by journal book.

A Ledger is the base of financial statements like Trading
Account, Profit and Loss Account and Balance Sheet.

Oral Evidence

Discussion with different officers of an organization is the
basis for generation of some oral evidence. The Auditor should
carefully observe if there is any inconsistency; he should look
in to it.

Subsequent Events

Subsequent events after the Date of Balance Sheet are also
very important evidences; for example, huge deposits before
balance sheet date and huge withdrawals after balance sheet date
put a question mark on bank’s performance.

Circumstantial Evidence

Circumstantial evidence is not direct evidence but related to
circumstances. For example, if any employee of a company spends
hefty amount on any marriage, party or purchases a luxury
apartment or car which is not possible with the income that he
receives from his salary, it creates an uncertainty of something
being wrong. An Auditor should make use of circumstantial
evidence if he needs certain facts.


If the Auditor finds any variation in the financial ratios, then
he should look into it carefully. Comparison in ratio may be for
same organization for different periods or it may be a comparison
between two organizations.

Computerized Records

Evidences will remain same even in case of that organisation
where computerised accounting system is maintained.

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