An audit evidence may be obtained by an auditor using following methods:
- Inspection
It generally includes investigation of an item and referred to as looking at an item. E.g. Auditor investigates the existence of vehicle disclosed in the books of the company
- Observation
It refers to observing a certain process within the entity to place reliance on such process. E.g. Auditor watches an inventory count process.
- Inquiry
Inquiry is a process to seek information from a concerned person within or may be outside the entity. Audit may inquire knowledgeable persons to inquire certain matter and then evaluate the responses followed by corroborating those responses with other audit evidence.
- External confirmation
It is a process of gathering information from the third party (external source of the client’s company). E.g. If an auditor wishes to place reliance on the payable balance of a vendor of the client’s company, an auditor may confirm it directly from the vendor externally.
- Analytical procedure
Evaluating and comparing financial and/or non-financial data for plausible relationships and investigating unexpected fluctuations is known as analytical procedure. E.g. comparing last year’s gross profit percentage to this year’s and ensuring any change is in line with expectations
- Recalculation
It is a process of checking mathematical accuracy of the transactions recorded by recalculating the sample. E.g. auditor may recalculate the total of sampled individual’s client ledgers.
- Re-Performance
It is a process of independently carrying out procedures or controls, which were originally performed by the client (e.g. re-performing the aging of year-end trade receivables)
