Understanding of Auditing Evidence and its Characteristics & Procedure

 

The information gathered for an audit of a company’s financial transactions, internal control processes, and other elements required for an auditor or certified public accountant to certify financial statements is known as auditing evidence. The amount and kind of auditing evidence evaluated vary greatly depending on the type of company being audited and the audit’s needed scope. In other words, the information gathered by an auditor to determine the correctness and conformity of a company’s financial statements is known as auditing evidence.

The auditing evidence is intended to substantiate the company’s assertions in the financial statements, as well as their compliance with the accounting regulations of their legal jurisdiction.

Bank accounts, management accounts, payrolls, bank statements, invoices, and receipts are examples of auditing evidence.

Sufficient, dependable, presented from a credible source, and relevant to the audit at hand are all qualities of good auditing evidence.

For the best auditors in Dubai, audit documentation may serve a variety of functions, including serving as proof of their work and conclusions, assisting team members in conducting audit duties, such as supervision and review, and so on. It establishes the auditors’ grounds for reaching a decision regarding the overall objective’s success.

• Understanding of Auditing Evidence :

A company’s financial statements must meet with generally accepted accounting principles (GAAP), international financial reporting standards (IFRS), or another set of accounting rules appropriate to the entity’s country. As publicly listed firms are obligated to deliver fully audited financial statements to shareholders on a regular basis, auditors and accountants of accounting and auditing firms in Dubai must compile and organize auditing evidence as part of their duties. In short, auditing evidence is intended to give auditors the data they need to determine if financial statements are accurate and truthful.

The term “auditing evidence” is described as a concept that promotes transparent, accurate, and impartial audit reports in order to safeguard investors. The Sarbanes-Oxley Act of 2002 established the Public Company Accounting Oversight Board (PCAOB), which defines auditing evidence as “any information that may be utilized by auditors to make their conclusion on the quality and accuracy of a company’s financial statements.” The auditing evidence backs up and confirms the final information in the financial statements presented by management. If there are any flaws or fraud, it might also contradict them.

• The extent to which the following characteristics are present in good auditing evidence may be measured:

1. Sufficiency: Sufficiency considers whether the material presented is of sufficient amount to enable auditors to make an informed assessment. If an auditor was given only one bank statement from a corporation, he or she would not be able to make any conclusions about the company’s financial situation.

2. Reliability: It is the process of determining whether or not a piece of information can be trusted and relied upon to create an opinion. The source of the information is usually a determinant of reliability.

3. Source: Accounting proof might be collected directly from the accounting firms in Dubai or through outside parties. Externally supplied data is often thought to be more reliable and is so preferable.

4. Nature: The sort of information obtained is referred to as nature. The information can be supplied in a variety of ways, including legal documents, presentations, or oral confirmation from personnel.

5. Relevance: How relevant the information gathered in relation to the overall analysis is a guiding element, depending on the type of audit being undertaken.

Normally, Auditors prefer written information over oral information. Information from a third-party source over information from within the company. Original documents over copies of those documents. The auditor must have a strong knowledge of the company in order to seek suitable auditing proof. Firsthand observations by the auditor over the documentation provided by another source.

• Procedure to obtain Audit Evidence :

Audit inquiry, audit observation, audit inspection, analytical method, audit recalculation, audit confirmation, and re-performance are examples of such procedures.

1. Audit inquiry: An auditor questions management about specific business transactions or occurrences in order to have a better knowledge of them or to corroborate a relevant allegation.

2. Audit observation: The auditor sees how certain financial reporting controls operate.

3. Audit Inspection: An auditor examines specific papers or evidence relating to a financial transaction or incident.

4. Analytical Procedure: The auditor often employs analytical procedures to evaluate transactions or amounts in financial statements using other financial and non-financial data.

5. Recalculation: The auditor may need to recalculate any management-prepared depreciation expenses.

6. Re-performance: The auditor may re-perform a bank reconciliation that the customer has prepared.

These are the processes of understanding auditing evidence, including its characteristics and procedures. Tgs Koya is one of the best audit firms in Dubai, offering the best auditing and accounting services.