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(C) Enquiry and Confirmation
Enquiry consists of seeking relevant information from knowledgeable persons

inside or outside the entity. Enquiries may be formal or informal, written or oral.
In other words, they range from formal written enquiries addressed to persons
outside the entity to information oral enquiries addressed to persons within the
entity. Response to enquiries may provide the auditor with information which
he did not previously possess or may provide him with corroborative evidence.
Confirmation consists of the response to an enquiry to corroborate information

contain the accounting records. For instance, it is a normal auditing procedure to
request confirmation of bank balances, debtor balances, etc. by direct
communication with the bank, debtors etc.
An auditor can have strong evidence if an independent party makes a written or

oral statement in support of certain facts; provide the auditor is of the opinion
that the party has the necessary competence, experience and integrity. Statement
from the bank as to bank balances, statements from the client s lawyers as to the
extent of contingent liabilities in respect of disputed claims before courts of law,
etc. are examples.
(D) Computation
This consists of checking the arithmetical accuracy of source documents and

accounting records or of performing independent calculations. Independent
computations made by the auditor often provide an important source of audit
evidence.
(E) Analytical Review
This consists of studying significant ratios, trends and other statistics and
investigating unusual or unexpected fluctuations and items and expected
fluctuations which fail to occur. Various types of ratios changes and trends
analyses have become recognized in recent years as important audit tools.
Whether the data meet the test of logic, reasonableness and normality is just as
significant as whether they are documentary evidence.
Types of Audit Evidences
The auditors gather a combination of many types of audit evidence to adequately

restrict audit risk. The major types of audit evidence may be summarized as
follows:
1. Physical Evidence
Evidence that the auditors can actually see is referred to as physical evidence.
As an example, the best evidence of the existence of certain assets is the auditors
examination of the assets themselves. The existence of property and equipment,
such as automobiles, building, office equipment, and factory machinery, may be
conclusively established by physical examination. Similarly, evidence about the
existence of cash may be obtained by counting, and the client s inventory may be
observed as it is counted by client personnel. The auditors also can determine
whether an internal control activity is being performed by observing the
employees performing the activity.
2. Third Party Representations
Auditors obtain a variety of representations from a number of outside parties,

such as the clients customers, vendors, financial institutions, and attorneys. In
addition, evidence maybe obtained from specialists in some audits.
3. Documentary Evidence
Documentary evidence includes checks, invoices, contracts and minutes of

meetings. The competence of a document as evidence depends in party on
whether it was created within the company ( e.g., a sales invoice) or outside the
company (e.g., a vendors invoice). Some documents created within the company
(e.g., checks) are sent outside the organization for endorsement and processing;
because of this critical review by outsiders, these documents are regarded as very
reliable evidence.
4. Computations
Another type of audit evidence consists of the results of computations made

independently by the auditors to prove the arithmetical accuracy of the client s
analyses and records. In its simplest form, an auditor s computations might
consist of footing a column of figures in a sales journal or in a ledger account to
provide that column total. Independent computations maybe used to prove the
accuracy of such client calculations as earnings per share, depreciation expense,
allowance for uncollectible accounts, revenue recognized on a percentage of
completion basis, and provisions for federal and state income taxes. Specialists
may become involved in certain computations. For example, because the
computations of a clients liability for postretirement benefits involves actuarial
assumptions and computations beyond the auditors area of expertise, auditors
usually rely on the services of an actuary to compute this liability.
5. Data Interrelationships
Data interrelationships involve the comparison of relationships among financial

and, sometimes, non financial data. Data interrelationships differ from
computations. As indicated in the preceding section, computations verify
mathematical processes. Data interrelationships rely upon plausible
relationships among both financial and non financial data. For example, a
plausible relationship may exist in an industry between annual square footage of
sales space and retail sales.
6. Oral and Written Client Representations
Throughout an audit the auditors ask a great many questions of the officers and
employees of the clients organization. These questions cover an endless range of
topics the location of records and documents, the reasons underlying an unusual
accounting procedure, the probabilities of collecting a long past-due account
receivable.
The answers that the auditors receive to these questions constitute another type
of evidence. Generally, oral client representations are not sufficient by
themselves, but may be useful in disclosing situations that require investigation
or in corroborating other forms of evidence. For example, after making a careful
analysis of all past due accounts receivable, an auditor will normally discuss with
the credit manager the prospects of collecting specific accounts. If the opinion of
the credit manager are in accordance with the estimates of uncollectible accounts
that have been made independently by the auditor, this oral evidence will
constitute support for the conclusions reached. In repeat audits of a business, the
auditor will be in a better position to evaluate the opinions of the credit manager
based on the managers estimates in prior years.
Auditors also obtain written representations from client. At the conclusion of the
audit, the CPAs obtain from the client a written representations letter
summarizing the most important oral representations made by management
during he engagement. Many specific items are included in this representation
letter. For example, management usually represents that all liabilities known to
exist are reflected in the financial statements.
7. Accounting Records
When auditors attempt to verify an amount in the financial statements by tracing

it back through the accounting records they will ordinarily carry this process
through the ledgers to the journal and compare the item to such basic
documentary evidence as a paid check, invoice or other source documents. To
some extent, however the ledger account and the journals constitute worthwhile
evidence in themselves.

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(C) Enquiry and Confirmation

Enquiry consists of seeking relevant information from knowledgeable persons

Confirmation consists of the response to an enquiry to corroborate information

An auditor can have strong evidence if an independent party makes a written or

This consists of checking the arithmetical accuracy of source documents and

(E) Analytical Review

Types of Audit Evidences

The auditors gather a combination of many types of audit evidence to adequately

2. Third Party Representations

Auditors obtain a variety of representations from a number of outside parties,

Documentary evidence includes checks, invoices, contracts and minutes of

Another type of audit evidence consists of the results of computations made

Data interrelationships involve the comparison of relationships among financial

6. Oral and Written Client Representations

When auditors attempt to verify an amount in the financial statements by tracing

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