Forms of evidence

a) Observation: is usually witnessing internal control and book-keeping procedures. It includes attendance at wages pay out. Observation of stock-take, opening of mail and receipting and issuing procedures at the stores warehouse.

b) Inspection: examining of physical assets to confirm their existence and their condition as an aid in determining their value for accounts purposes. It includes examining the records to ensure that book-keeping and internal control procedures have been carried out.

c) Testimony from independent third parties: These are obtaining bank letters, debtor’s circularisation, lawyer’s letters etc.

d) Review of authoritative documents: e.g title deeds, share and loan certificates, leases, contract, supplier's invoices, minutes of board meetings, internal sales invoices.

e) Testimony from management and employees: This can be formal for example a letter of representation or informal for example replies to questions in questionnaires.

f) Satisfactory internal control: Where the volume of transaction is large for example sales, purchases, wages and salaries, receipts and payments, this may be the most useful evidence.

g) Calculations performed by the auditor: These give him evidence of the correctness of many figures.

h) Review of post balance sheet events: In most cases the final audit is performed well after the end of the year and since the present is a function of the future many assertions can be verified by reference to subsequent events.

i) Relationship evidence: Evidence confirming truth about one item may confirm the truth about another, for example verifying the expense rates confirms to some extent existence and ownership of the property.

j) Agreement with expectation: Computation and comparison of ratios and absolute magnitude with those achieved in the past, by other companies, or budgeted can assist in verification.  Also inconsistencies, unusual, abnormal or unexpected items can alert the auditor.

k) External events: The auditor must consider external events in using his knowledge of current events to assist him in the assessment of a company's accounts. He must therefore consider prevailing economic circumstances that affect his client; he must also consider the political situation and legislation.