## Audit Evidence — SA 500

Audit evidence is all information used by the auditor to draw conclusions on which the audit opinion is based.

### Sources of Audit Evidence

Source	Examples
Accounting records	Ledgers, journals, trial balance, bank statements
Supporting documents	Invoices, bills, contracts, title deeds
Minutes of meetings	Board minutes, AGM resolutions
Internal control manuals	Policy documents, process flowcharts

### The Two Dimensions — SAAE

> The auditor must obtain Sufficient Appropriate Audit Evidence (SAAE) before forming any conclusion.

Dimension	Meaning	Key Question
Sufficiency	Quantity of evidence	"Do I have enough?"
Appropriateness	Quality — relevance + reliability	"Is it trustworthy and on-point?"

### Reliability Hierarchy (general rules)

1. External evidence (from third parties) > Internal evidence

2. Documentary evidence > Oral evidence

3. Auditor-obtained directly > Management-provided

4. Original documents > Photocopies

### Key Interaction

Sufficiency and appropriateness are interdependent: lower reliability of individual items means the auditor needs more of them to reach a sufficient total. A single highly reliable external confirmation can outweigh a stack of weak internal records.

Worked example

### Example 1

PPE verification (₹50 lakhs): The auditor examines the machine invoice (internal document — moderate reliability) AND the registered sale deed for land (external/legal document — high reliability). The combination improves sufficiency (two pieces of evidence) and appropriateness (the sale deed is externally sourced and legally registered).

### Example 2

Coffee company purchases: For raw material purchases, the auditor examines purchase orders, goods received notes (GRNs), supplier invoices, and bank payment confirmations. Each layer adds to sufficiency; the bank confirmation (external) adds most to appropriateness.

⚠️ Common exam mistakes

Treating sufficiency and appropriateness as independent — they interact; lower quality evidence requires higher quantity to compensate
Relying only on internal documents when external confirmation is readily available and cost-effective
Forgetting that minutes of meetings and internal control manuals count as audit evidence
Confusing 'audit evidence' (what you get) with 'audit procedure' (how you get it) — SA 500 covers evidence, while each procedure type governs how that evidence is gathered

Bare-Act text Paragraph 6 · SA 500 – Audit Evidence · click to expand

The auditor shall design and perform audit procedures that are appropriate in the circumstances for the purpose of obtaining sufficient appropriate audit evidence.

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Audit Evidence: Sufficiency and Appropriateness (SA 500)

Worked example

⚠️ Common exam mistakes