## Obtaining Best Evidence: Designing the Audit Programme

### Evidence as the Basis for Opinion

The audit programme must be designed to obtain the best evidence, because evidence forms the basis for formulation of the auditor's opinion.

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### What is "Best Evidence"?

A matter of expert knowledge and experience — there is no universal answer
Primary task of the auditor: understand what evidence is reasonably available before framing the programme
Auditor assigns "weights" to different types of evidence
Best evidence = evidence that brings the highest satisfaction about a specific assertion

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### Types of Audit Evidence

Type	Description
Documentary examination	Review of vouchers, invoices, contracts, ledgers
Physical examination	Inspection of tangible assets (stock count, cash count)
Statements & explanations	Representations from management, officials, employees
Third-party / external confirmation	Confirmations from banks, debtors, creditors
Arithmetic calculations	Re-performance of calculations by the auditor
Minutes	Board, audit committee, or AGM minutes
Subsidiary & memorandum records	Supporting schedules and records

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### Examples of Best Evidence by Item

Item Under Audit	Best Evidence	Reason
Cash in hand	Physical count by auditor	Direct verification — no better evidence
Inventory pledged with bank	Banker's certificate	Third party confirms existence and pledge
Book debts (debtors)	External confirmation	Provides greatest reliability for existence and accuracy assertions

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### Critical Note: What Does "Available" Mean?

> Do NOT limit yourself to evidence that happens to be available with the client.

"Available" means what normally should be available in the context of that type of transaction
If standard evidence (e.g., a delivery note for a sales transaction) is missing, the auditor must investigate — absence of expected evidence is itself a finding
The auditor must know the normal documentation trail for each type of transaction

Worked example

### Example 1

Example — Weighting Evidence for Inventory:

For verifying closing inventory, the auditor has access to: (a) stock register (internal document), (b) purchase invoices (internal document), (c) physical count certificates (auditor-generated), (d) independent valuer's report (external). The auditor assigns highest weight to (c) physical count and (d) independent valuer, as these are either auditor-generated or external — both more reliable than internal records alone.

### Example 2

Example — The "Reasonably Available" Concept:

An auditor is verifying a large export sale. Normal documentation for an export sale includes: sales invoice, shipping bill, bill of lading, bank remittance advice. The client produces the invoice but cannot locate the bill of lading. The auditor notes: the bill of lading is normally available in this type of transaction. Its absence is an audit finding requiring explanation — the auditor does NOT simply accept the invoice as sufficient.

### Example 3

Example — Banker's Certificate vs. Client's Own Records:

Inventory worth ₹50 lakhs is pledged with a bank as security for a working capital loan. The client provides an internal 'pledge register' showing the pledged items. The auditor instead requests a banker's certificate confirming the pledge and the value of pledged stock — this is the best evidence as it is external, independent, and directly confirms the assertion.

⚠️ Common exam mistakes

Accepting whatever evidence the client provides as 'the available evidence' — the auditor must independently assess what evidence normally exists for each transaction type.
Treating all evidence types as equal — the auditor must weight evidence by reliability (external > auditor-generated > internal) and by relevance to the specific assertion being tested.
Over-relying on management representations — these are the weakest form of evidence and must be corroborated by stronger evidence for material assertions.
Designing the programme before identifying the best available evidence — the programme should follow from the evidence assessment, not precede it.
Confusing 'sufficient' quantity of evidence with 'appropriate' quality — obtaining large volumes of weak evidence does not compensate for failing to obtain the best available evidence.

Bare-Act text SA 500, Paragraph 6 · SA 500 – Audit Evidence (ICAI) · 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 to be able to draw reasonable conclusions on which to base the auditor's opinion.

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Obtaining Best Evidence – Designing the Audit Programme

Worked example

⚠️ Common exam mistakes