## Types of Audit Evidence

Audit evidence is classified along two independent dimensions.

### Dimension 1 — By Nature (what form it takes)

Type	Description	Examples
Visual	What the auditor sees	Physical verification of inventory by client staff (observed)
Oral	Spoken information	Discussion with management, officers of the client
Documentary	Written/recorded	Fixed deposit certificate, loan agreement, sales bill

### Dimension 2 — By Source (where it comes from)

Type	Description	Examples
Internal	Originates within the entity	Sales invoice, copies of sales challan, forwarding notes, goods received note, inspection report, cash memo, debit/credit notes
External	Originates outside the entity	Purchase invoice, supplier's challan and forwarding note, debit/credit notes from parties, quotations, bank confirmations

### Reliability ranking (general rule)

External documentary > Internal documentary (when effective controls exist) > Oral

> Note: These are generalisations — exceptions exist. External evidence from an unknowledgeable source may be less reliable than well-controlled internal evidence.

Worked example

### Example 1

Visual + Internal: The auditor observes the storekeeper physically counting goods — this is visual evidence about inventory existence.

### Example 2

Documentary + External: A bank confirmation letter sent directly by the bank to the auditor — strong evidence because it is both documentary and external.

### Example 3

Documentary + Internal: A goods received note prepared by the client's receiving department — internal documentary evidence of receipt of goods.

### Example 4

Oral + Internal: Management's verbal explanation for a large year-end adjustment — oral evidence that must be corroborated.

⚠️ Common exam mistakes

Treating all external evidence as automatically reliable — an external source can still be unreliable if they lack knowledge or are not independent.
Forgetting that the two dimensions (nature and source) are independent — a document can be both internal and documentary, or external and oral (e.g., a phone call to a supplier).
Overlooking that internal evidence prepared under strong controls can be as reliable as some external evidence.

Reference:

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Types of Audit Evidence – Nature and Source

Worked example

⚠️ Common exam mistakes