SA 500 Audit Evidence

SA 500*
Audit Evidence
(Effective for audits of financial statements for periods
beginning on or after April 1, 2009)

Contents
Paragraph(s)
Introduction
Scope of this SA .................................................................................... 1-2
Effective Date ........................................................................................... 3
Objective ................................................................................................. 4
Definitions ............................................................................................... 5
Requirements
Sufficient Appropriate Audit Evidence ...................................................... 6
Information to be Used as Audit Evidence ............................................ 7-9
Selecting Items for Testing to Obtain Audit Evidence ............................ 10
Inconsistency in, or Doubts over Reliability of, Audit Evidence ............. 11
Application and Other Explanatory Material
Sufficient Appropriate Audit Evidence ............................................ A1-A25
Information to be Used as Audit Evidence ................................... A26-A51
Selecting Items for Testing to Obtain Audit Evidence .................. A52-A56
Inconsistency in, or Doubts over Reliability of, Audit Evidence ........... A57
Material Modifications vis a vis ISA 500, “Audit Evidence”

Standard on Auditing (SA) 500, “Audit Evidence” should be read in the
context of the “Preface to the Standards on Quality Control, Auditing,
Review, Other Assurance and Related Services”, which sets out the
authority of SAs and SA 200, “Overall Objectives of the Independent
Auditor and the Conduct of an Audit in Accordance with Standards on
Auditing”.

* Published in April, 2009 issue of the Journal.
 Handbook of Auditing Pronouncements-I.A

Introduction
Scope of this SA
1. This Standard on Auditing (SA) explains what constitutes audit evidence
in an audit of financial statements, and deals with the auditor’s responsibility to
design and perform audit procedures to obtain sufficient appropriate audit
evidence to be able to draw reasonable conclusions on which to base the
auditor’s opinion.
2. This SA is applicable to all the audit evidence obtained during the course
of the audit. Other SAs deal with specific aspects of the audit (for example, SA
3151), the audit evidence to be obtained in relation to a particular topic (for
example, SA 570(Revised)2), specific procedures to obtain audit evidence (for
example, SA 5203), and the evaluation of whether sufficient appropriate audit
evidence has been obtained (SA 200 and SA 3304).
Effective Date
3. This SA is effective for audits of financial statements for periods
beginning on or after April 1, 2009.
Objective
4. The objective of the auditor is to design and perform audit procedures in
such a way as to enable the auditor to obtain sufficient appropriate audit
evidence to be able to draw reasonable conclusions on which to base the
auditor’s opinion.
Definitions
5. For purposes of the SAs, the following terms have the meanings
attributed below:
(a) Accounting records – The records of initial accounting entries and
supporting records, such as checks and records of electronic fund
transfers; invoices; contracts; the general and subsidiary ledgers, journal
entries and other adjustments to the financial statements that are not
reflected in journal entries; and records such as work sheets and
spreadsheets supporting cost allocations, computations, reconciliations
and disclosures.

1 SA 315, “Identifying and Assessing the Risks of Material Misstatement Through Understanding the

Entity and Its Environment”.
2 SA 570(Revised), “Going Concern”.
3 SA 520, “Analytical Procedures”.
4 SA 330, “The Auditor’s Responses to Assessed Risks”.

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(b) Appropriateness (of audit evidence) – The measure of the quality of audit
evidence; that is, its relevance and its reliability in providing support for the
conclusions on which the auditor’s opinion is based.
(c) Audit evidence – Information used by the auditor in arriving at the
conclusions on which the auditor’s opinion is based. Audit evidence
includes both information contained in the accounting records underlying
the financial statements and information obtained from other sources.
(d) Management’s expert – An individual or organisation possessing expertise
in a field other than accounting or auditing, whose work in that field is used
by the entity to assist the entity in preparing the financial statements.
(e) Sufficiency (of audit evidence) – The measure of the quantity of audit
evidence. The quantity of the audit evidence needed is affected by the
auditor’s assessment of the risks of material misstatement and also by the
quality of such audit evidence.
Requirements
Sufficient Appropriate Audit Evidence
6. The auditor shall design and perform audit procedures that are
appropriate in the circumstances for the purpose of obtaining sufficient
appropriate audit evidence. (Ref: Para. A1-A25)
Information to be Used as Audit Evidence
7. When designing and performing audit procedures, the auditor shall
consider the relevance and reliability of the information to be used as audit
evidence. (Ref: Para. A26-A33)
8. When information to be used as audit evidence has been prepared using
the work of a management’s expert, the auditor shall, to the extent necessary,
having regard to the significance of that expert’s work for the auditor’s purposes,:
(Ref: Para. A34-A36)
(a) Evaluate the competence, capabilities and objectivity of that expert; (Ref:
Para. A37-A43)
(b) Obtain an understanding of the work of that expert; and (Ref: Para. A44-
A47)
(c) Evaluate the appropriateness of that expert’s work as audit evidence for
the relevant assertion. (Ref: Para. A48)
9. When using information produced by the entity, the auditor shall evaluate
whether the information is sufficiently reliable for the auditor’s purposes,
including as necessary in the circumstances:

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(a) Obtaining audit evidence about the accuracy and completeness of the
information; and (Ref: Para. A49-A50)
(b) Evaluating whether the information is sufficiently precise and detailed for
the auditor’s purposes. (Ref: Para. A51)
Selecting Items for Testing to Obtain Audit Evidence
10. When designing tests of controls and tests of details, the auditor shall
determine means of selecting items for testing that are effective in meeting the
purpose of the audit procedure. (Ref: Para. A52-A56)
Inconsistency in, or Doubts over Reliability of, Audit Evidence
11. If:
(a) audit evidence obtained from one source is inconsistent with that obtained
from another; or
(b) the auditor has doubts over the reliability of information to be used as
audit evidence,
The auditor shall determine what modifications or additions to audit procedures
are necessary to resolve the matter, and shall consider the effect of the matter, if
any, on other aspects of the audit. (Ref: Para. A57)
***
Application and Other Explanatory Material
Sufficient Appropriate Audit Evidence (Ref: Para. 6)
A1. Audit evidence is necessary to support the auditor’s opinion and report. It
is cumulative in nature and is primarily obtained from audit procedures performed
during the course of the audit. It may, however, also include information obtained
from other sources such as previous audits (provided the auditor has determined
whether changes have occurred since the previous audit that may affect its
relevance to the current audit)5 or a firm’s quality control procedures for client
acceptance and continuance. In addition to other sources inside and outside the
entity, the entity’s accounting records are an important source of audit evidence.
Also, information that may be used as audit evidence may have been prepared
using the work of a management’s expert. Audit evidence comprises both
information that supports and corroborates management’s assertions, and any
information that contradicts such assertions. In addition, in some cases the
absence of information (for example, management’s refusal to provide a
requested representation) is used by the auditor, and therefore, also constitutes
audit evidence.

5 SA 315, paragraph 9.

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A2. Most of the auditor’s work in forming the auditor’s opinion consists of
obtaining and evaluating audit evidence. Audit procedures to obtain audit
evidence can include inspection, observation, confirmation, recalculation,
reperformance and analytical procedures, often in some combination, in addition
to inquiry. Although inquiry may provide important audit evidence, and may even
produce evidence of a misstatement, inquiry alone ordinarily does not provide
sufficient audit evidence of the absence of a material misstatement at the
assertion level, nor of the operating effectiveness of controls.
A3. As explained in SA 200,6 reasonable assurance is obtained when the
auditor has obtained sufficient appropriate audit evidence to reduce audit risk
(i.e., the risk that the auditor expresses an inappropriate opinion when the
financial statements are materially misstated) to an acceptably low level.
A4. The sufficiency and appropriateness of audit evidence are interrelated.
Sufficiency is the measure of the quantity of audit evidence. The quantity of audit
evidence needed is affected by the auditor’s assessment of the risks of
misstatement (the higher the assessed risks, the more audit evidence is likely to
be required) and also by the quality of such audit evidence (the higher the
quality, the less may be required). Obtaining more audit evidence, however, may
not compensate for its poor quality.
A5. Appropriateness is the measure of the quality of audit evidence; that is, its
relevance and its reliability in providing support for the conclusions on which the
auditor’s opinion is based. The reliability of evidence is influenced by its source
and by its nature, and is dependent on the individual circumstances under which
it is obtained.
A6. SA 330 requires the auditor to conclude whether sufficient appropriate
audit evidence has been obtained.7 Whether sufficient appropriate audit evidence
has been obtained to reduce audit risk to an acceptably low level, and thereby
enable the auditor to draw reasonable conclusions on which to base the auditor’s
opinion, is a matter of professional judgment. SA 200 contains discussion of such
matters as the nature of audit procedures, the timeliness of financial reporting,
and the balance between benefit and cost, which are relevant factors when the
auditor exercises professional judgment regarding whether sufficient appropriate
audit evidence has been obtained.
Sources of Audit Evidence
A7. Some audit evidence is obtained by performing audit procedures to test
the accounting records, for example, through analysis and review, reperforming
procedures followed in the financial reporting process, and reconciling related

6 SA 200, paragraph 5.
7 SA 330, paragraph 26.

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types and applications of the same information. Through the performance of
such audit procedures, the auditor may determine that the accounting records
are internally consistent and agree to the financial statements.
A8. More assurance is ordinarily obtained from consistent audit evidence
obtained from different sources or of a different nature than from items of audit
evidence considered individually. For example, corroborating information
obtained from a source independent of the entity may increase the assurance the
auditor obtains from audit evidence that is generated internally, such as evidence
existing within the accounting records, minutes of meetings, or a management
representation.
A9. Information from sources independent of the entity that the auditor may
use as audit evidence may include confirmations from third parties, analysts’
reports, and comparable data about competitors (benchmarking data).
Audit Procedures for Obtaining Audit Evidence
A10. As required by, and explained further in, SA 315 and SA 330, audit
evidence to draw reasonable conclusions on which to base the auditor’s opinion
is obtained by performing:
(a) Risk assessment procedures; and
(b) Further audit procedures, which comprise:
(i) Tests of controls, when required by the SAs or when the auditor
has chosen to do so; and
(ii) Substantive procedures, including tests of details and substantive
analytical procedures.
A11. The audit procedures described in paragraphs A14-A25 below may be
used as risk assessment procedures, tests of controls or substantive procedures,
depending on the context in which they are applied by the auditor. As explained
in SA 330, audit evidence obtained from previous audits may, in certain
circumstances, provide appropriate audit evidence where the auditor performs
audit procedures to establish its continuing relevance8.
A12. The nature and timing of the audit procedures to be used may be affected
by the fact that some of the accounting data and other information may be
available only in electronic form or only at certain points or periods in time. For
example, source documents, such as purchase orders and invoices, may exist
only in electronic form when an entity uses electronic commerce, or may be
discarded after scanning when an entity uses image processing systems to
facilitate storage and reference.

8 SA 330, paragraph A35.

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A13. Certain electronic information may not be retrievable after a specified
period of time, for example, if files are changed and if backup files do not exist.
Accordingly, the auditor may find it necessary as a result of an entity’s data
retention policies to request retention of some information for the auditor’s review
or to perform audit procedures at a time when the information is available.
Inspection
A14. Inspection involves examining records or documents, whether internal or
external, in paper form, electronic form, or other media, or a physical
examination of an asset. Inspection of records and documents provides audit
evidence of varying degrees of reliability, depending on their nature and source
and, in the case of internal records and documents, on the effectiveness of the
controls over their production. An example of inspection used as a test of
controls is inspection of records for evidence of authorisation.
A15. Some documents represent direct audit evidence of the existence of an
asset, for example, a document constituting a financial instrument such as a
stock or bond. Inspection of such documents may not necessarily provide audit
evidence about ownership or value. In addition, inspecting an executed contract
may provide audit evidence relevant to the entity’s application of accounting
policies, such as revenue recognition.
A16. Inspection of tangible assets may provide reliable audit evidence with
respect to their existence, but not necessarily about the entity’s rights and
obligations or the valuation of the assets. Inspection of individual inventory items
may accompany the observation of inventory counting.
Observation
A17. Observation consists of looking at a process or procedure being
performed by others, for example, the auditor’s observation of inventory counting
by the entity’s personnel, or of the performance of control activities. Observation
provides audit evidence about the performance of a process or procedure, but is
limited to the point in time at which the observation takes place, and by the fact
that the act of being observed may affect how the process or procedure is
performed. See SA 501 for further guidance on observation of the counting of
inventory.9
External Confirmation
A18. An external confirmation represents audit evidence obtained by the
auditor as a direct written response to the auditor from a third party (the
confirming party), in paper form, or by electronic or other medium. External

9 SA 501, “Audit Evidence—Specific Considerations for Selected Items”.

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confirmation procedures frequently are relevant when addressing assertions
associated with certain account balances and their elements. However, external
confirmations need not be restricted to account balances only. For example, the
auditor may request confirmation of the terms of agreements or transactions an
entity has with third parties; the confirmation request may be designed to ask if
any modifications have been made to the agreement and, if so, what the relevant
details are. External confirmation procedures also are used to obtain audit
evidence about the absence of certain conditions, for example, the absence of a
“side agreement” that may influence revenue recognition. See SA 505 for further
guidance.10
Recalculation
A19. Recalculation consists of checking the mathematical accuracy of
documents or records. Recalculation may be performed manually or
electronically.
Reperformance
A20. Reperformance involves the auditor’s independent execution of
procedures or controls that were originally performed as part of the entity’s
internal control.
Analytical Procedures
A21. Analytical procedures consist of evaluations of financial information made
by a study of plausible relationships among both financial and non-financial data.
Analytical procedures also encompass the investigation of identified fluctuations
and relationships that are inconsistent with other relevant information or deviate
significantly from predicted amounts. See SA 520 for further guidance.
Inquiry
A22. Inquiry consists of seeking information of knowledgeable persons, both
financial and non- financial, within the entity or outside the entity. Inquiry is used
extensively throughout the audit in addition to other audit procedures. Inquiries
may range from formal written inquiries to informal oral inquiries. Evaluating
responses to inquiries is an integral part of the inquiry process.
A23. Responses to inquiries may provide the auditor with information not
previously possessed or with corroborative audit evidence. Alternatively,
responses might provide information that differs significantly from other
information that the auditor has obtained, for example, information regarding the
possibility of management override of controls. In some cases, responses to

10 SA 505, “External Confirmations”.

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inquiries provide a basis for the auditor to modify or perform additional audit
procedures.
A24. Although corroboration of evidence obtained through inquiry is often of
particular importance, in the case of inquiries about management intent, the
information available to support management’s intent may be limited. In these
cases, understanding management’s past history of carrying out its stated
intentions, management’s stated reasons for choosing a particular course of
action, and management’s ability to pursue a specific course of action may
provide relevant information to corroborate the evidence obtained through
inquiry.
A25. In respect of some matters, the auditor may consider it necessary to
obtain written representations from management and, where appropriate, those
charged with governance to confirm responses to oral inquiries. See SA 580 for
further guidance.11
Information to be Used as Audit Evidence
Relevance and Reliability (Ref: Para. 7)
A26. As noted in paragraph A1, while audit evidence is primarily obtained from
audit procedures performed during the course of the audit, it may also include
information obtained from other sources such as, for example, previous audits, in
certain circumstances, and a firm’s quality control procedures for client
acceptance and continuance. The quality of all audit evidence is affected by the
relevance and reliability of the information upon which it is based.
Relevance
A27. Relevance deals with the logical connection with, or bearing upon, the
purpose of the audit procedure and, where appropriate, the assertion under
consideration. The relevance of information to be used as audit evidence may be
affected by the direction of testing. For example, if the purpose of an audit
procedure is to test for overstatement in the existence or valuation of accounts
payable, testing the recorded accounts payable may be a relevant audit
procedure. On the other hand, when testing for understatement in the existence
or valuation of accounts payable, testing the recorded accounts payable would
not be relevant, but testing such information as subsequent disbursements,
unpaid invoices, suppliers’ statements, and unmatched receiving reports may be
relevant.
A28. A given set of audit procedures may provide audit evidence that is
relevant to certain assertions, but not others. For example, inspection of

11 SA 580, “Written Representations”.

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documents related to the collection of receivables after the period end may
provide audit evidence regarding existence and valuation, but not necessarily
cut-off. Similarly, obtaining audit evidence regarding a particular assertion, for
example, the existence of inventory, is not a substitute for obtaining audit
evidence regarding another assertion, for example, the valuation of that
inventory. On the other hand, audit evidence from different sources or of a
different nature may often be relevant to the same assertion.
A29. Tests of controls are designed to evaluate the operating effectiveness of
controls in preventing, or detecting and correcting, material misstatements at the
assertion level. Designing tests of controls to obtain relevant audit evidence
includes identifying conditions (characteristics or attributes) that indicate
performance of a control, and deviation conditions which indicate departures
from adequate performance. The presence or absence of those conditions can
then be tested by the auditor.
A30. Substantive procedures are designed to detect material misstatements at
the assertion level. They comprise tests of details and substantive analytical
procedures. Designing substantive procedures includes identifying conditions
relevant to the purpose of the test that constitute a misstatement in the relevant
assertion.
Reliability
A31. The reliability of information to be used as audit evidence, and therefore
of the audit evidence itself, is influenced by its source and its nature, and the
circumstances under which it is obtained, including the controls over its
preparation and maintenance where relevant. Therefore, generalisations about
the reliability of various kinds of audit evidence are subject to important
exceptions. Even when information to be used as audit evidence is obtained from
sources external to the entity, circumstances may exist that could affect its
reliability. For example, information obtained from an independent external
source may not be reliable if the source is not knowledgeable, or a
management’s expert may lack objectivity. While recognising that exceptions
may exist, the following generalisations about the reliability of audit evidence
may be useful:
• The reliability of audit evidence is increased when it is obtained from
independent sources outside the entity.
• The reliability of audit evidence that is generated internally is increased
when the related controls, including those over its preparation and
maintenance, imposed by the entity are effective.
• Audit evidence obtained directly by the auditor (for example, observation
of the application of a control) is more reliable than audit evidence

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obtained indirectly or by inference (for example, inquiry about the
application of a control).
• Audit evidence in documentary form, whether paper, electronic, or other
medium, is more reliable than evidence obtained orally (for example, a
contemporaneously written record of a meeting is more reliable than a
subsequent oral representation of the matters discussed).
• Audit evidence provided by original documents is more reliable than audit
evidence provided by photocopies or facsimiles, or documents that have
been filmed, digitised or otherwise transformed into electronic form, the
reliability of which may depend on the controls over their preparation and
maintenance.
A32. SA 520 provides further guidance regarding the reliability of data used for
purposes of designing analytical procedures as substantive procedures.12
A33. SA 240 deals with circumstances where the auditor has reason to believe
that a document may not be authentic, or may have been modified without that
modification having been disclosed to the auditor.13
Reliability of Information Produced by a Management’s Expert (Ref: Para. 8)
A34. The preparation of an entity’s financial statements may require expertise
in a field other than accounting or auditing, such as actuarial calculations,
valuations, or engineering data. The entity may employ or engage experts in
these fields to obtain the needed expertise to prepare the financial statements.
Failure to do so when such expertise is necessary increases the risks of material
misstatement.
A35. When information to be used as audit evidence has been prepared using
the work of a management’s expert, the requirement in paragraph 8 of this SA
applies. For example, an individual or organisation may possess expertise in the
application of models to estimate the fair value of securities for which there is no
observable market. If the individual or organisation applies that expertise in
making an estimate which the entity uses in preparing its financial statements,
the individual or organisation is a management’s expert and paragraph 8 applies.
If, on the other hand, that individual or organization merely provides price data
regarding private transactions not otherwise available to the entity which the
entity uses in its own estimation methods, such information, if used as audit
evidence, is subject to paragraph 7 of this SA, but is not the use of a
management’s expert by the entity.

12 SA 520, paragraph 5(a).
13 SA 240, “The Auditor’s Responsibilities Relating to Fraud in an Audit of Financial
Statements”, paragraph 13.

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A36. The nature, timing and extent of audit procedures in relation to the
requirement in paragraph 8 of this SA, may be affected by such matters as:
• The nature and complexity of the matter to which the management’s expert
relates.
• The risks of material misstatement in the matter.
• The availability of alternative sources of audit evidence.
• The nature, scope and objectives of the management’s expert’s work.
• Whether the management’s expert is employed by the entity, or is a party
engaged by it to provide relevant services.
• The extent to which management can exercise control or influence over
the work of the management’s expert.
• Whether the management’s expert is subject to technical performance
standards or other professional or industry requirements.
• The nature and extent of any controls within the entity over the
management’s expert’s work.
• The auditor’s knowledge and experience of the management’s expert’s
field of expertise.
• The auditor’s previous experience of the work of that expert.
The Competence, Capabilities and Objectivity of a Management’s Expert (Ref:
Para. 8(a))
A37. Competence relates to the nature and level of expertise of the
management’s expert. Capability relates the ability of the management’s expert
to exercise that competence in the circumstances. Factors that influence
capability may include, for example, geographic location, and the availability of
time and resources. Objectivity relates to the possible effects that bias, conflict of
interest or the influence of others may have on the professional or business
judgment of the management’s expert. The competence, capabilities and
objectivity of a management’s expert, and any controls within the entity over that
expert’s work, are important factors in relation to the reliability of any information
produced by a management’s expert.
A38. Information regarding the competence, capabilities and objectivity of a
management’s expert may come from a variety of sources, such as:
• Personal experience with previous work of that expert.
• Discussions with that expert.
• Discussions with others who are familiar with that expert’s work.

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• Knowledge of that expert’s qualifications, membership of a professional
body or industry association, license to practice, or other forms of external
recognition.
• Published papers or books written by that expert.
• An auditor’s expert, if any, who assists the auditor in obtaining sufficient
appropriate audit evidence with respect to information produced by the
management’s expert.
A39. Matters relevant to evaluating the competence, capabilities and objectivity
of a management’s expert include whether that expert’s work is subject to
technical performance standards or other professional or industry requirements,
for example, ethical standards and other membership requirements of a
professional body or industry association, accreditation standards of a licensing
body, or requirements imposed by law or regulation.
A40. Other matters that may be relevant include:
• The relevance of the management’s expert’s competence to the matter for
which that expert’s work will be used, including any areas of specialty
within that expert’s field. For example, a particular actuary may specialise
in property and casualty insurance, but have limited expertise regarding
pension calculations.
• The management’s expert’s competence with respect to relevant
accounting requirements, for example, knowledge of assumptions and
methods, including models where applicable, that are consistent with the
applicable financial reporting framework.
• Whether unexpected events, changes in conditions, or the audit evidence
obtained from the results of audit procedures indicate that it may be
necessary to reconsider the initial evaluation of the competence,
capabilities and objectivity of the management’s expert as the audit
progresses.
A41. A broad range of circumstances may threaten objectivity, for example,
self-interest threats, advocacy threats, familiarity threats, self-review threats and
intimidation threats. Safeguards may reduce such threats, and may be created
either by external structures (for example, the management’s expert’s profession,
legislation or regulation), or by the management’s expert’s work environment (for
example, quality control policies and procedures).
A42. Although safeguards cannot eliminate all threats to a management’s
expert’s objectivity, threats such as intimidation threats may be of less
significance to an expert engaged by the entity than to an expert employed by

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the entity, and the effectiveness of safeguards such as quality control policies
and procedures may be greater. Because the threat to objectivity created by
being an employee of the entity will always be present, an expert employed by
the entity cannot ordinarily be regarded as being more likely to be objective than
other employees of the entity.
A43. When evaluating the objectivity of an expert engaged by the entity, it may
be relevant to discuss with management and that expert any interests and
relationships that may create threats to the expert’s objectivity, and any
applicable safeguards, including any professional requirements that apply to the
expert; and to evaluate whether the safeguards are adequate. Interests and
relationships creating threats may include:
• Financial interests.
• Business and personal relationships.
• Provision of other services.
Obtaining an Understanding of the Work of the Management’s Expert (Ref: Para.
8(b))
A44. An understanding of the work of the management’s expert includes an
understanding of the relevant field of expertise. An understanding of the relevant
field of expertise may be obtained in conjunction with the auditor’s determination
of whether the auditor has the expertise to evaluate the work of the
management’s expert, or whether the auditor needs an auditor’s expert for this
purpose.14
A45. Aspects of the management’s expert’s field relevant to the auditor’s
understanding may include:
• Whether that expert’s field has areas of specialty within it that are relevant
to the audit.
• Whether any professional or other standards, and regulatory or legal
requirements apply.
• What assumptions and methods are used by the management’s expert,
and whether they are generally accepted within that expert’s field and
appropriate for financial reporting purposes.
• The nature of internal and external data or information the management’s
expert uses.
A46. In the case of a management’s expert engaged by the entity, there will
ordinarily be an engagement letter or other written form of agreement between

14 SA 620, “Using the Work of an Auditor’s Expert”, paragraph 7.

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the entity and that expert. Evaluating that agreement when obtaining an
understanding of the work of the management’s expert may assist the auditor in
determining the appropriateness of the following for the auditor’s purposes:
• The nature, scope and objectives of that expert’s work;
• The respective roles and responsibilities of management and that expert; and
• The nature, timing and extent of communication between management
and that expert, including the form of any report to be provided by that
expert.
A47. In the case of a management’s expert employed by the entity, it is less
likely there will be a written agreement of this kind. Inquiry of the expert and other
members of management may be the most appropriate way for the auditor to
obtain the necessary understanding.
Evaluating the Appropriateness of the Management’s Expert’s Work (Ref: Para.
8(c))
A48. Considerations when evaluating the appropriateness of the
management’s expert’s work as audit evidence for the relevant assertion may
include:
• The relevance and reasonableness of that expert’s findings or conclusions,
their consistency with other audit evidence, and whether they have been
appropriately reflected in the financial statements;
• If that expert’s work involves use of significant assumptions and methods,
the relevance and reasonableness of those assumptions and methods; and
• If that expert’s work involves significant use of source data, the relevance,
completeness, and accuracy of that source data.
Information Produced by the Entity and Used for the Auditor’s Purposes
(Ref: Para. 9(a)-(b))
A49. In order for the auditor to obtain reliable audit evidence, information
produced by the entity that is used for performing audit procedures needs to be
sufficiently complete and accurate. For example, the effectiveness of auditing
revenue by applying standard prices to records of sales volume is affected by the
accuracy of the price information and the completeness and accuracy of the
sales volume data. Similarly, if the auditor intends to test a population (for
example, payments) for a certain characteristic (for example, authorisation), the
results of the test will be less reliable if the population from which items are
selected for testing is not complete.
A50. Obtaining audit evidence about the accuracy and completeness of such
information may be performed concurrently with the actual audit procedure

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applied to the information when obtaining such audit evidence is an integral part
of the audit procedure itself. In other situations, the auditor may have obtained
audit evidence of the accuracy and completeness of such information by testing
controls over the preparation and maintenance of the information. In some
situations, however, the auditor may determine that additional audit procedures
are needed.
A51. In some cases, the auditor may intend to use information produced by the
entity for other audit purposes. For example, the auditor may intend to make use
of the entity’s performance measures for the purpose of analytical procedures, or
to make use of the entity’s information produced for monitoring activities, such as
internal auditor’s reports. In such cases, the appropriateness of the audit
evidence obtained is affected by whether the information is sufficiently precise or
detailed for the auditor’s purposes. For example, performance measures used by
management may not be precise enough to detect material misstatements.
Selecting Items for Testing to Obtain Audit Evidence (Ref: Para. 10)
A52. An effective test provides appropriate audit evidence to an extent that,
taken with other audit evidence obtained or to be obtained, will be sufficient for
the auditor’s purposes. In selecting items for testing, the auditor is required by
paragraph 7 to determine the relevance and reliability of information to be used
as audit evidence; the other aspect of effectiveness (sufficiency) is an important
consideration in selecting items to test. The means available to the auditor for
selecting items for testing are:
(a) Selecting all items (100% examination);
(b) Selecting specific items; and
(c) Audit sampling.
The application of any one or combination of these means may be appropriate
depending on the particular circumstances, for example, the risks of material
misstatement related to the assertion being tested, and the practicality and
efficiency of the different means.
Selecting All Items
A53. The auditor may decide that it will be most appropriate to examine the
entire population of items that make up a class of transactions or account
balance (or a stratum within that population). 100% examination is unlikely in the
case of tests of controls; however, it is more common for tests of details. 100%
examination may be appropriate when, for example:
• The population constitutes a small number of large value items;

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• There is a significant risk and other means do not provide sufficient
appropriate audit evidence; or
• The repetitive nature of a calculation or other process performed
automatically by an information system makes a 100% examination cost
effective.
Selecting Specific Items
A54. The auditor may decide to select specific items from a population. In
making this decision, factors that may be relevant include the auditor’s
understanding of the entity, the assessed risks of material misstatement, and the
characteristics of the population being tested. The judgmental selection of
specific items is subject to non-sampling risk. Specific items selected may
include:
• High value or key items. The auditor may decide to select specific items
within a population because they are of high value, or exhibit some other
characteristic, for example, items that are suspicious, unusual, particularly
risk-prone or that have a history of error.
• All items over a certain amount. The auditor may decide to examine items
whose recorded values exceed a certain amount so as to verify a large
proportion of the total amount of a class of transactions or account
balance.
• Items to obtain information. The auditor may examine items to obtain
information about matters such as the nature of the entity or the nature of
transactions.
A55. While selective examination of specific items from a class of transactions
or account balance will often be an efficient means of obtaining audit evidence, it
does not constitute audit sampling. The results of audit procedures applied to
items selected in this way cannot be projected to the entire population;
accordingly, selective examination of specific items does not provide audit
evidence concerning the remainder of the population.
Audit Sampling
A56. Audit sampling is designed to enable conclusions to be drawn about an
entire population on the basis of testing a sample drawn from it. Audit sampling is
discussed in SA 530.15
Inconsistency in, or Doubts over Reliability of, Audit Evidence (Ref:
Para. 11)
A57. Obtaining audit evidence from different sources or of a different nature

15 SA 530, “Audit Sampling”.

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may indicate that an individual item of audit evidence is not reliable, such as
when audit evidence obtained from one source is inconsistent with that obtained
from another. This may be the case when, for example, responses to inquiries of
management, internal audit, and others are inconsistent, or when responses to
inquiries of those charged with governance made to corroborate the responses
to inquiries of management are inconsistent with the response by management.
SA 230 includes a specific documentation requirement if the auditor identified
information that is inconsistent with the auditor’s final conclusion regarding a
significant matter.16
Material Modifications vis a vis ISA 500, “Audit Evidence”
SA 500, “Audit Evidence” does not contain any material modifications vis-a-vis
ISA 500.

16 SA 230, “Audit Documentation”, paragraph 11.

561 SA 500