What is Audit Evidence?

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  • Written By: Mary McMahon
  • Edited By: O. Wallace
  • Last Modified Date: 23 August 2019
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Audit evidence is evidentiary material collected during the course of a financial audit. Evidence collected during an audit can take a number of different forms, and there must be sufficient audit evidence for the auditor to make a final opinion. This evidence also has to be carefully controlled because it can potentially include confidential material and access to the evidence must be limited to people who authorized to examine it. Access is also limited to prevent tampering or interference with the evidence which could compromise the audit.

In an audit, financial records and practices are scrutinized. People can perform audits for a wide range of reasons. Internally, companies use auditing to make sure that all of their practices are legal. Auditing can also be performed externally for compliance reasons, to determine whether or not a company is reporting financial information accurately. If errors are uncovered during an audit they must be corrected and deliberate errors may be punishable by law.

People can break up audit evidence into two broad categories: internal and external. An example of internal audit evidence might be something like a checkbook register. External evidence includes things such as bank statements. Both types of evidence can be important for an audit; ideally, the evidence should agree, demonstrating that a company is following procedure and that its financial practices are fully legal.


Collection of evidence can include gathering documents, observing practices within a company, and conducting interviews with employees. There interviews may be conducted with people responsible for financial recordkeeping along with other members of the personnel. If a company is engaging in fraudulent or questionable activity, employees who are not directly involved in the activity may have noticed irregularities which could be important to auditors.

As auditors collect evidence, they record the evidence in the audit working papers and make sure that it is carefully documented. At the end of the audit, all of the evidence is reviewed and the auditor generates an opinion. Auditors must be able to back up their conclusions with evidence, demonstrating exactly where areas of concern lie and showing how they came to the opinion they did. For example, if an auditor states that a company knowingly committed tax fraud, she or he could point to interviews in the audit evidence in which people disclosed their awareness that certain practices were illegal, and can document with financial records that these practices were engaged in by company personnel.


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Post 5

@StringBender - Yes, that's the same thing I learned (not the hard way, fortunately). But every little thing you deduct, even if it's only a partial deduction, adds up. Here's an example: I love to fish, and I have a fishing blog that is designed to get affiliate sales.

I also belong to a fishing club, so when I go there to fish, I deduct the mileage. I also deduct the dues. Then, when I come home, I make sure I post a new article about my experience. Hopefully, it's a good news post. So, if I have a receipt for my dues, and I keep track of my mileage, I can use the information if I get audited.

Post 4

This is definitely something that needs to be tended to. Being audited doesn't have to be a nightmare. If you keep all of your books straight and have receipts for everything, you should be okay. The other important thing is to make sure you don't claim things you are not allowed to claim, or make bigger claims than you really have proof for.

Home offices are an area that always gets people in trouble in an audit. If you use anything in your home office for anything other than work, you cannot claim it as a 100-percent deduction. Just because you watched a business video on your TV doesn't mean you can claim the TV as a deduction. Right?

Post 3

@everetra - Living through an audit can be a scary experience, for all employees involved. This is because an auditor does more than collect paperwork. They also watch employees doing their jobs; it’s one of their audit evidence gathering techniques.

An auditor visited our company and spent some time watching us go about our work. I was especially nervous because my work directly impacted the books.

I had developed a database that helped us to track money we were saving by disconnecting T1s in our telecommunications network. The auditor watched over my shoulder for awhile as I entered the numbers and generated the reports.

He asked about my criteria for quantifying the savings and wanted me to hand verify the calculations. Fortunately, the numbers were correct, but I was sweating it all the way.

Post 2

We’ve been audited at our business before. One of the purposes of an audit procedure is not only to uncover fraud, but also to help prevent it.

For example, an auditor will want to verify the integrity of your internal controls. By internal controls I mean who’s handling what and making sure that there is no conflict of interest.

For example, who is writing checks for your business? Is this the same purpose who is also receiving money for the business? What kind of authority do they have?

In other words, different financial functions need to be broken up by different departments, to minimize the possibility of embezzlement.

It’s just as much preventive maintenance as it is locating existing problems. At least that’s the way it worked for our audit, and we made some necessary changes.

Post 1

Several years ago I underwent an audit-it wasn’t a business audit, it was a personal tax audit. The notice from the IRS sent shivers down my spine. I had never been audited before and I wasn’t exactly rich.

However, it was not my personal income that was at issue; it was the amount I claimed for charitable contributions. Apparently the year prior I had been more charitable than usual, and their computer flagged me for an audit. Go figure.

Anyway, as part of the audit evidence and documentation requested in their letter, they wanted receipts of my charitable contributions.

It took me weeks to comb through all the receipts; I eventually found them all, and being a computer programmer, I even developed a detailed report tagging each piece of evidence with the line item in the report.

It blew the auditor away, and I came out squeaky clean.

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