Internal Audit Evidence (SIA-10)

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Internal Audit Evidence (SIA-10)
  • Objective: “The internal auditor should, based on his professional judgment, obtain sufficient appropriate evidence to enable him to draw reasonable conclusions therefrom on which to base his opinion or findings.” Paragraph 14 of the SIA 2, Basic Principles Governing Internal Audit.
  • The scope of an internal audit is much broader that of statutory audit, which is spread beyond checking of financial transactions and is expected to cover comments on internal control systems, risk management, propriety aspect of transactions.
  • Sufficiency & Appropriateness
    • Meaning
      • Sufficiency => Quantum
      • Appropriateness => Relevance and Reliability
    • Depends on
      • Materiality
      • Type of information available
      • Degree of risk of misstatement
    • Reliability of documentary evidence depends on sources, which include
      • Documentary evidence originating from and held by third parties;
      • Documentary evidence originating from third parties and held by the entity;
      • Documentary evidence originating from the entity and held by third parties; and
      • Documentary evidence originating from and held by entity.
    • Procedures for Obtaining Internal Audit Evidence
      • Inspection
        • Inspection of records, documents, or tangible assets provides evidence of varying degrees of reliability, depending on their nature and source.
      • Observation
        • Observation consists of witnessing a process or procedure performed by client.
      • Inquiry and confirmation
        • Inquiry consists of seeking appropriate information from knowledgeable persons inside or outside the entity (both Internal and External).
        • Confirmation consists of the response to an inquiry to corroborate information contained in the accounting records. For example, direct debtor’s conformation.
      • Computation
        • Checking the arithmetical accuracy of source documents and accounting records or performing independent calculations.
      • Analytical review
        • Involves in studying significant ratios and trends and investigating unusual fluctuations and items.

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