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What Types of Evidence Should You Sample During an Audit?

Because businesses generate so much paperwork, auditors can’t possibly sort through all of it. Instead you review a sample. You don’t include every type of client information in an auditing sample. Here are the types of evidence that you typically sample:

  • Tangible assets: If, for example, a business states that it owns 300 company cars. You don’t hunt down all 300 cars; you just select a sample of the cars to track down to verify their existence.

  • Records or documents: Records or documents are also known as source materials, and they’re the materials on which the numbers in financial statements are based. For example, the amount of sales that a financial statement represents is derived from the data on customer invoices, which in this case is your sampling unit.

  • Reperformance: This term refers to checking the sampling work the client has already done. For example, company policy dictates that no employee is paid unless she has turned in a timesheet. The client states that this rule is in use for 100 percent of all paychecks. You can test this client assertion by taking a sample of payroll checks and matching them to the timesheets.

  • Recalculation: This term refers to checking the mathematical accuracy of figures and totals on a document. For example, a sample may have three columns: cost per item, items ordered, and total. You perform recalculation if you verify the figures on the invoice by multiplying cost per item times items ordered and making sure the figure equals the total.

  • Confirmation: This term refers to getting account balance verification from unrelated third parties. A good example is sending letters to customers or vendors of the business to verify accounts receivable or accounts payable balances.

Some audit evidence can’t be sampled because it can’t be broken down into smaller parts. These types of evidence are still integral to an audit, but you must consider them in their entirety for them to be useful.

Here are two examples of audit evidence that you don’t sample:

  • Inquiry: This term refers to questioning knowledgeable people who work for your client. Auditors typically question department heads and key employees to understand how each department works. You can’t sample an inquiry because you have to take the whole response into account in order to understand it.

  • Observation: This means watching the client’s employees do their jobs. An example is to be in attendance when your client takes its physical ending inventory in order to verify that it exists.

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