ISA 500 (Revised) — Audit Evidence

ISA 500 (Revised) 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.

ISA 500 (Revised) – Introduction

1. Scope of this ISA

It is APPLICABLE to all the audit evidence obtained during the course of the audit.

2. Effective Date

This ISA is EFFECTIVE for audits of financial statements for periods beginning on or after December 15, 2009.

ISA 500

ISA 500 – Objective

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.

ISA 500 – Definitions

1. 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.

2. Sufficiency of Audit Evidence

The Measure of the ‘QUANTITY’ of audit evidence.

3. Appropriateness of Audit Evidence

The Measure of the ‘QUALITY’ of audit evidence.

4. Management’s Expert

An ‘Individual’ or ‘Organization’ 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.

ISA 500 – Requirements

1. Sufficient Appropriate Audit Evidence

The ‘Auditor‘ shall DESIGN and PERFORM audit procedures that are appropriate in the circumstances for the purpose of obtaining sufficient appropriate audit evidence.

2. Information to be Used as Audit Evidence

When designing and performing audit procedures, the auditor shall CONSIDER the relevance and reliability of the information to be used as audit evidence.

If the information to be used as Audit Evidence has been prepared using the work of ‘Management’s Expert‘, the auditor shall:

  • EVALUATE the competence, capabilities and objectivity of that expert;
  • OBTAIN an understanding of the work of that expert; AND
  • EVALUATE the appropriateness of that expert’s work as audit evidence for the relevant assertion.

When using the ‘Information’ provided by the entity, the auditor shall EVALUATE whether the information is sufficiently reliable:

(a) Obtaining audit evidence about the accuracy and completeness of the information; AND
(b) Evaluating whether the information is sufficiently precise and detailed for the auditor’s purposes.

3. Selecting Items for Testing to Obtain Audit Evidence

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.

4. Inconsistency in, or Doubts Over Reliability of Audit Evidence

If:

  • Audit evidence obtained from one source is inconsistent with that obtained from another: OR
  • 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.

Synopsis

ISA 500 Audit Evidence DEALS with the auditor’s responsibility to design and perform audit procedures to obtain sufficient appropriate audit evidence.

[500-599] Audit Evidence

ISA 501

ISA 505

ISA 510

ISA 520

ISA 530

ISA 540

ISA 550

ISA 560

ISA 570

ISA 580

Leave a Comment