Before making a conclusion and express an audit opinion on the financial statements, the auditor needs to assess whether the audit evidence that they obtain are sufficient and appropriate for them to make a decision or not.
Sufficient audit evidence here mainly refers to the number of audit evidence. And the appropriate here refers to the quality of evidence.
Sufficient here can refer to the number of sampling they select, the procedures they use, as well as documents that they obtain.
The auditor needs to perform assessment whether that evidence is sufficient and they now get comfort on the evidence that the conclusion will make corrections.
If the quantity of evidence that they obtain seems to be enough, the auditor need also to assess the quality of that evidence is reliable or not. This is what the appropriate is all about.
The reliability of audit evidence depends on the nature of evidence whether they obtain from thirds parties, prepared by the auditor, prepare by clients, written, or original.
Appropriateness of audit evidence is very important for the auditor to make a correct conclusion.
The audit risks of express incorrect audit opinions are significantly related to sufficient and appropriate audit evidence.
In conclusion, sufficient and appropriate audit evidence include:
- Quality of audit evidence
- Quantity of audit evidence
- Reliability of sources of evidence obtained
- Reliability of internal control over financial reporting
- The relevance of the evidence obtained
- Reliable form audit evidence