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Collecting Audit Evidence

Throughout the audit process, the internal auditors gather facts. They are supported by written or verbal evidence. The supporting documents are called evidence, work papers, or documentations, etc.

In the real world, there is no rule regarding the amount of evidence that the auditor should or must collect. Unlike the external auditor there is no pre-set template the internal auditor is required to follow. Pictures and graphs tables - etc are allowed in internal audit reporting but not in external audit report. Verbal reporting is also allowed. All these are subject to the individual company politics and the VP internal audit philosophy.

Given the above stated statements, a number of auditors argued that the external auditor (the CPA) has to 'over document' their audit process in anticipation of unexpected law suit by someone, contrary to the internal auditor who does not expect any law suit by any insider (auditee).

In addition, if the auditee accepted the findings and recognized them, why internal auditors should waste their time documenting the audit process?

Others claim that there is no need to write an audit report. A verbal presentation to top management at the end of the audit process will suffice.

Discuss the above stated issues regarding collecting evidence and reporting findings. In addition, if you are the Internal Audit VP and want to establish your company policy, what are the prime points that you will require your staff to adhere to?

Please cite Textbooks and adequate websites.

Solution Preview

Audit Evidence, Communication and Reporting

Throughout the audit process, the internal auditors gather facts. They are supported by written or verbal evidence. The supporting documents are called evidence, work papers, or documentations - etc.

In the real world, there is no rule regarding the amount of evidence that the auditor should or must collect. Unlike the external auditor there is no pre-set template the internal auditor is required to follow. Pictures and graphs tables - etc are allowed in internal audit reporting but not in external audit report. Verbal reporting is also allowed. All these are subject to the individual company politics and the VP internal audit philosophy.

I do not agree that individual company politics and the VP internal audit philosophy should drive the evidence, work papers, or documentation that the internal auditor produces. There are several reasons for my contention. The first is that there is a Standard on Internal Audit. This provides standards for evidence, work papers, and documentation. If individual company politics or internal audit VP drives the standards there is high chance of low quality internal audit (2).

Consider this: Paragraph 10 of the SIA 2 states that "The internal auditor should document matters, which are important in providing evidence that the audit was carried out in accordance with the Standards on Internal Audit and support his findings or the report submitted by him. In addition, the working papers also help in planning and performing the internal audit, review and supervise the work and most importantly, provide evidence of the work performed to support his findings or report(s)." Para 10 SIA 2. This standard requires internal auditor to document matters and support his finding or reports submitted by him. It is evident that the report must be written and should mention the persons to whom the report has been submitted. In SIA 3(a) there is clear description of what internal audit documentation means. The working papers produced are also a part of the documentation produced.

Even other bodies like IIA ...

Solution Summary

Collecting Audit Evidence is discussed in great detail in this solution.

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