RTI, Mumbai1 Objective of this session is to test the understanding of the participants with reference to the previous Theory Session which covered the following:  Competence, relevance and sufficiency of evidence  Factors affecting the evidence  Types of evidences  Audit criteria & evidence  Sources of evidence  Sampling techniques

RTI, Mumbai2 Cont…  Evidence analysis  Evidential process  Documentation  Characteristics of good quality working papers  Quality assurance in evidence gathering, analysis and working papers

RTI, Mumbai3 Evidence and Documentation Q.1. What is meant by Audit Evidence?

RTI, Mumbai4 Evidence and Documentation Solution:1 Audit evidence is the information to be collected to support audit findings. The recommendation and conclusions in the p.a. report are framed based on the audit evidence.

RTI, Mumbai5 Evidence and Documentation Q.2. What are the techniques followed to collect Audit Evidence and Characteristic of Good Evidence?

RTI, Mumbai6 Evidence and Documentation Solution:2 The evidence that are gathered should be competent i.e. valid and reliable and actually represent the observations of audit The evidence should be relevant and have a clear bearing and logical relationships to audit objectives. Sampling techniques should be carefully chosen. Inspection,observation,enquiry and conformation are good procedure of techniques followed

RTI, Mumbai7 Evidence and Documentation – Sufficiency and reasonableness is the other requirement of valid evidence to strengthen the performance audits – The following documents were relied upon as substantive evidence in the MAT review

RTI, Mumbai8 Evidence and Documentation  Audit queries  Copies of Assessment orders  Copies of the statement of accounts  Copies of the TDS certificates, advance tax challans  Provisions of MAT  Case laws  Circulars and instructions

RTI, Mumbai9 Evidence and Documentation Q.3 Explain competence relevance and reasonableness of Audit Evidence?

RTI, Mumbai10 Evidence and Documentation Solution: 3 A valid and reliable evidence is called competent evidence. Documentary evidence are move valid than oral evidence similarly evidence obtained by direct observation are more reliable than indirectly obtained. Oral evidence should be corroborated in writing and attestations. Entity generated information is a reflection of reliability of internal control system. Photo copies are to be certified with reference to. their source and identity.

RTI, Mumbai11 Evidence and Documentation Relevance of the evidence is determined the clear and logical relationship it bears to the audit objective and criteria. The objectives and criteria are known when the subject is selected for p.a. Relevant evidence, its nature and location are indicated in advance in accordance with the audit objectives and criteria to support the views in p.a. While sufficiency of evidence is quantitative, recommendations is qualitative in p.a. Evidence is sufficient if the fact is carried out on a reasonable population selected on representative basis. It should be convincing when the observation is sensitive and controversial.

RTI, Mumbai12 Evidence and Documentation Q.4. Classify the following evidences into competence, relevance and reasonableness?

RTI, Mumbai13 Evidence and Documentation (i) sample selected was not representative (ii) evidence collected relate to insolated occurrence (iii) does not establish cause and effective relationship (iv) conflicting (v) biased (vi) obtained orally (vii) unattested photo copy

RTI, Mumbai14 Evidence and Documentation Solution: 4 (i) sufficiency (ii) sufficiency, validity (iii) sufficiency, reliability (iv) reliability (v) reliability (vi) importance (vii) competence

RTI, Mumbai15 Evidence and Documentation Q.5 What types of evidences are collected in audit? With Reference to MAT?

RTI, Mumbai16 Evidence and Documentation Solution : 5 Physical evidence- Possible Oral evidence – Not Possible Documentary evidence - Possible Analytical evidence - Possible All types of evidence was not possible to obtain in MAT.

RTI, Mumbai17 Evidence and Documentation Evidences obtained for MAT Replies to Audit queries Copies of Assessment orders Copies of the statement of accounts Copies of the TDS certificates, advance tax challans Provisions of MAT Case laws Circulars and instructions

RTI, Mumbai18 Evidence and Documentation (i) Provision of the Act detailing the scheme of MAT. (ii) Judicial decisions on interpretation of terms and usages in I.T. Act and provision. (iii) Assessment orders passed by the Assessing officers. (iv) Review orders and appeal orders. (v) Copies of accounts along with their tax returns

RTI, Mumbai19 Evidence and Documentation (vi) Note accompanying the accounts, director’s report and tax audit report. (vii) Para's avoidable in the previous L.A.Rs (viii) Guidelines received from the top management of SAI (ix) Discussion papers.

RTI, Mumbai20 Evidence and Documentation Q.6 A well prepared documentation of evidence is a measure of quality assurance of P.A. Do you agree?

RTI, Mumbai21 Evidence and Documentation Solution 6 Meticulous documentation of evidence in working paper include: Planning Work performed Findings of Audit It should be sufficient enough to enable

RTI, Mumbai22 Cont An experienced auditor having no previous connection with the subject of P.A. to understand the significant audit findings and conclusions.