a) Audit evidence is all the information used by the auditor in arriving at the conclusions on which the audit opinion

is based and includes the information contained in the accounting records underlying the nancial statements and other information. Auditors are not expected to examine all information that may exist. Audit evidence, which is cumulative in nature, includes audit evidence obtained from audit procedures performed during the course of the audit and may include audit evidence obtained from other sources, such as previous audits and a rm's quality control procedures for client acceptance and continuance. b) Sufficiency of evidence The auditors knowledge and experience of the business. Where the auditor has well past knowledge of the business and trusts the integrity of staff then less evidence will be required. Assessment of risk at the financial statement level and/or the individual transaction level. As risk increases then more evidence is required. The nature of the accounting and internal control systems. The auditor will place more reliance on good accounting and internal control systems limiting the amount of audit evidence required. The findings of audit procedures. Where findings from related audit procedures are satisfactory (e.g. tests of controls over receivables) then substantive evidence will be collected. The materiality of the item. More evidence will normally be collected on material items whereas immaterial items may simply be reviewed to ensure they appear correct. The source and reliability of the information. Where evidence is obtained from reliable sources (e.g. written evidence) then less evidence is required than if the source was unreliable (e.g. verbal evidence). The following five factors that influence the reliability of audit evidence are taken from ISA 500 Audit Evidence: (i) Audit evidence is more reliable when it is obtained from independent sources outside the entity. (ii) Audit evidence that is generated internally is more reliable when the related controls imposed by the entity are effective.

(iii) Audit evidence obtained directly by the auditor (for example, observation of the application of a control) is more reliable than audit evidence obtained indirectly or by inference (for example, inquiry about the application of a control). (iv) Audit evidence is more reliable when it exists in documentary form, whether paper, electronic, or other medium. (For example, a contemporaneously written record of a meeting is more reliable than a subsequent oral representation of the matters discussed.) (v) Audit evidence provided by original documents is more reliable than audit evidence provided by photocopies or facsimiles. Other examples are: (vi) Evidence created in the normal course of business is better than evidence specially created to satisfy the auditor. (vii) The best-informed source of audit evidence will normally be management of the company (although managements lack of independence may reduce its value as a source of such evidence). (viii) Evidence about the future is particularly difficult to obtain and is less reliable than evidence about past events

6 f There are two primary reasons why the auditor can only be persuaded with a reasonable level of assurance, rather than be convinced that the financial statements are correct: The cost of accumulating evidence. It would be extremely costly for the auditor to gather enough evidence to be completely convinced. Evidence is normally not sufficiently reliable to enable the auditor to be completely convinced. For example, confirmations from customers may come back with erroneous information, which is the fault of the customer rather than the client.