Attaining the probation elements through which the opinion expressed in the audit report is sustained represents the central element of a financial audit mission. From this perspective, the document deals with the characteristics which the audit evidence, as well as the basic procedure regarding attaining them in the course of the auditors’ demarche.audit evidence, quantity, quality, attaining procedures.

Dragan Cristian

Lect. Brabete Valeriu

English

Research Papers in Economics

 
  41 
Finances - Accounting 
CONSIDERATIONS REGARDING THE AUDIT VERIFICATIONS AND THE PROCEDURES FOR 
ATTAINING THEM  
Lect. PhD Dr gan Cristian 
Lect. Ph.D. Brabete Valeriu 
University of Craiova 
Faculty of Economics and Business 
Administration, Craiova, Romania 
 Abstract: Attaining the probation elements through which the opinion 
expressed in the audit report is sustained represents the central element of 
a financial audit mission. From this perspective, the document deals with 
the characteristics which the audit evidence, as well as the basic 
procedure regarding attaining them in the course of the auditors’ 
demarche.  
Key words: audit evidence, quantity, quality, attaining procedures.  
In the course of its mission, the auditor gathers information in order to 
determine the extent in which the examined information is presented according the pre-
established reference criteria. As such, the information submitted to examination is 
represented by all the information attained and which serve issuing the conclusions on 
which the audit opinion will be based.  
By combining all the attained evidence, the auditor must be able to decide if it 
can elaborate the audit report.  
In the purpose of accomplishing this purpose, the audit standards (Audit 
standard no. 500 - Audit Evidence) retain the relevant conditions in order for the 
collected evidence to allow the opinion elaboration under the form of: sufficiency and 
adequate character. Also, regarding this aspect we mention that in the specialty 
literature, in order the express the adequate character, other equivalent terms can be 
encountered, among which we mention accuracy (Toma M., Chivulescu M, 1997)  and 
solidness (Arens A., Loebbecke K., 2003). 
Sufficiency  represents the quantitative dimension of the audit evidence and 
regards its volume, number or value of the verified samples. According to some 
opinions, the evidences’ sufficient character can be appreciated according to several 
criteria, among which the auditor’s experience within past mission and the error risk 
discovered in the mission planning stage and in testing the inner verifications can be 
considered essential.   
The adequate character constitutes the qualitative side of the audit evidence 
and represents the extent in which they are regarded as plausible or trustworthy.  
The quality of the audit evidence is decisive for attaining the auditor’s 
assurance that the financial statements represent a true image. In this respect there are 
several characteristic through which the quality of the audit evidence is defined, which 
will be presented shortly in the following.  
Relevance expresses the usefulness of the evidence for grounding the auditor’s 
opinion. In order to be useful, the evidence must strictly refer to the audit specific  
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objectives and also, to influence the professional reasoning in accepting or rejecting a 
declaration issued in the financial statements.  
The source independence degree from which the audit evidence are attained, 
represent the criteria which separates the two representative categories, namely: 
evidence attained from external sources and from internal sources. Regarding this 
problem, the audit standards retain that “the audit evidence from external sources are 
more believable that the internal generated ones” (Audit Standard no.500 Audit 
Evidence). So, if the auditor attains a confirmation from a third party regarding an 
analyzed aspect, and, in the same time, has the employees’ answers regarding the aspect 
under debate, he will regard the external confirmation as more credible.   
It is also mentioned that independence can be interpreted according to the 
degree in which the auditor or client influences the accomplishing of the attaining 
procedure, in the sense that it is appreciated on a higher level when the influence is 
exercised by the auditor and a reduced level in case it comes from the client.  
The qualification of the information suppliers represents the criteria based on 
which audit evidence can be considered as more believable, even if it only partially 
fulfills the independence condition. So, the auditor will consider  the evidence attained 
from a competent person as more believable, than the one attained from a person who is 
less familiar with the specific of the examined activities.  
The auditor’s direct involvement leads to attaining more believable evidence 
than the ones attained indirectly.  
The efficiency of internal control positively influences the credibility of the 
attained evidence. After performing the control tests, the auditor is able to appreciate 
the quality of the audit samples and the degree in which it will use them in issuing the 
conclusions.  
The form of the audit evidence represents the basic criteria according to which 
the auditor will hold as believable the evidence materialized in documents or written 
confirmations other than the verbal affirmations.  
The objectivity degree represents the extent of the auditor’s professional reasoning. 
In this respect, it appreciates as having an increased degree of credibility the evidence which 
require the smallest degree of subjective reasoning in order to determine their correctitude. 
Furthermore, the context in which the evidence is acquired within an audit procedure is also 
taken into consideration (for example, when the observation procedure is used, although the 
attained evidence fulfill the auditor’s individual independence and involvement criteria, 
generally their quality is regarded as reduced, as there is a high probability that the situation 
noticed by the auditor is modified immediately after his departure).  
The specialty literature recommends the evaluation of the audit evidence by 
considering their combined effect of the qualitative and quantitative sides, which in 
most cases are more relevant that the particular examination of the adequate character 
and efficiency.  
Determining the adequate character and of the audit evidence sufficiency is 
accomplished exclusively based on the auditor’s professional reasoning. The audit 
standards (Audit Standard no.500 - Audit Evidence) retain a series of factors which can 
influence the auditor’s professional judgment under this aspect, and namely:   
  evaluation of the  inherent risk nature and level as well as for the financial 
situation in their ensemble, as well as on the balance and transaction categories level;  
  the nature of the accounting and inner control system, as well as the 
evaluation of the control risk;   
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Finances - Accounting 
  the significance threshold of the examined element; 
  the experience acquired in the course of the previous performed missions;  
  the results of the audit procedures, including the discovered frauds and 
errors;  
  the source and credibility of the available information.  
The auditor has the obligation of collecting the evidence for each evaluation of 
the leadership, distinctively, the compensation of the audit evidence lack regarding a 
certain assessment with the evidence attained for a different assessment being allowed.   
Within the demarche of attaining sufficient and adequate evidence, the analysis 
of the correspondent costs, represents a problem constantly in the auditor’s attention. In 
our opinion, the decision in this matter is an extremely delicate one, at least from the 
perspective of the stipulation included in the standard regarding the audit samples, 
according to which “the implied costs do not intrinsically constitute a valid ground for 
omitting a necessary procedure”.  
Another aspect which can be retained regarding the audit evidence is 
represented by the procedures for attaining them. The specialty literature refers to 
several procedures used for collecting the audit evidence, which can be classified into 
two significant categories (Rusovici A., Cojoc F., Rusu Gh., 2003):  basic procedures 
and analytical procedures.  
As the presentation of both categories require a more ample space, in the 
following we submit for debate the significant aspects regarding the basic procedures. 
In this respect, in the beginning, we consider useful to define the notion of audit 
procedure, by which we understand an ensemble of instructions presented in a detailed 
manner and used in the purpose of attaining a certain type of audit evidence, within one 
of its phases. The basic characteristic is represented by the precision with which the 
instructions are formulated within it.  For example, the following formulas constitute 
audit procedures applied in the audit section named Debtors and advanced payments  
  obtaining a table of the debt balances;  
  obtaining a list of the commercial debtors;  
  verifying the balances according to their seniority and subsequent cashing, 
etc 
The presented instructions are completed with even more detailed elements. 
Referring to the last instruction, the details are presented as follows:  
„Verifying the subsequent installments in cash is an important modality of 
checking the debtors’ balance. If round amounts are cashed, make sure that they regard 
the previous debts and that there are no problems regarding the not retrieved 
debentures for a long period of time. In the extent in which these procedures have 
satisfactory results, the direct confirmation of the debtors can be abandoned” 
(Auditors’ Chamber in Romania, 2001).  
The basic procedures mainly insure attaining the valid information for 
understanding the content of the balance sheet elements, and based on it, the 
determination of the need to turn to external information sources.  
 The specialty literature retains in this category various types of procedures 
whose characteristic elements are exposed in the following.  
Physical examination represents the direct modality through which the auditor 
verifies if an asset really exists. Next to proofing its existence, this procedure insures 
the evaluation of the asset’s state at a given moment. Analyzed based on the criteria 
regarding the quality and quantity of the audit evidence, it can be appreciated that this  
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examination is characterized by supplying audit evidence with a relatively high 
qualitative level (the auditor’s implication, which is a person qualified in this respect 
and does not require a high level of professional reasoning), but not sufficient enough 
(it does not offer information regarding the property right on assets). From the cost 
perspective, physical examination can be considered an expensive procedure, as it 
presupposes the auditor’s presence in the moment of the organization assets’ inventory, 
which imposes in mod cases, shifting in various geographical locations with the 
elevated correspondent costs.  
The confirmation represents receiving an answer in written or verbal form on 
behalf of a third independent party, as a consequence of the solicitation addressed by 
the auditor, in the name of the audited entity. In order to increase the value of the 
procedure, most opinions claim that the entire confirmation procedure must be managed 
by the leader of the audit team (the elaboration and delivery of the confirmation request, 
as well as the answer). The use of the confirmation method depends of the credibility 
degree necessary for each specific situation as well as of the alternative evidence in the 
auditor’s possession.  
Confirmation constitutes a procedure with high level of application regarding 
the trading debts of the entity. In this respect, the norms in our country recommend that 
“if there are lots of balances, and the audit reports must be presented in a relatively 
short period of time, then the direct confirmation of the debtors can be a useful stage in 
the course of their verification.” (Auditors’ Chamber in Romania, 2001). Also, the 
American standards (SAS 67) in the field stipulate that when proven practical and 
reasonable, the confirmation of a sample of the debts-clients is compulsory.  
The practical demarche for accomplishing this procedure is exercised within 
two technical modalities and namely: positive confirmation and negative confirmation.  
The positive confirmation presupposes a solicitation addressed to a third party 
through which an answer is required in any circumstances or based on the information 
which is to be confirmed, included in the application form. As the answer based on the 
information in the application form presupposes a relatively increased effort on behalf 
of the third party, a small frequency of the positive type to this solicitation is noticeable 
in the practical activity.  
The negative confirmation consists of receiving the answer from the third party 
only in case the information is correct.  
The examination based on quality reveals the fact that the confirmation 
procedure offers highly appreciated audit evidence, their adequate character being 
sustained by relevance, information source independence, auditor’s involvement and in 
many situations the presentation form.  
From the quantitative point of view it can be appreciated that the evidence 
attained by confirmation are not sufficient, they are justified even by the name of the 
procedure which suggests that it is a completion of the information otherwise obtained.  
From the cost point of view, the confirmation is considered to be costly enough, 
taking into consideration the administration of the process as such (elaborating the 
form, expedition, reception, etc). 
In other words, it is mentioned that in the situations in which the auditor does 
not obtain confirmation on behalf of the third parties, the application of other 
procedures, named alternative procedures (such as the examination of a subsequent 
installment) proves necessary.  
The documentation represents the examination of the documents and evidence  
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Finances - Accounting 
in the purpose of determining those aspects which should be included in the financial 
statements.  
This constitutes a relevant procedure for obtaining audit evidence from at least 
two points of view.  
Firstly, the evidence constitutes a strictly necessary component for the activity 
administration in an organized manner. As such, by studying them, the auditor obtains a 
higher quantity of information regarding the activity as an ensemble of entities. 
Second of all, the accounting system includes documentation among the used 
procedures, the fact that any operation registered in accounting is based on a document 
is well known. So, through documentation a multitude of information is obtained 
regarding the conceiving and functioning of the entity’s accounting system.  
Analyzed through the qualitative dimension, the documentation insures 
obtaining such evidence with an increased credibility in the case of external documents, 
due to the fact that they are relevant, obtained from an independent source and issued 
by competent persons.  
Regarding the completion of the quantity criteria, as in the case of the previous 
procedures, the auditors determine these characteristics based on the audit’s objectives.  
Under the aspect of the cost, it can be appreciated that the documentation is 
situated on a medium level, compared to the other procedures of obtaining the audit 
evidence.  
The observation consists of following a process or a procedure within the 
entity. Through this, the auditor has an overview of the client’s assets, follows the 
manner in which the employees perform their functions (mainly in the accounting 
system), etc.  
Observation represents an useful procedure in accomplishing the mission, but 
the obtained evidence does not fulfill the conditions imposed regarding their 
conclusions. That is why the practitioners consider that the situations in which the 
attained evidence are enough, and from the quality point of view the strong element is 
constituted only by the auditor’s implication.  
Analyzed from the cost point of view, the observance is framed between the 
two less expensive procedures applied by the auditor.  
Questioning or interrogation is the procedure through which written or verbal 
information are attained by means of the questions addressed to the personnel of the 
audited entity.  
Questioning is a procedure characterized by a reduced conclusiveness of the 
obtained evidence as a result of both the qualitative side as well as the quantitative one.  
Regarding the cost for obtaining the evidence through it is classified under the 
category of the cheap procedures.  
With all the defective aspects regarding the conclusiveness of the evidence 
attained through this procedure, due to the matters of cost, as well as the extended 
collaboration possibilities with other information, it is used for many test performed by 
the auditor.  From this perspective, we appreciate the presentation of a few 
recommendations in the specialty literature regarding the surveys’ elaboration and 
namely:  
  formulating a optimal set of questions, clear and easy to understand, which 
varies according to the analyzed problem and to the interviewed person;  
  the question elaboration will be performed in a manner which does not have 
personal character of which does not imply answer;   
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  in the situation in which the survey is elaborated by a team, the paper 
coordinator must not annul the questions asked by another colleague, but he must 
patiently wait for the answer, afterwards he can intervene with new ones;  
  when the interviewed persons offers an evasive answer to the addressed 
question, a lot of tact is required in the purpose of finding the most suitable modality for 
insisting in obtaining a satisfactory answer.  
  all the questions addressed through the survey must be subject to some 
aspects on which the auditor already formed an impression or has an answer, 
accomplishing simultaneously the appreciation of the interviewed person’s credibility.   
The reconstitution or calculation presupposes the verification of the arithmetic 
accuracy of the justifying documents and of the accounting registrations. In this purpose 
the auditor reconstitutes the evolution of some amounts in order to convince that any 
information registered in several places has the same amount every time.  
This procedure is characterized by a relatively high conclusiveness of the 
obtained evidence, which is supported by the source independence and its objectivity.  
From the implied cost perspective it is retained that it requires minimum costs, 
facilitated aspect and the possibility of using some IT audit programs in this respect.  
In conclusion, the rigorous application of the procedures regarding obtaining 
the evidence constitute, among others, an essential condition for founding a pertinent 
opinion regarding the fidelity of the financial statements.  
REFERENCES  
1.  Arens A., 
Loebbecke K. 
Audit: An Integrated Approach,  Arc Publishing House, 
2003, page 209. 
2.  Rusovici A., 
Cojoc F.,  
Rusu Gh. 
Financial Audit for Trading Companies, R.A. Official 
Monitor, Bucharest, 2003, page 133. 
3.  Toma M., 
Chivulescu M.  
Financial Audit and for Certification of the Annual 
Accounts, edited by the Foundation for Financial – 
Accounting Management and Audit “Grigore Trancu”, Iasi, 
1997, page 67. 
4.  Auditors’ 
Chamber in 
Romania  
Minimal Audit Norms, Economica Publishing House, 
Bucharest, 2001, page 96. 
5.  Auditors’ 
Chamber in 
Romania  
Audit Standard no.500 Audit Evidence. 
 

Audit: An Integrated Approach, Arc Publishing House,

Auditors’ Chamber in Romania Minimal Audit Norms,

Financial Audit and for Certification of the Annual Accounts, edited by the Foundation for Financial – Accounting Management and Audit “Grigore Trancu”, Iasi,

CONSIDERATIONS REGARDING THE AUDIT VERIFICATIONS AND THE PROCEDURES FOR ATTAINING THEM

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