Evidence evaluation activities
Evidence evaluation activities in auditing correspond to
information evaluation activities in human information processing
theory. Evidence evaluation activities are those activities
performed by auditors that relate to the evaluation of audit evidence
gathered. The evaluation of evidence requires skill and care and is a task performed by appropriately experienced auditors that apply a degree of professional skepticism to the evaluation of all audit evidence and consider the concept of substance over form.
Evaluation activities incorporate the activities of estimation[fn] as well as evaluation. Auditors estimate or evaluate:
- whether the audit evidence gathered is of sufficient
quantity and appropriate quality to make a decision based on that evidence before making the actual decision. In other words auditors estimate whether the evidence is relevant and sufficiently reliable.
- audit risk factors during each audit stage. In particular auditors evaluate:
- the acceptable and achievable levels of audit risk at the financial statement level, in the client acceptance/ retention stage.
- inherent risk, control risk and the acceptable level of detection risk, at the account balance level, in the audit planning stage.
- control risk during the control testing stage to compare with
the control risk evaluated during the audit planning stage.
- audit risk, at the account balance level, for comparison with
the acceptable level of audit risk, during the substantive testing
stage.
- audit risk, at the financial statement level, for comparison
with the acceptable level of audit risk, during the opinion
formulation stage.
- exceptions found during the
final three audit stages (an evaluation activity), namely control deviations in the control testing stage and misstatements in the substantive and opinion formulation stages.
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