Pub. 3 2013 Issue 2

22 www.azbankers.org A N AUDITOR’S RESPONSIBILITY IS THE EXPRESSION OF HIS/HER OPINION BASED ON CONCLU ͳ SIONS THAT ARE BACKED BY relevant facts, figures and all necessary information that supports the opinion. Put simply, all such information that is used by the auditor to form conclu- sions is audit evidence. A lack of this evidence, or the lack of relevant & up- to-date evidence, can lead to issues if a bank’s staff is not able to fulfill requests from auditors. Depending on the nature of your business, there are at least six types of audits. They include: financial review, operational review, compliance review, internal control review, informational review and special audits. While mul- tiple compliance audits are requirement in banks, often the audit process and procedures are similar in obtaining suf- ficient and appropriate audit evidence. Knowing this process can help staff prepare for audits.  Sufficiency is a measure of the quality of audit evidence and in assessing sufficiency an auditor must determine whether enough evidence has been obtained to draw a reasonable conclusion. Insufficient audit evidence can be as simple as a network diagram that does not reflect recent changes.  Appropriateness is a measure of the quality of evidence. The quality of all audit evidence is affected by the relevance and reliability of the information it is based on. The reliability of information is influenced by its source, nature and how it is obtained. For example, a bank statement obtained directly from the bank is more reliable than a bank statement from an entity being audited, and an original bank statement is more reliable that a photocopy of a bank statement. A combination of audit procedures are used to obtain audit evidence during the conduct of an audit, including:  Inquiry - seeking information from within and outside the entity, ranging from formal written inquiries to informal discussions  Inspection - examining records and documents in paper or electronic form  Observation - looking at a process or procedure being performed by others  External confirmation - obtaining written confirmation directly from a third party  Recalculation - checking the mathematical accuracy of documents or records  Re-performance - independently re-performing procedures or controls that were originally performed as part of the entity’s internal controls  Analytical procedures - evaluating financial information made by a study of plausible relationships among both financial and non- financial data Although inquiry may provide important audit evidence, inquiry alone does not provide sufficient audit evidence upon which to form a conclusion. Auditors are required to corroborate evidence obtained via inquiry through other means such as inspecting relevant documents. Inspection involves examining records or documents, whether internal or external, in paper or electronic form or other media. Inspection of records or documents provides audit evidence of varying degrees of reliability, depending on their nature and source and in the case of internal records and documents, The Importance of Evidence in an Audit “You can observe a lot just by watching” - Yogi Berra BY SUZANNE FARR