Final answer:
The nature of audit evidence involves documentation or verbal information collected during an audit to support financial statements or assertions. The evidence must be rooted in verifiable facts, relevant, and sufficient to make a reliable audit judgment.
Step-by-step explanation:
The nature of audit evidence refers to the form, quality, and usefulness of information obtained by an auditor to draw conclusions on which to base the audit opinion. Audit evidence includes various types of documentation and verbal information that support the financial statements or assertions of the entity being audited. Examples of audit evidence might include bank statements, invoices, contracts, and minutes from meetings.
When choosing evidence for an audit, it is important to select information that is rooted in verifiable facts and relevant to the financial assertions being tested. In addition, the auditor must ensure that the evidence is sufficient and appropriate to support the accuracy of the financial statements and internal controls.
There are different kinds of evidence used in an audit, and each has a specific role in substantiating the financial statements. In order to make a well-reasoned audit judgment, an auditor might gather more evidence than initially thought necessary to select the best possible items that contribute to an accurate and reliable audit conclusion.