Question

Classify the given activity according to the eight types of audit evidence:

a) Physical examination
b) Confirmation
c) Inquiry
d) Reperformance

Answer 1

Audit evidence includes physical examination, confirmation, inquiry, and reperformance, each serving a distinct function in gathering necessary information to support an auditor's opinion.

Step-by-step explanation:

The audit evidence can be classified into different types as per the auditing standards. Here is how the given activities can be classified:

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• Physical examination refers to the inspection or count by the auditor of a tangible asset. This could involve the auditor actually counting inventory or examining physical conditions of assets.
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• Confirmation is the process of obtaining a direct response from a third party verifying the accuracy of information that was requested by the auditor.
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• Inquiry involves seeking information from knowledgeable persons inside or outside the entity. However, the information gathered through inquiry must be corroborated with other types of evidence as it is considered less reliable on its own.
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• Reperformance is an audit procedure where the auditor independently executes procedures or controls that were originally performed as part of the entity's internal controls.

These types of evidence are all part of an auditor's toolkit for gathering sufficient, appropriate evidence to support their opinion on an entity's financial statements.