Auditing - Types of Evidence

In this chapter, let us understand the different types of evidence used in Auditing.

Accounting System

Accounting System of an organization must be reliable. On the basis of flow chart, the Auditor may come to know about the documents which originate at each state of transaction. Reliability of the internal control system in organization will decide the acceptability of evidence originating from the accounting system.

Physical Evidence

Physical Evidence is important in case of tangible assets. Physical verification can prove the actual existence of tangible assets like, land, building, plant and machinery, furniture and fixture, cash-in hand and stocks, etc.

Documentary Evidence

Documentary Evidence is very important and most of the evidence is in the form of documents. The following are the different types of documentary evidence −

  • Documents that originated outside the organization but have been held by the client; for example, fixed deposit certificate is an evidence of deposit in bank.

  • Cheques issued by the client is the second type of evidence which originated from within the organization but circulated to outsiders.

  • Salary paid to employees is supported by salary sheet, time card, etc. This type of evidence is availed from within the organization and supported by internal control system.

Journals and Ledgers

Basic entries in journals are booked and supported by source documents like sale invoices, purchase invoice, payment advice, etc.

Ledger are books of final entry supported by journal book.

A Ledger is the base of financial statements like Trading Account, Profit and Loss Account and Balance Sheet.

Oral Evidence

Discussion with different officers of an organization is the basis for generation of some oral evidence. The Auditor should carefully observe if there is any inconsistency; he should look in to it.

Subsequent Events

Subsequent events after the Date of Balance Sheet are also very important evidences; for example, huge deposits before balance sheet date and huge withdrawals after balance sheet date put a question mark on bank’s performance.

Circumstantial Evidence

Circumstantial evidence is not direct evidence but related to circumstances. For example, if any employee of a company spends hefty amount on any marriage, party or purchases a luxury apartment or car which is not possible with the income that he receives from his salary, it creates an uncertainty of something being wrong. An Auditor should make use of circumstantial evidence if he needs certain facts.


If the Auditor finds any variation in the financial ratios, then he should look into it carefully. Comparison in ratio may be for same organization for different periods or it may be a comparison between two organizations.

Computerized Records

Evidences will remain same even in case of that organisation where computerised accounting system is maintained.