Techniques of obtaining evidence
ISA 500 mentions them as:
(a) Inspection of records or documents, (b) Inspection of tangible assets, (c) Observation, (d) Inquiry, (e) Confirmation, (f) Recalculation, (g) Re-performance and (h) Analytical procedures. These can be further analyzed as follows:
(a) The physical examination: of tangible assets and counting them;(b) Confirmation: These should be in writing, external sources being preferable to internal sources;(c) Examination of original documents: Vouching should be carried out that is comparing original documents with entries in the books;(d) Re-computation: This involves carrying out additions, calculations, extracting balances, rechecking postings and summaries.(e) Scanning: This is useful in seeking the unusual or extra-ordinary item. It involves just flipping through the records and documents looking out for the odd items.(f) Inquiry: This is asking questions of knowledgeable persons within and outside the entity. It is a necessary and valid technique. Auditors however, prefer confirmation to oral answers.(g) Correlation: This is seeking consistency in the records and in the accounts and using evidence obtained in other areas to provide additional assurance in other areas.
(h) Observation: Visual evidence is more satisfactory therefore, observing a procedure being performed is the best possible confirmation. However, observation has the drawback that you can only rely on it at the time you are observing. You can never be sure that the procedure is carried out that way all the time.