Lessons · Accounting · what makes one piece of evidence stronger than another
What makes one piece of evidence stronger than another
Evidence is stronger when it comes from outside the company, when the auditor obtained it directly, when it is written rather than spoken, and when it is an original rather than a copy.
Hone is a place to practise a career, one idea a day. This is one of its lessons, written out in full and free to read without an account.
In beta. This lesson was written for Hone and has not yet been checked by a qualified accountant. Practice material, not professional advice. What that means.
What it is for
It decides what is worth doing. A confirmation from a bank and a schedule prepared by the client can address the same balance, and one of them is evidence about the balance while the other is largely evidence about what the client says. Knowing the ranking is what stops an audit file filling with paper that proves nothing.
How to think about it
For each piece, ask where it came from, who handled it, and whether it is original. Prefer outside, direct and original, and be explicit when you are relying on something weaker and why.
Worked example
A confirmation sent to you by the client's bankOutside the company, obtained directly, written. Strong.
An invoice from a supplier, held by the clientOutside in origin, passed through the client's hands.
A schedule prepared by the client's accountantInternal. Useful, and not the same thing.
A verbal explanation from managementWeakest, and never sufficient on its own for a material balance.
Your turn
Name the property that makes evidence stronger, concerning where it came from.
Evidence from the company is stronger than evidence from within it
Solve one, graded on the server
The trap
Accepting a client-prepared schedule as evidence for the balance it summarises. It is evidence of what the client asserts, which is the thing being audited, so on its own it is close to circular.