SA 500 Audit Evidence explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
SA 500 explains what counts as audit evidence, what makes it good enough, and what the auditor must do when evidence comes from the company's own systems or from an expert the company hired. It also covers how items are picked for testing and what to do when evidence conflicts.
SA 500, as effective for audits of financial statements for periods beginning on or after 1 April 2009, applies to all the evidence obtained in an audit. ICAI may revise standards, so check icai.org for the current text.
The auditor designs and performs procedures to obtain sufficient appropriate audit evidence. Sufficiency is quantity; appropriateness is quality, meaning relevance and reliability. The auditor considers the relevance and reliability of the information used, tests the accuracy and completeness of reports produced by the entity, evaluates a management's expert, chooses effective ways to select items for testing, and follows up inconsistent evidence or doubts about reliability.
Scope and definitions (paragraphs 1-5)
SA 500 explains what audit evidence is and the auditor's responsibility to design and perform procedures that obtain enough of it to support the opinion (paragraph 1). Other SAs handle particular topics, such as going concern in SA 570 or analytical procedures in SA 520 (paragraph 2).
| Term (paragraph 5) | Meaning |
|---|---|
| Accounting records | Initial entries and supporting records (cheques, electronic fund transfers, invoices, contracts, ledgers, journal entries and other adjustments) and worksheets and spreadsheets supporting allocations, computations, reconciliations and disclosures |
| Audit evidence | Information used by the auditor to reach conclusions; includes information in the accounting records and information from other sources |
| Sufficiency | The measure of quantity of evidence; affected by assessed risk and by quality |
| Appropriateness | The measure of quality of evidence: its relevance and reliability |
| Management's expert | A person or organisation with expertise in a field other than accounting or auditing whose work the entity uses to prepare the financial statements |
Sufficient appropriate evidence (paragraph 6)
The auditor designs and performs procedures that are appropriate in the circumstances to obtain sufficient appropriate evidence. The application material explains the idea.
- Evidence is cumulative. It comes mainly from procedures performed in the audit, and may include information from earlier audits (if relevance is checked) and from the firm's client acceptance and continuance procedures (A1).
- Evidence includes information that supports management's assertions and information that contradicts them; in some cases the absence of information, such as management's refusal to give a requested representation, is also evidence (A1).
- Sufficiency and appropriateness are linked: higher assessed risks mean more evidence is likely to be needed, and higher quality means less may be needed, but more evidence cannot make up for poor quality (A4).
- Whether enough has been obtained is a matter of professional judgment (A6).
The seven types of audit procedure
A2 and A14-A25 describe them:
| Procedure | What it is | Limit noted in the standard |
|---|---|---|
| Inspection | Examining records or documents, or a physical examination of an asset | Documents may show existence but not ownership or value (A15); inspecting an asset shows existence but not rights or valuation (A16) |
| Observation | Looking at a process being performed by others, such as an inventory count | Limited to the time of observation, and being observed may change behaviour (A17) |
| External confirmation | A direct written response from a third party | See SA 505 |
| Recalculation | Checking mathematical accuracy of documents or records | Manual or electronic (A19) |
| Reperformance | The auditor independently executing procedures or controls originally performed by the entity | (A20) |
| Analytical procedures | Evaluating financial information through plausible relationships among financial and non-financial data | See SA 520 |
| Inquiry | Seeking information from knowledgeable people inside or outside the entity | Alone, inquiry ordinarily does not give sufficient evidence of the absence of a material misstatement or of the operating effectiveness of controls (A2) |
A procedure may be used as a risk assessment procedure, a test of controls or a substantive procedure, depending on context (A11). Where records exist only in electronic form, or electronic information may not be retrievable after a period, the auditor may need to request retention or schedule the work for when it is available (A12-A13).
Relevance and reliability (paragraph 7)
Relevance is the logical connection with the purpose of the procedure and the assertion. It depends on the direction of testing: to test overstatement of payables, recorded payables are relevant; to test understatement, subsequent payments and unpaid invoices are more relevant (A27). Evidence about one assertion, such as existence of inventory, is not a substitute for evidence on another, such as valuation (A28).
Reliability depends on source, nature and circumstances. The SA lists generalisations, with exceptions (A31):
- evidence from independent sources outside the entity is more reliable;
- internally generated evidence is more reliable where related controls are effective;
- evidence obtained directly by the auditor, such as observation, is more reliable than indirect evidence, such as inquiry;
- documentary evidence is more reliable than oral evidence; and
- original documents are more reliable than photocopies or facsimiles.
More assurance is ordinarily obtained from consistent evidence from different sources or of a different nature (A8).
Management's expert (paragraph 8)
When information used as evidence has been prepared using the work of a management's expert, such as an actuary or valuer, the auditor, to the extent necessary having regard to the significance of the expert's work, evaluates the expert's competence, capabilities and objectivity, obtains an understanding of the expert's work, and evaluates its appropriateness as evidence for the assertion. Compare SA 620 for an expert engaged by the auditor.
Information produced by the entity (paragraph 9)
When using information produced by the entity, such as an ageing report or inventory listing, the auditor evaluates whether it is sufficiently reliable, including, as needed, getting evidence about its accuracy and completeness and evaluating whether it is precise and detailed enough for the purpose. This matters because the auditor often samples from a system report: if the report omits items, the sample misses them.
Selecting items for testing (paragraph 10)
When designing tests of controls and tests of details, the auditor determines effective means of selecting items. The application material identifies three broad approaches: selecting all items, selecting specific items, and audit sampling. Examining every item suits small populations of high-value or high-risk items and automated procedures; specific items can be chosen for value, risk or to learn about a process; sampling lets conclusions be drawn about a population. See SA 530.
Inconsistent or unreliable evidence (paragraph 11)
If evidence from one source is inconsistent with that from another, or the auditor doubts the reliability of information, the auditor determines what changes or additions to procedures are needed to resolve the matter and considers the effect on other parts of the audit.
Illustrative example
For Nova Components Pvt Ltd, an invented company, the auditor wants evidence that trade payables are complete. The auditor does not rely on the payables ledger alone, because that tests only what has been recorded; instead, the auditor reads April payments, unpaid invoices and supplier statements. The ledger listing is produced by the ERP, so the auditor first checks that the listing agrees to the ledger total and that its date filters are correct. A bank confirmation agrees with the cash book, but a supplier statement shows an unrecorded invoice. The auditor widens the search of subsequent payments.
Need help with audit evidence?
If you want supporting documents, system reports and reconciliations ready in a form an auditor can use, TaxClue's books of accounts compliance team can help you organise them. Accounts teams can also use our books of accounts compliance support to check that reports from your system are complete.
Key takeaways
- Sufficiency is quantity; appropriateness is relevance and reliability.
- More evidence cannot make up for poor-quality evidence.
- Evidence from independent external sources and original documents is generally more reliable.
- Check the accuracy and completeness of system reports before relying on them.
- Resolve inconsistencies and doubts about reliability by extending procedures.
Read next
- SA 330: responses to assessed risks
- SA 501: inventory, litigation and segment information
- SA 505: external confirmations
- SA 530: audit sampling
Disclaimer: Based on the Standards on Auditing and quality standards issued by the Institute of Chartered Accountants of India, in the versions named in the article, and ICAI's announcement of 31 March 2026 on SQM 1 and SQM 2, as consulted on 3 October 2026. ICAI revises standards from time to time; check the current text and effective dates on icai.org. This article is general information, not legal advice; check the official text before acting.