Jurisdiction relates to the quality of evidence obtained and is evaluated in terms of relevance and validity. The relevance of the evidence should address and answer the audit objective test. We will illustrate the verification of the inventory expound on this feature. The auditor should not only be satisfied with the reconciliation of the amounts of stocks with the books of accounts with supporting documents such as purchase orders or delivery receipts. To test if the inventory is well represented, the auditor begins by reviewing the inventory-taking procedures and observe the actual counting to obtain first-hand evidence that procedures are properly followed. Once satisfied, he could bring a higher degree of confidence on the assertion that the inventory is complete and properly evaluated.
The validity of the evidence is dictated by the circumstances in which it is produced in the middle of all the risks and factors that influence these, and is more erratic in nature. The following general principles are useful guides the auditor to ensure the validity of the evidence:
1. Evidence obtained from independent sources outside the client provides greater reliability than that obtained solely within the company. This is because the client does not reach into the treatment of such evidence. As such, bank statements are more reliable than the balances in the cash books provided that the billing records of customers clients are more reliable than vouchers or purchase orders.
2. accounting records and other documents generated internally is more reliable if they are a product of an internal control. If the transaction processing cash receipts employs the separation of functions for registration and reception, the possibility of collusion or other irregularities will be minimized, there is an automatic registration control and balance. The process will go through the large staff, which ensure the regularity of the operation.
3. Direct acquisition of evidence by the auditor himself is more persuasive than information obtained indirectly. This is the main reason for auditor uses the technique of checking the confirmation of receivables and loans said they sent a letter to the debtor or a creditor to verify the amounts reflected in the financial statements.
In addition to these generalizations, the competence of evidence is increased when the auditors are able to obtain additional information to support the original evidence. In the tests of ownership of land declared in the financial statements, the auditors inspect the course title. If one could obtain a certification from the Office of Local Government assessors or Titles that land was under the name of the client, the evidence is more convincing, perhaps compelling, rather than basing the evaluation on the title alone.