The outcome of a transaction Companys daily business is summarized in the financial statements. In those statements, we can see how the company is established, it is winning or not, and if it uses its resources. As such, the preparation of financial statements is a complete management responsibility. Just because the management has absolute control on the data presented in the financial statements, users, such as creditors and government regulators can not put a high reliance thereon. That's why CPAs are hired to perform audits.
The liability of auditors is to express an opinion as to whether the financial statements are presented according to certain criteria, generally accepted accounting principles. In the process, the auditor's main objective is to detect the hardware implied or overruns incorporated in the financial statements. To do this, the auditor gathers evidence to provide an adequate basis for his opinion. To guide the listener into the conduct of business, standards and practices of the Council (PHAC) issued Statement of Auditing Standards of the Philippines (SASP) No. 7 audit evidence and documentation. In this statement, the third standard of field work is planned: fairly competent evidential matter be obtained through inspection, observation, inquiries, and confirmations to provide a reasonable basis for an opinion on the financial statements under consideration.
It may be noted that the issue of evidence should be sufficient and competent. What is the adequacy and competency of evidence is a question that constantly embarrasses the listener in the planning and execution of the audit. Different situations call for different approach, but unfortunately there are no strict rules that can be easily applied to all situations. However, there are some generalizations to guide the auditor in obtaining evidence, and those principles affect both the competence and sufficiency of the evidence.