ISSAI 1500The International Standards of Supreme Audit Institutions, ISSAI, are issued by the pdf

ISSAI 1500
The International Standards of Supreme Audit Institutions, ISSAI, are issued by the International
Organization of Supreme Audit Institutions, INTOSAI. For more information visit www.issai.org.

I N T O S A I
Financial Audit Guideline –
Considering the Relevance
and Reliability of Audit
Evidence
This Financial Audit Guideline draws on the exposure draft of proposed International Standard on Auditing (ISA) 500 (Proposed and
Redrafted), ” Considering the Relevance and Reliability of Audit Evidence” developed by the International Auditing and Assurance
Standards Board (IAASB) and published by the International Federation of Accountants (IFAC). The proposed ISA is included in this
Guideline with the permission of IFAC.

Exposure Draft of INTOSAI
Practice Note, pages 3-7
(ISA 500 enclosed for reference)
For Comments
30 October 2008 – 30 January 2009
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Table of Contents
BACKGROUND 3
SCOPE OF THE ISA 3

CONTENT OF THE PRACTICE NOTE 3
APPLICABILITY OF THE ISA IN PUBLIC SECTOR AUDITING 3
ADDITIONAL GUIDANCE ON PUBLIC SECTOR ISSUES 4
SOURCES OF AUDIT EVIDENCE 4
AUDIT PROCEDURES FOR OBTAINING AUDIT EVIDENCE 4
SPECIFIC CONSIDERATIONS IN A COURT OF ACCOUNTS ENVIRONMENT 5
APPENDIX 1:
RISKS RELATED TO REGULARITY AND POSSIBLE CONTROL PROCEDURES 6



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ISSAI 1500
Practice Note
1
to (Proposed and Redrafted)
International Standard on Auditing 500 –
Considering the Relevance and Reliability of
Audit Evidence
Background

This Practice Note provides supplementary guidance on (Proposed and Redrafted)
ISA 500 – Considering the Relevance and Reliability of Audit Evidence. It is read
together with the ISA. The Practice Note is effective the same date as the ISA.
Scope of the ISA
This International Standard on Auditing (ISA) explains what constitutes audit
evidence in an audit of financial statements, and deals with the auditor’s
responsibility to design and perform audit procedures to obtain relevant and reliable
audit evidence.
This ISA is applicable to all the audit evidence obtained during the course of the
audit. Other ISAs deal with specific aspects of the audit, the audit evidence to be
obtained, the procedures to be performed in obtaining audit evidence, and the
evaluation of whether sufficient appropriate evidence has been obtained.

ISA 500 (Proposed and Redrafted) is effective for audits of financial statements for
periods beginning on or after December 15, 2009.
()Content of the Practice Note
P1. The Practice Note provides additional guidance for public sector auditors
related to:
a. Sources of Audit Evidence
b. Audit Procedures for Obtaining Audit Evidence
c. Information to be Used as Audit Evidence
d. Specific Considerations in a Court of Accounts Environment
Applicability of the ISA in Public Sector Auditing
P2. ISA 500 (redrafted) is applicable to auditors of public sector entities in their
role as auditors of the financial statements.

1
All Practice Notes are considered together with General Considerations in the Financial Audit
Guidelines.
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Additional Guidance on Public Sector Issues

Sources of Audit Evidence
P3. As noted in paragraph 3 of ISA 500 (Proposed Redrafted), the entity’s
accounting records are an important source of audit evidence along with
other sources inside and outside the entity. Audit evidence comprises both
information that supports and corroborates management’s assertions, and any
information that contradicts such assertions. In the case of financial
statements in the public sector management may often assert that transactions
and events have been carried out in accordance with legislation or proper
authority. Such assertions may fall within the scope of a financial audit
2
.
Public sector auditors consider INTOSAI Compliance Audit Guidelines in

this regard.
3

P4. When considering information from sources independent of the entity as
referred to in paragraph A3 in ISA 500 (Proposed Redrafted), public sector
auditors may consider sources as independent of the entity even though they
ultimately report to the same authority e.g. operationally independent
government agencies reporting to the same authority. The nature of
benchmarking data in the public sector may include other sources e.g.
comparisons between similar programs, performance indicators etc.
P5. When considering the sources of evidence in accordance with paragraph A2
of ISA 500 (Proposed Redrafted), public sector auditors may also consider

the use of evidence obtained in performance audits or other audit activities
relevant to the entity.
Audit Procedures for Obtaining Audit Evidence
P6. As explained in paragraph A5 of ISA 500 (Proposed Redrafted), audit
evidence obtained from previous audits may, in certain circumstances,
provide appropriate audit evidence where the auditor performs audit
procedures to establish its continuing relevance. When relying on evidence
obtained in previous performance audits, public sector auditors evaluate
whether the assertions used and tests performed are adequate for the purpose
of the financial statement audit.
P7. When the audit mandate includes objectives on regularity of transactions the
public sector auditors may need to consider the nature and timing of audit

procedures as explained in paragraph A6 of ISA 500 (Redrafted) e.g. the
ability to apply certain audit procedures to establish the regularity of the
transaction or the effectiveness of the controls may be adversely affected by
the passage of time.



2
Financial audit in the context of the additional guidance provided in the Practice Notes refers to audits
of financial statements and additional assertions on regularity and compliance when dealt with in
association with an audit of financial statements (Financial/Regularity audits). The ISAs deals with audits
of financial statements.

3
The Compliance Audit Guidelines are not yet approved, but are expected to be effective on the same
date as the Practice Note.
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P8. Public sector entities will usually have established internal controls designed
to secure the regularity of transactions. However, where the audited entity is
responsible for giving grants or other financial assistance to other parties, it is
often the case that the regularity of the transaction will depend on the other

parties satisfying the criteria and meeting the terms for receiving assistance.
Evidence might then be required on the entity's exercise of its responsibilities
to satisfy itself about the transactions of these other parties (as demonstrated
in Appendix 1).
P9. When considering the guidance in paragraph A7 of ISA 500 (Proposed
Redrafted), public sector auditors take into account that data retention
requirements for public sector entities may be different as stipulated by
relevant legislation. Public sector auditors familiarize themselves with
applicable legislation in regard to retention of data.
Specific Considerations in a Court of Accounts Environment
P10. Public sector auditors operating in a Court of Accounts environment may be
subject to laws and regulations requiring the auditors to understand and

follow precise procedures related to rules of evidence. Public sector auditors
familiarize themselves with policies and procedures describing additional
requirements relating to audit evidence and that are designed to ensure
compliance with applicable rules. The following matters may affect evidence
collection and are considered by the auditor:
Legislation imposing additional requirements on audit evidence.
The scope of additional requirements (i.e., are they to be imposed on every
document from the audit assignment or on specific documents relating to
certain audit issues).
Additional processing, formalities or requirements to which audit evidence
is subject.
The purpose of each additional requirement as regards due process of law

in following the steps of the audit.
Any restrictions that may be placed upon audit evidence due to specific
ways it has been collected and/or produced.

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Appendix 1: Risks related to regularity and possible
control procedures

Risk
Description
Mitigating Controls
Complexity of
regulations
The more complex the
regulations the greater the
risk of error. This may
occur either through a
misunderstanding or
misinterpretation of the
regulation or through an

error in application.
Formal procedures for
the translation of
statutory requirements
into operating
instructions.

Formal control plans
prepared and
monitored by scheme
managers
Review of scheme

control plans and
operating manuals by
internal audit or some
other independent
audit.
New Legislation
New legislation may
require the introduction
of new administrative an
control procedures. This
may result in errors in
either the design or

operation of controls
required to ensure
regularity.
The controls identified
above involving formal
procedures for the
translation of statutory
requirements into
scheme rules. Formal
control plans and the
independent review of
operating instructions

and control plans will
also apply where
schemes are introduced
following new
legislation.
International Schemes
(funded by the United
Nations, EU or other
institutions)
Where regulation is
developed by such
institutions there is a risk

that regulations and
guidance may be
misinterpreted or omitted
from internal instructions.
The mitigating controls
identified in connection
with the complexity of
regulations apply
equally to such funded
Schemes.
Services and programmes
delivered through third

parties.
Where programmes are
administered by agents,
departments lose a degree
of direct control and may
have to rely on agents to
ensure compliance with
authorities.
Formal agreements
between the entity and
the agent defining
control procedures to

be applied in the
administration of
services.
Management control
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and monitoring of third
party activities.
Inspection visits by

internal audit to third
parties to review
systems and
procedures, including
those relevant to
regularity.
Independent
certification of
payments and receipts
by the third parties'
auditor.

Payments and receipts
made on the basis of
claims or declarations
An entity's ability to
confirm compliance with
authorities may be
restricted where, for
example, criteria
specified for receipt of
grant are not subject to
direct verification.
Established criteria for

making claims, clearly
set out in departmental
instructions and
guidance to claimants.
Standard requirements
for documentation
evidencing entitlement
to be submitted in
support of claims.
(This may be a
condition of payment
of grant or a

requirement once the
activity supported by
the grant has been
completed).
Physical inspection of
claimants' records etc.,
to confirm eligibility.
Procedures for
assessing the financial
standing of claimants
before awarding a grant
and for monitoring

continuing solvency.
Independent
certification of the
application of grant by
external auditor.



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Exposure Draft
April 2007
Comments are requested by September 15, 2007
International
Auditing
and Assurance
Standards Board
Proposed Redrafted International Standard on
Auditing
ISA 500, Considering the Relevance
and Reliability of Audit Evidence

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REQUEST FOR COMMENTS
The International Auditing and Assurance Standards Board (IAASB), an independent standard-
setting body within the International Federation of Accountants (IFAC), approved the exposure draft,
proposed International Standard on Auditing (ISA) 500 (Redrafted), ―Considering the Relevance and
Reliability of Audit Evidence,‖ for publication in April 2007. This proposed ISA may be modified in
light of comments received before being issued in final form.

Please submit your comments, preferably by email, so that they will be received by September 15,
2007. All comments will be considered a matter of public record. Comments should be addressed to:
International Auditing and Assurance Standards Board
International Federation of Accountants
545 Fifth Avenue, 14
th
Floor
New York, New York 10017 USA
Comments should be emailed to They may also be faxed to +1-212-286-
9570 or mailed to the above address.
Copies of the exposure draft may be downloaded free-of-charge from the IFAC website at
.

Copyright © April 2007 by the International Federation of Accountants. All rights reserved.
Permission is granted to make copies of this work to achieve maximum exposure and feedback
provided that each copy bears the following credit line: ―Copyright © April 2007 by the
International Federation of Accountants. All rights reserved. Used with permission.‖
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CONTENTS

Page
Explanatory Memorandum 4
Introduction 4
Background 4
Significant Proposals 4
Effective Date 5
Guide for Respondents 5
Supplement to the Exposure Draft 6
Exposure Draft
Proposed International Standard on Auditing (ISA) 500 (Redrafted),
―Considering the Relevance and Reliability of Audit Evidence‖ 7

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EXPLANATORY MEMORANDUM
Introduction
This memorandum provides background to proposed International Standard on Auditing (ISA) 500
(Redrafted), ―Considering the Relevance and Reliability of Audit Evidence.‖ The proposed ISA has
been redrafted in accordance with conventions agreed by the International Auditing and Assurance
Standards Board (IAASB) to be applied to all ISAs. The IAASB approved the proposed redrafted
ISA for exposure in April 2007.
Background

As part of its project to improve the clarity of its International Standards, the IAASB has undertaken
to redraft all of its ISAs in accordance with its new clarity drafting conventions. This approach
responds to the desire for all ISAs to be consistently drafted, and subject to a single statement of
their authority and effect. The IAASB has agreed, in response to the general call for the Clarity
project to be completed within a reasonable time, that while a significant number of the ISAs are
under substantive revision as well as redrafting to reflect the new conventions, others will be subject
to a limited redrafting to reflect only the conventions and matters of clarity generally. ISA 500 is in
the latter category.
The conventions used by the IAASB in redrafting ISA 500 for exposure, and the authority and
obligation attaching to those conventions, are established in the amended ―Preface to the
International Standards on Quality Control, Auditing, Review, Other Assurance and Related
Services‖

1
(Preface), approved by the IAASB in September 2006.
Significant Proposals
Obtaining Sufficient Appropriate Audit Evidence
The IAASB is of the view that the overarching bold type requirement in paragraph 2 of extant ISA
500, ―Audit Evidence‖ for the auditor to obtain sufficient appropriate audit evidence is a
fundamental audit requirement, appropriate for inclusion as a requirement in proposed ISA 200
(Revised and Redrafted), ―Overall Objective of the Independent Auditor, and the Conduct of an
Audit in Accordance with International Standards on Auditing.‖
2
Further, the IAASB believes that
including this requirement in proposed ISA 200 (Revised and Redrafted) provides the appropriate

context for the requirement of that ISA that the auditor use objectives to consider whether sufficient
appropriate audit evidence has been obtained.
Accordingly, the requirement for the auditor to obtain sufficient appropriate audit evidence has been
moved from extant ISA 500 to proposed ISA 200 (Revised and Redrafted) along with supporting
Application and Other Explanatory Material. As a result of the repositioning of this requirement,

1
The Preface can be accessed at
2
The IAASB approved in April the Exposure Draft, proposed ISA 200 (Revised and Redrafted). This Exposure Draft
is available on the IAASB website at
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EXPLANATORY MEMORANDUM

5
proposed ISA 500 (Redrafted) focuses on the auditor’s responsibility to design and perform audit
procedures to obtain relevant and reliable audit evidence; it has been re-titled accordingly.
However, to provide the appropriate context for the requirements of proposed ISA 500 (Redrafted), a
discussion of the sufficiency and appropriateness of audit evidence, consistent with that in the
Application and Other Explanatory Material of proposed ISA 200 (Revised and Redrafted), has been
retained in the Introduction to proposed ISA 500 (Redrafted). Because the concept of sufficiency
and appropriateness of audit evidence is fundamental to the conduct of an audit in accordance with
ISAs, the IAASB believes that the benefits of emphasizing it in both the context of proposed ISA

500 (Redrafted) and proposed ISA 200 (Revised and Redrafted) outweigh the disadvantages of
repetition.
Selecting Items for Testing to Obtain Audit Evidence
As well as dealing with audit sampling, extant ISA 530, ―Audit Sampling and Other Means of
Testing‖ includes material dealing with the selection of items for testing by means other than
sampling, i.e., selecting all items and selecting specific items. The IAASB is of the view that this
material is better placed in proposed ISA 500 (Redrafted) in order to provide a clear focus on
sampling in ISA 530.
The IAASB has therefore moved the material regarding selecting all items and selecting specific
items from extant ISA 530 to proposed ISA 500 (Redrafted). The IAASB plans to release proposed
ISA 530 (Redrafted), ―Audit Sampling and Other Means of Testing‖ before the close of the comment
period for proposed ISA 500 (Redrafted) so as to enable respondents to consider the effect of this

change on both proposed ISAs. In order to facilitate this, and to provide a comment period consistent
with that of proposed ISA 200 (Revised and Redrafted), the comment period for this exposure draft
ends on September 15, 2007.
Effective Date
The current timetable envisages that all ISAs will have been revised and redrafted, or redrafted only,
by late 2008 and the IAASB has provisionally agreed that the complete set of ISAs will be effective
for audits of financial statements for periods beginning on or after December 15, 2008. This date will
depend on satisfactory progress being made, and will be amended to a later date should that prove
necessary. The IAASB believes that it is in the interests of auditors and others who use the ISAs that
the standards should be released as soon as they are approved so as to facilitate their implementation.
Guide for Respondents
The IAASB is seeking comments only on changes resulting from applying the clarity drafting

conventions and their effect on the content of the ISA. Respondents are asked to respond in
particular to the following questions:
1. Are the objectives to be achieved by the auditor, stated in the proposed redrafted ISA,
appropriate?
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2. Have the criteria identified by the IAASB for determining whether a requirement should be
specified been applied appropriately and consistently, such that the resulting requirements
promote consistency in performance and the use of professional judgment by auditors?
3

Comments are most helpful when they refer to specific paragraphs, include the reasons for the
comments, and, where appropriate, make specific suggestions for any proposed changes to wording.
When a respondent agrees with proposals in the exposure draft, it will be helpful for the IAASB to
be made aware of this view.
Translations
Recognizing that many respondents intend to translate the final ISA for adoption in their own
environments, the IAASB welcomes comment on potential translation issues noted in reviewing the
proposed redrafted ISA.
Supplement to the Exposure Draft
To assist respondents in tracking changes, IAASB staff has prepared an analysis of the decisions that
have been made by the IAASB with respect to the treatment of the present tense in the explanatory

paragraphs of the extant ISA. This analysis also demonstrates how the material in the extant ISA has
been reflected in the proposed redrafted ISA. In particular, the analysis:
Identifies existing sentences in the present tense and whether they are now treated as a
requirement or as application material;
Maps the material of the extant ISA to the proposed redrafted ISA; and
Identifies explanatory material that is proposed to be eliminated as a result of redrafting.
These staff-prepared mapping documents are available on the IAASB website at
They are for information purposes
only and do not form part of the exposure draft.
To be considered, responses should be emailed to They may also be faxed to
+1-212-286-9570 or mailed to 545 Fifth Avenue, 14th Floor, New York, NY 10017, USA.

3
The IAASB has identified the following criteria for determining the requirements of a Standard:
The requirement is necessary to achieve the objective stated in the Standard;
The requirement is expected to be applicable in virtually all engagements to which the Standard is relevant; and
The objective stated in the Standard is unlikely to have been met by the requirements of other Standards.
In determining the requirements of a Standard, the IAASB will consider whether the requirements are proportionate
to the importance of the subject matter of the Standard in relation to the overall objective of the engagement.
The criteria, which are intended only to assist the IAASB in appropriately and consistently determining
requirements, may be refined as further experience is gained.
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