On 22 May 2026, in accordance with the Schedule “On Conducting Master Classes Based on Audits Conducted by Advanced Auditors”, approved by Order No. 10-1/3-3-20/2026 of the Chairman of the Chamber of Auditors dated 15 May 2026, an online master class on “Audit Evidence” was held.
At the master class, Gasham Bayramov, Adviser to the Chairman of the Chamber of Auditors on Scientific and Methodological Affairs, acted as moderator, while Namiq Abbasli, Director-Auditor of “ANR Audit” LLC, and Samaya Taghiyeva, Audit Manager of the Azerbaijan Republic Branch of “Ernst&Young Holdings (SiAyEs) Bi.Vi.”, participated as speakers.
Opening the master class with introductory remarks, Gasham Bayramov, Adviser to the Chairman of the Chamber on Scientific and Methodological Affairs, spoke about the relevance of the topic “Audit Evidence” and the importance of International Standards on Auditing No. 500 “Audit Evidence”, No. 501 “Audit Evidence — Specific Considerations for Selected Items”, and No. 505 “External Confirmations”, emphasizing the need to properly comply with the requirements of these ISAs.
G. Bayramov noted that International Standard on Auditing No. 500 “Audit Evidence” explains what constitutes audit evidence in an audit of financial statements and addresses the auditor’s responsibility to plan and perform audit procedures to obtain sufficient appropriate audit evidence to enable the auditor to draw reasonable conclusions on which to base the auditor’s opinion.
The auditor’s objective is to plan and perform audit procedures to obtain sufficient appropriate audit evidence to enable the auditor to draw reasonable conclusions on which to base the auditor’s opinion.
The auditor shall plan and perform appropriate audit procedures to obtain sufficient appropriate audit evidence.
International Standard on Auditing No. 501 “Audit Evidence — Specific Considerations for Selected Items” addresses the auditor’s specific considerations in obtaining sufficient appropriate audit evidence regarding an entity’s inventory, certain aspects of litigation and claims involving the entity, and segment information in an audit of financial statements, in accordance with ISA 330 “The Auditor’s Responses to Assessed Risks”, ISA 500 and other ISAs.
The auditor’s objective is to obtain sufficient appropriate audit evidence regarding:
-The existence and condition of inventory,
-The completeness of the presentation of litigation and claims involving the entity,
as well as
-The preparation and disclosure of segment information in accordance with the applicable financial reporting framework.
International Standard on Auditing No. 505 “External Confirmations” addresses the use of external confirmation procedures to obtain audit evidence in accordance with the requirements of ISA 330 and ISA 500. This standard does not address inquiries regarding litigation and claims dealt with in ISA 501.
According to ISA 500, the reliability of audit evidence is influenced by its source and nature, as well as by the circumstances in which it is obtained. This ISA also includes the following general principles relating to audit evidence:
-The reliability of audit evidence increases when it is obtained from independent sources outside the entity.
-Audit evidence obtained directly by the auditor is more reliable than audit evidence obtained indirectly or by inference.
-Audit evidence documented in paper, electronic or other form is more reliable.
Accordingly, depending on the circumstances of the audit, audit evidence obtained by the auditor directly from external sources in the form of confirmations from confirming parties may be more reliable than evidence obtained within the entity. The objective of this ISA is to assist the auditor in designing and performing external confirmation procedures to obtain relevant and reliable audit evidence.
G. Bayramov gave the floor to N. Abbasli for a more detailed presentation on the topic. In his speech, N. Abbasli stated: “Dear fellow auditors!”
International Standards on Auditing No. 500, 501 and 505 are important standards regulating the obtaining of audit evidence necessary for the auditor to form an opinion on financial statements. These standards establish the fundamental principles regarding the sufficiency, reliability and quality of evidence in the audit process. International Standard on Auditing No. 500 is entitled “Audit Evidence” and establishes the auditor’s obligation to obtain sufficient appropriate audit evidence. According to the standard, the auditor should not rely solely on information provided by management, but should compare and analyse evidence obtained from various sources. The reliability of audit evidence depends on its source, the method by which it is obtained and the quality of the internal control system.
ISA 501 covers “Audit Evidence — Specific Considerations for Selected Items” and primarily determines the auditor’s specific procedures regarding inventory counts, litigation and segment information. The auditor should participate in the inventory count process, observe counting procedures and assess the actual existence of inventory. In addition, the auditor uses lawyers’ letters and other legal documents to identify the entity’s legal risks and potential liabilities. International Standard on Auditing No. 505 is devoted to “External Confirmations”. An external confirmation is a written response provided directly to the auditor by a third party and is considered one of the most reliable forms of audit evidence. This procedure is widely used, particularly in auditing bank accounts, receivables and loan liabilities. The auditor should maintain full control over the confirmation process, directly managing the sending of requests and receipt of responses. Consequently, these three standards ensure that the auditor obtains reliable audit evidence based on the principle of professional scepticism and forms a well-founded auditor’s opinion on the financial statements.
Depending on the source of acquisition, audit evidence is classified as follows:
-Internal — information obtained from the client entity;
-External — information obtained from disinterested third parties and organizations;
-Mixed — information obtained from the entity and confirmed by an external source;
-Information obtained by the auditor himself/herself.
By method of presentation, evidence may be documentary (written) or oral.
Regardless of whether audit evidence is obtained in documentary or oral form, all audit evidence must be reflected in the auditor’s working papers.
Sources of audit evidence include:
-Financial (accounting) statements for the period under audit;
-Accounting records, accounting software, journals and books;
-Operational accounting data;
-Internal management reports (current and previous periods);
-Inventory documents;
-Working papers from the previous audit;
-Minutes of shareholders’ (founders’) meetings;
-Internal auditor’s documents;
-Orders and instructions of the client’s management;
-Information obtained from oral discussions with management;
-Constituent documents.
Factors affecting the auditor’s judgments regarding evidence include:
-The auditor’s assessment of the nature and extent of risk;
-Materiality of the items being audited;
-The auditor’s experience;
-Results of audit procedures;
-Source and reliability of the information obtained.
G. Bayramov gave the floor to S. Taghiyeva for a more detailed presentation on the topic. In her speech, S. Taghiyeva stated: “Dear fellow auditors! The relevance of audit evidence is one of the most important factors in achieving audit effectiveness, because only appropriate evidence helps the auditor reach well-founded conclusions and form an appropriate auditor’s report.”
Within the framework of the training, S. Taghiyeva mainly spoke about the following key principles:
Direct linkage of audit evidence to audit objectives
Audit evidence is considered relevant when it is directly related to a specific audit objective (existence, completeness, accuracy, valuation, rights and obligations, presentation).
An effective audit test should provide sufficient and appropriate evidence for the auditor’s objectives.
The auditor evaluates:
-Relevance;
-Reliability;
-Sufficiency.
Sampling methods:
-Full-scope testing (100%) — testing all elements;
-Audit sampling — testing based on a sample;
-Specific selection — high-risk or large transactions;
-Result: the correct sampling method reduces audit risk and improves the quality of decisions.
An auditor may sometimes select certain elements from a population. The following are considered during selection:
-Understanding of the entity;
-Risks of material misstatement;
-Characteristics of the population and elements that can be selected;
-High-value or key elements (risky, unusual, suspicious);
-All elements above a certain amount.
This approach is based on the auditor’s judgment and is subject to sampling risk.
Relevance expresses the logical relationship between audit evidence and the audit objective and the related assertion.
Key points:
-Evidence should be appropriate to the objective of the selected audit procedure;
-The direction of the test affects relevance (accounts payable);
-Risk of overstatement: — checking recorded liabilities is relevant;
-Risk of understatement: — checking alternative sources is relevant: — subsequent payments — unpaid invoices — supplier statements — unmatched receiving documents.
Main conclusion: audit evidence is relevant and effective only when selected in the correct direction.
Audit procedures may provide relevant evidence for certain assertions, but may not cover all assertions.
Increasing the efficiency of the audit process
Audit effectiveness depends not only on correctness but also on the efficient use of sources. The availability of appropriate evidence helps avoid excessive testing. This prevents time from being wasted on procedures that do not address audit objectives. At the same time, international approaches and practical recommendations aimed at improving audit efficiency were presented to the participants.
Audit sampling makes it possible to draw conclusions about the entire population based on a sample selected from that population.
Objective:
-To save time and resources;
-At the same time, to obtain a reliable audit result (Standard: ISA 530).
Result: when properly applied, sampling helps the auditor provide an effective and well-founded opinion.
The reliability of audit evidence depends on the following:
-Source of information (internal or external);
-Nature of the evidence;
-Circumstances of obtaining it;
-Control over the preparation and storage of information — key points;
-Evidence obtained from external sources is generally more reliable;
-Effective internal control systems increase the reliability of internal information;
-General rules may vary depending on specific circumstances — limitation;
-Even information obtained from external sources may not always be completely reliable.
Description and explanation of related standards
International Standards on Auditing (for example, ISA 500) require auditors to obtain sufficient appropriate audit evidence. The details of this standard were explained to the participants in detail.
Evaluation of collected evidence
The possible types of responses to external confirmation requests were considered; an auditor’s report is persuasive only to the extent that it is supported by evidence. Relevant audit evidence must be linked to the assertions in the financial statements.
As a result, it will be possible to conduct a high-quality audit within time and financial constraints and increase the confidence of stakeholders (investors, regulators and creditors).
The master class continued with practical discussions, and participants’ questions were answered.
More than 100 members of the Chamber of Auditors participated in the master class.
Chamber of Auditors of the Republic of Azerbaijan
