The objective of ASA 500 Audit Evidence is to enable the auditor to obtain sufficient appropriate audit evidence to draw reasonable conclusions on which to base the audit opinion. This requirement applies to all evidence obtained during the course of the audit. It establishes the foundation of audit work: conclusions must be supported not by assumption or appearance, but by evidence that meets a defined standard of quality and quantity.
Core Requirement
ASA 500 requires the auditor to design and perform audit procedures that are appropriate in the circumstances in order to obtain sufficient appropriate audit evidence. This obligation exists before judgement is applied. The auditor must first ensure that procedures are properly designed to address the risks identified, and only then assess whether the resulting evidence is adequate.
In the SMSF audit context, this is often operationalised through structured audit frameworks. For common fund scenarios, auditors typically rely on established document checklists to ensure that all relevant evidence is obtained efficiently. For more complex or non-standard investments, additional tailored procedures and documentation requirements are necessary. These frameworks do not replace judgement, but support it by ensuring that key areas of risk are consistently addressed.
What is Audit Evidence
Audit evidence is defined as all information used by the auditor in arriving at the conclusions on which the audit opinion is based. This includes both accounting records and other information, such as supporting documentation, confirmations, and externally sourced data. Not all information automatically qualifies as audit evidence and must be evaluated.
Traditionally, audit evidence was largely paper-based, requiring manual collection and verification. With the advancement of technology, data feeds have become an increasingly dominant source of evidence, significantly improving efficiency. For example, platforms such as BGL 360 and Class Super can automatically match dividend income to a fund’s shareholdings, reducing the need for manual reconciliation. Similarly, distribution statements are often system-mapped, with tax components applied based on known allocation percentages.
In addition, a fund’s Holder Identification Number (HIN) can now be linked directly to share registries, allowing investment holdings to flow into the system without manual input. More recently, document feeds have further changed how evidence is obtained. Instead of relying on trustees to provide bank statements, original statements can now be sourced directly within the software environment.
The Two-Dimensional Test: Sufficiency and Appropriateness
All audit evidence is assessed using sufficiency and appropriateness.
Sufficiency refers to the quantity of audit evidence obtained. It is influenced by risk and quality. Higher risk requires more evidence, and lower quality evidence requires more to compensate.
Appropriateness refers to quality, determined by relevance and reliability. Evidence must support the assertion and be trustworthy.
Sufficiency and appropriateness are interrelated, but more evidence cannot compensate for poor quality.
Appropriateness
Relevance
Relevance means the evidence directly relates to the assertion being tested. Irrelevant evidence has no audit value.
Reliability
Reliability refers to how much the auditor can trust the evidence. External, independent, and directly obtained evidence is generally more reliable.
Read our ariticle: When the evidence looks convicing but isn’t enough
Other Aspects of ASA 500
Internally Generated Reports
A key aspect of audit evidence arises where information is produced by the entity itself. In these cases, the auditor cannot assume reliability simply because the information forms part of the accounting records. Internally generated data must be assessed for accuracy, completeness, and precision before it can be relied upon. This often involves understanding how the information was prepared, the controls surrounding its production, and whether it has been subject to independent verification. Without this evaluation, internally produced information carries a higher risk of error or bias.
This reflects the requirement under ASA 500 Audit Evidence that information generated internally cannot be accepted at face value and must be critically evaluated before reliance is placed on it.
In an SMSF audit, software-generated reports play an important role by presenting a structured and consolidated view of the fund’s transactions. A key example is the investment movement report, which shows acquisitions, disposals, and changes in holdings over the financial year. As a reporting tool, it provides visibility over the flow of transactions and assists the auditor in understanding the activity within the fund.
However, the usefulness of these reports does not determine the reliability of the underlying data. In some systems, users have the ability to manually adjust transactions or balances, including changes to an asset’s cost base. Unless these changes are supported by appropriate documentation, the information may not represent the true position of the fund.
For this reason, internally generated reports should be viewed as a tool for analysis rather than evidence in themselves. The auditor’s role remains to evaluate the underlying data and determine whether it meets the standard of sufficient appropriate audit evidence.
Consistency and Contraditions
The reliability of audit evidence is strengthened when it is consistent across multiple sources. Where evidence obtained from different origins aligns, the auditor can place greater reliance on it. Conversely, where inconsistencies arise, they cannot be ignored. Conflicting evidence is a clear signal that further investigation is required. The auditor must resolve these inconsistencies through additional procedures, rather than selecting the evidence that appears more convenient or persuasive. In this way, contradictory evidence is not an obstacle to the audit process, but a critical input that requires careful analysis.
A common example in an SMSF audit arises in the classification of contributions. Trustees may change their intention over time, for example deciding whether a contribution is to be treated as concessional or non-concessional. As a result, different documents may reflect different stages of that decision, such as contribution forms, correspondence, or accounting records. Where these sources are inconsistent, the auditor cannot rely on any single document in isolation. Instead, it is necessary to determine which treatment represents the trustee’s final and valid decision, supported by appropriate documentation.
Audit Procedures
Audit evidence is obtained through a range of procedures, each with varying levels of reliability. These include inspection of documents, observation of processes, external confirmations, recalculation of figures, analytical procedures, and enquiry. No single procedure is sufficient in isolation. For example, enquiry alone does not provide adequate audit evidence unless it is supported by more objective forms of verification. The auditor must determine which combination of procedures is appropriate based on the nature of the assertion being tested and the level of risk involved.
This is particularly evident in the audit of loan investments within an SMSF. In such cases, the audit typically involves multiple procedures, including inspecting the executed loan agreement, enquiring with the trustee about the due diligence undertaken, and their assessment on the recoverability of the loan. This may involve obtaining and reviewing the borrower’s financial information, recalculating expected interest against amounts actually received, and verifying the treatment of the loan where it has been extended or rolled over.
This reflects the principle that SMSF audit evidence is cumulative in nature, and its strength lies in the combined effect of multiple procedures rather than any single test.
Professional Judgement and Framework
Professional judgement underpins the entire process. It is required not only at the conclusion of the audit, but throughout — in designing procedures, selecting evidence, and evaluating whether the evidence obtained is sufficient and appropriate. The auditor must balance these factors, recognising that more evidence does not necessarily mean better evidence if its quality is lacking.
Importantly, ASA 500 also sets clear boundaries on what cannot be relied upon. A large volume of evidence does not compensate for poor quality. The appearance of a document, including whether it looks formal or complete, does not determine its reliability. Enquiry, on its own, is insufficient without corroboration. Internally generated information cannot be accepted at face value without proper evaluation. These principles reinforce that audit evidence must be assessed critically, not accepted passively.
In practice, the process follows a structured framework. The auditor begins by identifying the relevant assertion, then designs and performs procedures to obtain supporting evidence. That evidence is evaluated for relevance and reliability, and its sufficiency and appropriateness are assessed. Any inconsistencies are investigated and resolved before a conclusion is formed. This framework ensures that the audit opinion is supported by evidence that meets the required standard, rather than by information that merely appears convincing.
Interaction with ASA 620 Using the work of an Auditor’s Expert
A further category of audit evidence arises from the use of expert work. In practice, this is common in SMSF audits, particularly where specialised knowledge is required. Examples include property valuations, actuarial certificates, and legal opinions on complex structures. While these reports may appear authoritative, they do not automatically satisfy the requirements of audit evidence.
The use of an expert is governed by ASA 620 Using the Work of an Auditor’s Expert, which requires the auditor to evaluate the expert’s competence, capability, and objectivity, as well as to understand the nature of the work performed. However, even where an expert is considered appropriate, the resulting report must still be assessed under the principles of ASA 500 Audit Evidence. The auditor must determine whether the information produced is relevant, reliable, and sufficient to support the audit conclusion.
I have received legal opinions that I didn’t agree.
In this sense, expert evidence is not a substitute for audit judgement. It is one form of evidence among many, and its weight depends on how well it withstands evaluation. A valuation, for example, may require consideration of assumptions, methodology, and supporting data before it can be relied upon. The presence of an expert’s report does not remove the auditor’s responsibility; it reinforces the need for careful assessment.
