When an auditor obtains photographic evidence to support audit procedures, the requirements for audit evidence need to be considered, i.e.

• Sufficient and appropriate
• Relevant and reliable
• Accurate and complete
• Sufficiently precise for purpose

It should be kept in mind that evidence is persuasive, rather than conclusive.

ISA 200 para 5:

‘As the basis for the auditor’s opinion, ISAs require the auditor to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error. Reasonable assurance is a high level of assurance. It is obtained when the auditor has obtained sufficient appropriate audit evidence to reduce audit risk (that is, the risk that the auditor expresses an inappropriate opinion when the financial statements are materially misstated) to an acceptably low level. However, reasonable assurance is not an absolute level of assurance, because there are inherent limitations of an audit which result in most of the audit evidence on which the auditor draws conclusions and bases the auditor’s opinion being persuasive rather than conclusive.’

The following needs consideration and conclusion:

 

1. Procedures for taking the photograph

Was the photograph taken by the auditor or a third party?

Evidence obtained directly by the auditor is generally more reliable than evidence obtained indirectly.

Was the auditor present when the photograph was taken?

This affects the reliability of the evidence.

If a third party took the photograph, their accuracy and completeness need to be verified.

2. The credibility of the person taking the photograph

Evidence needs to be reliable. This judgment is affected by previous determinations of, for example, the integrity of management when accepting the engagement, and the determination of the incentives of management to commit fraud when assessing overall fraud risk.

3. The purpose of the photograph

To determine quantities of an item, the question arises whether the photographs are a complete set.

Furthermore, consider whether the evidence is relevant.

When used to demonstrate the condition of an asset, it must be stated clearly that the relevant asset has been photographed.

It should be documented whether the evidence is primary or corroborative.

4. The risk of the photographs not being a complete and accurate representation of the subject matter

It is a requirement that evidence is relevant, reliable, sufficient and appropriate, accurate and complete, and sufficiently precise.

It has to be demonstrated that the items being audited are the subject matter in the photograph. With technological advances, there is also a risk that images may be manipulated.

Therefore, control over the images, between the time they were taken and when they were presented to the auditor is relevant. Images can be manipulated, electronically or otherwise, and may be intercepted upon electronic transmission and amended.

5. Tolerable error, compared to materiality

Is the representation of the population by the photographs within the level of confidence and accuracy required by the auditor?

The auditor may determine by way of substantive analytic procedures the spread of results which are likely for the current period, and compare the results of the photographs. According to the likelihood of the results, the auditor may determine whether the photographs on their own represent sufficient evidence.

6. Other corroborating evidence

In a similar way, substantive analytic review results may be used to corroborate the photographic evidence obtained.

7. Controls over taking the photograph

Consider how it was ensured that:

• All relevant photographs were taken
• All relevant photographs were presented to the auditor
• Duplicates were identified
• Duplicates were excluded from evidence presented to the auditor.

8. Was the photograph taken at the right time?

The timing of the photograph adds to relevance and reliability.

9. Do the photographs, as well as corroborative evidence, present a sufficient reduction of audit risk to the desired level?

This is the most important question to answer. The role of the photographs as corroborative or primary evidence, and the other evidence dictate whether there is a limitation of scope, which needs to be addressed as a qualification in the audit report.

10. Inventory counting requirements

With the counting of inventory, the following applies, but the principles are still relevant in the verification of other asset classes. Observation is the key element, and where the auditor is not directly observing the client’s procedures, it weakens the persuasiveness of evidence.

ISA 501 requires the auditor to obtain sufficient, appropriate audit evidence regarding the existence and condition of inventory by attending physical inventory counting, unless impracticable. Attendance involves evaluating management’s instructions and procedures for recording and controlling the results of the count, observing the performance of the count procedures, inspecting the inventory, and performing test counts. The auditor must also assess whether the procedures applied by management ensure the completeness and accuracy of the count, including controls over the identification of inventory, the treatment of damaged, obsolete or slow-moving items, and the proper segregation of inventory already counted from that not yet counted. In addition, the auditor considers cut-off procedures and movements of inventory during the count to ensure that inventory quantities relate to the correct reporting period. Where attendance at the physical count is not possible, ISA 501 requires the auditor to perform alternative audit procedures to obtain sufficient, appropriate evidence regarding the existence and condition of inventory; however, if such procedures cannot provide adequate evidence, a scope limitation may arise which may affect the auditor’s opinion.

11. Documentation requirements under ISA 230 should be addressed explicitly

ISA 230 requires documentation to be sufficient for an experienced auditor with no prior connection to understand the procedures performed, evidence obtained, results, judgments, and the identifying characteristics of the items tested.

In the case of photographic evidence, your summary should require documentation of:

• Date/time of capture
• Place/location
• Who captured it?
• Device/source
• To what item/location/batch/bin/stockpile it relates
• How the image ties to the population tested
• Which audit procedure/assertion it supports
• What corroborating evidence was matched to it
• The auditor’s conclusion on sufficiency and reliability.

Conclusion

Photographic evidence is rarely independent. Its sufficiency and appropriateness depend on the assertion being tested, the reliability of how the image was created and preserved, the completeness of the image set relative to the population, the auditor’s ability to identify the subject matter and timing, and the extent of corroborating evidence obtained. Where those conditions are not met, the photograph should be treated only as corroborative evidence, or not relied on at all.

References

1. ISA 200, Overall objectives of the independent auditor and the conduct of an audit, in accordance with International Standards on Auditing
2. ISA 230, Audit documentation
3. ISA 501, Audit evidence – Specific considerations for selected items

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