Which type of audit evidence is exemplified by physical examination and inspection?

The type of audit evidence exemplified by physical examination and inspection refers to direct knowledge and observation. This form of evidence is essential in the audit process because it involves the direct verification of tangible assets or data. For instance, when auditors physically examine inventory or inspect fixed assets, they obtain evidence that confirms the existence, condition, and appropriateness of those assets.

Direct knowledge and observation are considered the most reliable sources of audit evidence. This is because they involve firsthand verification rather than relying on statements, interpretations, or assumptions made by others. Physical examination helps auditors assess not only the existence of an item but also its value and suitability against the claims made in financial statements.

Additionally, while corroborating evidence, internal evidence, and oral evidence all play roles in the audit process, they do not carry the same level of reliability as direct observation. Corroborating evidence typically supports claims made through other forms of evidence, internal evidence may come from within the organization and might not be independently verified, and oral evidence relies on statements made by individuals rather than physical proof. In contrast, the examination and inspection serve as direct benchmarks that provide clear and observable proof.