Physical examination Physical examination is a type of evidence gathering activity performed by the auditor, usually in the substantive testing stage.
Physical examination refers to the examination by the auditor of a physical asset of the entity.
Where evidence of completeness is required, the auditor gathers evidence that the asset physically examined has been included in the accounting records. Where evidence of existence is required, the auditor physically examines an asset that has already been included in the accounting records. This assumes that the person making the physical inspection is competent and appropriately experienced.