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ACCA Strategic Professional · Advanced Audit and Assurance (International) · Evidence and testing considerations

An auditor is testing the existence of trade receivables at Marlow Co. Which of the following pieces of evidence is generally the MOST reliable according to ISA 500 principles?

A written confirmation received directly by the auditor from the customer is most reliable, because it comes from an independent external source under the auditor's control. Internal schedules, verbal assurances and photocopies are less reliable under ISA 500.

  1. AA schedule of receivables balances prepared by Marlow's credit controller and handed to the auditor
  2. BA written reply received directly by the auditor from the customer confirming the balanceCorrect
  3. CA verbal assurance from Marlow's finance director that the balances are valid
  4. DA photocopy of a sales invoice supplied by Marlow's sales team

Explanation

Evidence from independent external sources obtained directly by the auditor is more reliable than internally generated evidence. Documents are more reliable than oral representations, and originals are more reliable than photocopies. A direct customer confirmation meets all these criteria; the others are internal, oral or copies.

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