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CA Intermediate · Auditing and Ethics · Audit Evidence

An auditor wants to use a schedule of fixed asset additions prepared by the accounts team of Bhatia Logistics Ltd as audit evidence. Under SA 500, what must the auditor do concerning this information produced by the entity?

The auditor must evaluate whether the entity-produced schedule is sufficiently reliable for the intended purpose, including testing its accuracy and completeness where needed. It can neither be used blindly nor rejected outright merely because management prepared it.

  1. AUse it directly since it is prepared by the client
  2. BEvaluate whether the information is sufficiently reliable for the auditor's purposes, including its accuracy and completenessCorrect
  3. CReject it since all client-prepared information is unreliable
  4. DUse it only if the management signs it

Explanation

SA 500 requires the auditor, when using information produced by the entity, to evaluate whether it is sufficiently reliable, obtaining evidence about its accuracy and completeness as needed. Using it blindly is wrong, and rejecting all such information is unnecessary. A management signature does not establish reliability.

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