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CMA Intermediate · Corporate Accounting and Auditing · Brief Introduction to Auditing Standards

As per SA 200, which statement correctly describes how the reliability of audit evidence is determined, and what determines whether sufficient appropriate evidence has been obtained?

Reliability of evidence is influenced by both its source and its nature and depends on the circumstances in which it is obtained. Whether sufficient appropriate evidence has been obtained to reduce audit risk to an acceptably low level is a matter of the auditor's professional judgment.

  1. AReliability is fixed by the evidence's size, and sufficiency is decided by a prescribed formula
  2. BReliability is influenced by source and nature and depends on the circumstances of obtaining it; sufficiency to reduce audit risk to an acceptably low level is a matter of professional judgmentCorrect
  3. CReliability depends only on the source, and sufficiency is decided by the management of the entity
  4. DReliability depends only on the nature of evidence, and sufficiency is decided by the number of procedures performed

Explanation

SA 200 states reliability is influenced by source and nature and depends on individual circumstances of obtaining it. Whether sufficient appropriate evidence has been obtained to reduce audit risk to an acceptably low level is a matter of professional judgment. No formula or management decision is prescribed, and reliability is not limited to a single factor.

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