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

Auditors of Delmar Plc plan to rely on the company's aged receivables report generated by its accounting system when selecting items for testing and when evaluating the allowance for credit losses. Which action is required by ISA 500 before using this report as audit evidence?

The auditor must obtain evidence that the aged receivables report is accurate and complete, and evaluate whether it is reliable enough for the purpose. Entity-produced information may be used as evidence, but only after this assessment of its reliability.

  1. AObtain evidence about the accuracy and completeness of the information in the reportCorrect
  2. BReplace the report with a spreadsheet prepared by the auditor from management's verbal descriptions
  3. CConfirm that the report was printed by the finance director
  4. DDisregard the report since information produced by the entity cannot be audit evidence

Explanation

ISA 500 requires that when using information produced by the entity, the auditor evaluates whether it is sufficiently reliable for the purpose, including obtaining evidence about its accuracy and completeness. Entity-produced information can be evidence, so it is not automatically disregarded. Who printed it does not establish reliability.

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