CA Final · Advanced Auditing, Assurance and Professional Ethics · Audit Evidence

CA Arjun audits Lotus Retail Ltd. He finds that inventory records, the minutes of the board meeting and a management representation all support the existence of stock at a third-party warehouse. He also obtains a direct confirmation from the warehouse keeper agreeing with the quantities. How does the warehouse confirmation affect his assurance?

The confirmation may increase his assurance. Consistent evidence from different sources or of a different nature gives more assurance than individual items, and corroboration from a source independent of the entity strengthens internally generated evidence such as records, minutes and management representations. It is supportive, not conclusive by itself.

1. AIt adds nothing, since three internal items already agree
2. BIt may increase assurance, as corroborating information from an independent source adds to evidence generated internallyCorrect
3. CIt replaces the need for any other evidence, as external evidence is conclusive
4. DIt reduces assurance, because evidence from different sources is inconsistent by nature