CA Final · Advanced Auditing, Assurance and Professional Ethics · Audit Evidence
CA Mehul audits Bharat Auto Components Ltd. For a significant risk relating to revenue, he has obtained internal sales registers showing high quantities of evidence, but they are of poor quality because they are easily altered by the sales team. His junior suggests extending the sample of internal records instead of seeking independent evidence. What is the correct view?
The junior's suggestion is wrong. More evidence may not compensate for poor quality. For a significant risk, the auditor should seek more persuasive, reliable evidence, such as external confirmations from independent third parties, which corroborate internally generated records and increase the assurance obtained.
- AAgree, because a larger quantity of evidence can fully compensate for poor quality
- BAgree, because sufficiency depends only on quantity
- CDisagree; obtaining more evidence may not compensate for poor quality, and corroborating evidence from independent sources such as external confirmations should be consideredCorrect
- DDisagree; external confirmations are prohibited for revenue-related balances
Explanation
SA 500 states that obtaining more audit evidence may not compensate for its poor quality, and that higher risk calls for more persuasive evidence. Corroboration from an independent source, such as external confirmation, increases assurance over internally generated records. Nothing prohibits confirmations for revenue-related balances.
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