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

CA Rohan is auditing Sundaram Pharma Ltd, where the risk of material misstatement in trade receivables has been assessed as significant. He has already inspected sales invoices and the receivables ledger. The audit manager proposes to reduce further work because the entity's records are extensive and consistent. What is the most appropriate view under SA 500 and SA 505?

The auditor should consider external confirmations from customers. For significant risks, more persuasive evidence is needed, and confirmations provide highly reliable third-party evidence. Piling up more internal records does not make up for their lower quality, and inquiry alone ordinarily cannot support a conclusion that no material misstatement exists.

1. AExtensive internal records are enough, as quantity can compensate for the higher risk
2. BInquiry of the sales head alone is enough, as it gives sufficient evidence of absence of misstatement
3. CExternal confirmation from customers may be used to obtain more reliable evidence, since higher assessed risk calls for more persuasive evidenceCorrect
4. DEvidence from different sources should be avoided so that the audit file stays consistent