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

During the audit of Deccan Steels Ltd, CA Vikram finds the sales ledger entries are supported only by a few low-quality, photocopied dispatch notes. His team proposes to compensate by collecting a very large number of similar photocopied notes. Which statement is correct under SA 500?

Obtaining more audit evidence may not compensate for its poor quality. Sufficiency measures quantity, appropriateness measures quality, and they are interrelated, so the auditor should seek more reliable evidence, such as independent corroboration, instead of simply gathering more photocopied internal documents.

  1. AQuantity fully compensates for poor quality, so a larger volume is sufficient
  2. BQuality is irrelevant once the sample is large enough
  3. CObtaining more audit evidence may not compensate for its poor quality, so he should seek more reliable evidenceCorrect
  4. DSufficiency depends only on the auditor's fee and available time

Explanation

SA 500 explains that sufficiency (quantity) is affected by assessed risks and by quality; higher quality may reduce quantity needed, but obtaining more evidence may not compensate for poor quality. Hence collecting more of the same weak evidence is not the right response; he should obtain more reliable evidence, for example corroboration from independent sources.

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