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ACCA Strategic Professional · Advanced Audit and Assurance (International) · Audit procedures and obtaining evidence

During the audit of Meridian Print Ltd, the auditor obtains inconsistent evidence: a customer confirmation shows a balance of $48,000, but the sales ledger shows $60,000 and management says the ledger is correct. Under ISA 500, what should the auditor do?

The auditor should determine what modified or additional procedures are needed to resolve the inconsistency, such as reconciling items and checking delivery and cash records, and consider the implications for other audit areas. Simply accepting management's explanation or ignoring the exception does not provide sufficient appropriate evidence.

  1. AAccept the ledger balance because management has explained it
  2. BAccept the confirmation and adjust the ledger balance without further work
  3. CDetermine what modifications or additions to audit procedures are needed to resolve the matter, and consider the effect on other aspects of the auditCorrect
  4. DDisregard the confirmation as an isolated exception and reduce the sample size

Explanation

ISA 500 states that if evidence from one source is inconsistent with that from another, or the auditor has doubts over reliability of information, the auditor determines what modifications or additions to procedures are necessary to resolve the matter and considers any effect on other aspects of the audit. Accepting either figure without investigation, or ignoring the exception, would not be sufficient.

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