CA Intermediate · Auditing and Ethics · Audit Evidence
In auditing Rohan Engineering Ltd, the auditor plans to use a report prepared by the company's ERP system listing overdue debtors to select items for testing. As per SA 500, which response is most appropriate regarding this information produced by the entity?
The auditor should evaluate whether the ERP report is sufficiently accurate and complete for the intended purpose before using it. SA 500 requires this assessment for information produced by the entity, because a system-generated report is not automatically reliable and a management representation alone is not enough.
- AUse it directly because system reports are always more reliable than manual records
- BEvaluate whether the information is sufficiently accurate and complete for the auditor's purposesCorrect
- CReject it and rely only on confirmations obtained from debtors
- DUse it only if management signs a representation about it
Explanation
SA 500 requires the auditor to evaluate whether information produced by the entity (IPE) is sufficiently reliable, including its accuracy and completeness, for the intended purpose. System generation does not make it automatically reliable. A management representation alone is not sufficient evidence and rejecting the report outright is unnecessary.
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