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

In auditing Sagar Foods Ltd, the auditor relies mainly on enquiries of the production manager about the operating effectiveness of controls over stock issue, and performs no other procedures. What is the correct conclusion under SA 500?

Inquiry alone ordinarily does not provide sufficient audit evidence of the operating effectiveness of controls. The auditor should combine it with other procedures such as inspection, observation or reperformance, because inquiry, though useful, is not enough by itself.

  1. AInquiry alone ordinarily does not provide sufficient audit evidence of the operating effectiveness of controlsCorrect
  2. BInquiry alone is sufficient when the manager is experienced
  3. CInquiry is not an audit procedure at all
  4. DInquiry alone is sufficient if the answers are given in writing

Explanation

Inquiry may give important evidence and may even reveal a misstatement, but alone it ordinarily does not give sufficient evidence of the absence of a material misstatement at the assertion level or of operating effectiveness of controls. It should be combined with inspection, observation, reperformance and similar procedures.

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