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CA Final · Advanced Auditing, Assurance and Professional Ethics · Digital Auditing & Assurance

Kiran & Co, auditors of Veda Textiles Ltd, plan to use a data analytics tool to test 100% of sales invoices for duplicate invoice numbers and invoices dated after the year-end. Before relying on the output, what is the most appropriate step under SA 500 on audit evidence?

The auditor should first assess whether the data extracted and fed into the analytics tool is complete, accurate and relevant. Output from software is only as reliable as its source data, and a management certificate or the mere use of a tool does not by itself give sufficient appropriate audit evidence.

  1. AAccept the output because software-generated results are always reliable
  2. BAssess the relevance and reliability of the data fed into the tool, including its completeness and accuracyCorrect
  3. CReplace all other substantive procedures on sales with the tool output
  4. DAsk management to certify that the extract is correct and treat that as sufficient

Explanation

Under SA 500 the auditor must evaluate the relevance and reliability of information used as audit evidence, including completeness and accuracy of the data extracted. A management certificate alone is not sufficient, and software output is only as reliable as its input. Option A ignores this, and testing the whole population does not remove the need to validate data.

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