Skip to content

CS Professional · Compliance Management, Audit and Due Diligence · Audit Principles and Techniques

Mehta & Associates audits Rohini Pharma Ltd, where the risk of material misstatement in inventory is assessed as high. The audit team proposes to offset the poor quality of the evidence they have, which comes from unsigned and informal internal notes, by collecting many more such notes. Under SA 200, what is the correct position?

More audit evidence may not compensate for poor quality. Sufficiency is about quantity and appropriateness is about relevance and reliability. Collecting many more unreliable internal notes does not make the evidence appropriate, especially when assessed risk is high.

  1. ALarger quantities of such notes will make the evidence appropriate
  2. BQuantity and quality are unrelated, so any volume of evidence is acceptable
  3. CObtaining more audit evidence may not compensate for its poor qualityCorrect
  4. DPoor-quality evidence is acceptable if the volume exceeds the prior year's

Explanation

SA 200 states that sufficiency measures quantity, appropriateness measures quality, and the two are interrelated. A higher assessed risk calls for more evidence, but obtaining more evidence may not compensate for its poor quality. So adding more unreliable notes does not fix the problem.

Did you get it right without looking?

One question tells you little. A timed set on Audit Principles and Techniques shows your real accuracy, how long you take and where you lose marks.

Practise Audit Principles and TechniquesFree diagnostic mock

More Audit Principles and Techniques questions