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

Mr. Iyer is auditing Narmada Logistics Ltd. Management gives him a system-generated aged debtors report, which he plans to use to select samples for confirmation and to evaluate the provision for doubtful debts. Under SA 500, which procedure is most appropriate before using the report?

The auditor should test the report's completeness and accuracy before use, for instance by reconciling its total to the general ledger and recalculating ageing for a sample. System generation or a management representation alone does not provide sufficient appropriate audit evidence of reliability.

  1. AUse it without checks because it is generated by the ERP
  2. BTest the completeness and accuracy of the report, for example by reconciling its total to the general ledger and re-performing ageing for a sampleCorrect
  3. CAsk the management to certify the report in a representation letter and rely on that alone
  4. DUse it only for sample selection and not for evaluating the provision

Explanation

SA 500 requires evaluating whether information produced by the entity is sufficiently reliable, including its accuracy and completeness. Reconciling to the ledger and re-performing the ageing addresses both. A management representation alone is not sufficient evidence, and restricting the use does not remove the need for reliable data for sample selection.

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