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CA Intermediate · Auditing and Ethics · Audit Evidence

The auditor of Mehta Logistics Ltd intends to use a schedule of fixed assets prepared by the company's accounts team as audit evidence. Under SA 500, what must the auditor do regarding this information?

The auditor must evaluate whether the information produced by the entity is sufficiently reliable, including testing its accuracy and completeness, before relying on it. SA 500 neither accepts such information blindly nor rejects it outright, and a management certificate alone does not provide enough evidence.

  1. AUse it directly since it is prepared by the entity's own staff
  2. BReject it, because information produced by the entity cannot be audit evidence
  3. CEvaluate whether the information is sufficiently reliable, including its accuracy and completeness, for the auditor's purposesCorrect
  4. DObtain a certificate from a director that the schedule is correct and nothing more

Explanation

SA 500 requires that when information produced by the entity is used as audit evidence, the auditor evaluates whether it is sufficiently reliable for the purpose, including obtaining evidence about its accuracy and completeness. Information from the entity is not automatically rejected, and a director's certificate alone is not enough.

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