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CMA Intermediate · Corporate Accounting and Auditing · Brief Introduction to Auditing Standards

The statutory auditor of Kaveri Textiles Ltd. has found that the evidence gathered on inventory existence is of poor quality. The audit manager suggests simply enlarging the sample of the same weak evidence. As per SA 200, what is the position?

Obtaining more audit evidence may not compensate for its poor quality. SA 200 explains that sufficiency and appropriateness are interrelated, higher quality may reduce the quantity needed, but piling up more weak evidence does not cure its lack of relevance or reliability.

  1. AObtaining more audit evidence may not compensate for its poor qualityCorrect
  2. BA larger quantity always makes up for poor quality
  3. CQuality of evidence is irrelevant if the quantity is large
  4. DPoor quality evidence cannot be used even in combination with other evidence

Explanation

SA 200 says that the higher the quality of evidence, the less may be required, but obtaining more evidence may not compensate for its poor quality. The option claiming quantity always compensates contradicts this directly.

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