Skip to content

CA Intermediate · Auditing and Ethics · Audit Evidence

While auditing Kalyani Textiles Ltd, the auditor finds that a bank confirmation received directly from the bank by the auditor differs from a photocopy of the bank statement provided by the company's accountant. Both relate to the same balance date. Which evidence should the auditor ordinarily regard as more reliable under SA 500?

The direct bank confirmation is more reliable. Under SA 500, evidence obtained directly by the auditor from an independent external source is more reliable than documents supplied by the entity, and photocopies are less reliable than originals. The difference should be reconciled and investigated rather than averaged.

  1. AThe photocopy of the bank statement, because it is already in the company's records
  2. BThe direct bank confirmation, because evidence obtained from an independent external source is more reliableCorrect
  3. CBoth are equally reliable, so the average of the two balances should be taken
  4. DNeither, because only a physical inspection of cash can be reliable

Explanation

SA 500 states that audit evidence is more reliable when obtained from independent external sources outside the entity and directly by the auditor. A photocopy supplied by management is less reliable than an original confirmation received directly. The difference should be investigated through reconciliation, not averaged.

Did you get it right without looking?

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

Practise Audit EvidenceFree diagnostic mock

More Audit Evidence questions