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CA Intermediate · Auditing and Ethics · Audit Evidence

While auditing Kaveri Textiles Ltd, the auditor intends to use a schedule of ageing of trade receivables generated by the company's ERP system as a basis for assessing the adequacy of the provision for doubtful debts. Under SA 500, what should the auditor do before relying on this information?

The auditor must evaluate whether the ERP-generated ageing schedule is sufficiently reliable, including testing its accuracy and completeness, before using it. SA 500 treats entity-produced information as usable evidence only after such evaluation; system generation or a management representation alone is not enough.

  1. AEvaluate whether the information is sufficiently reliable for the auditor's purposes, including its accuracy and completenessCorrect
  2. BAccept it without testing because it is generated by a computer system
  3. CReject it because information produced by the entity cannot be audit evidence
  4. DObtain a management representation that the report is accurate and treat that as sufficient

Explanation

SA 500 requires the auditor to evaluate whether information produced by the entity is sufficiently reliable, including obtaining evidence about its accuracy and completeness. Computer generation does not make it reliable automatically. A representation alone is not sufficient appropriate evidence for this purpose.

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