Skip to content

CA Final · Advanced Auditing, Assurance and Professional Ethics · Audit Evidence

While auditing Kaveri Textiles Ltd, the auditor must decide which evidence on trade receivables is the most reliable. Available are: (i) a customer's balance confirmation received directly by the auditor by email from the customer, (ii) the company's own sales ledger, (iii) a photocopy of a sales invoice kept in the company's files, and (iv) the accountant's oral assurance. Which is ordinarily the most reliable, based on SA 500 and SA 505?

The confirmation received directly from the customer is the most reliable. Evidence from sources independent of the entity, obtained directly by the auditor and in documentary form, is more reliable than internally generated records or oral statements made by company staff.

  1. AThe confirmation received directly by the auditor from the customerCorrect
  2. BThe company's sales ledger
  3. CThe photocopy of the sales invoice from the company's files
  4. DThe accountant's oral assurance

Explanation

Audit evidence is more reliable when obtained from independent sources outside the entity and when obtained directly by the auditor. The customer confirmation satisfies both, and it is also in documentary form. The sales ledger is internally generated, so it is less reliable.

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