ACCA Strategic Professional · Advanced Audit and Assurance (International) · Audit procedures and obtaining evidence
While auditing Kestrel Components, the auditor intends to rely on a schedule of inventory ageing produced by Kestrel's IT system as evidence for the inventory provision. Under ISA 500, what must the auditor do before using this information as audit evidence?
The auditor must obtain evidence on the accuracy and completeness of the system-generated report and assess whether it is precise and detailed enough for the audit purpose. Information produced by the entity is not automatically reliable, and neither management representations nor full manual reperformance are what ISA 500 requires.
- ANothing further, because system-generated information is always reliable
- BObtain evidence about the accuracy and completeness of the information, and evaluate whether it is sufficiently precise and detailed for the auditor's purposesCorrect
- CRe-perform the whole ageing manually for every inventory line
- DObtain management's written representation that the report is correct, which is then sufficient evidence
Explanation
ISA 500 requires that when information from the entity is used as audit evidence, the auditor evaluates whether it is sufficiently reliable, including obtaining evidence about accuracy and completeness and its precision and detail. Full manual reperformance is not required. A representation alone is not sufficient, and system output is not automatically reliable.
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