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CA Intermediate · Auditing and Ethics · Audit Evidence

While auditing Sagar Textiles Ltd, the auditor needs evidence about the completeness of purchase liabilities at the year-end. Which of the following sources would generally provide the more reliable audit evidence for this assertion?

Supplier statements received directly from suppliers are the more reliable evidence, because SA 500 treats evidence from independent external sources, in original form, as more reliable than internally prepared schedules, oral explanations or photocopied documents supplied by the client.

  1. AA schedule of creditors prepared by the accounts manager at the auditor's request
  2. BSupplier statements received directly from the suppliers' own recordsCorrect
  3. COral explanations given by the purchase manager
  4. DPhotocopies of purchase invoices provided by the company

Explanation

Under SA 500, evidence obtained from independent external sources in original form is more reliable than internally generated information, photocopies or oral statements. Supplier statements come directly from third parties. The accounts manager's schedule and oral explanations originate within the entity, so they are less reliable.

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