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CA Intermediate · Auditing and Ethics · Audit Evidence

While auditing Shree Textiles Ltd, the auditor wants evidence of the existence of a fixed deposit shown in the balance sheet. The auditor obtains a direct written confirmation from the bank, sent to and received by the auditor without passing through the management. Compared with a photocopy of the deposit receipt supplied by the company, the bank confirmation is more reliable mainly because it is:

The bank confirmation is more reliable because the auditor obtains it directly from an independent external source. SA 500 states that evidence from outside the entity, received first-hand, is more reliable than documents or copies provided by management, which could be altered or incomplete.

  1. AObtained from an external source directly by the auditorCorrect
  2. BCheaper and quicker to obtain than inspection
  3. CPrepared in a standard format approved by ICAI
  4. DAvailable only for financial assets

Explanation

Under SA 500, audit evidence is more reliable when obtained from independent external sources and directly by the auditor. A photocopy supplied by management can be altered, so it is less reliable. Cost or format does not determine reliability.

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