Which of the following statements concerning audit evidence is correct?
In the field of auditing, the reliability and accuracy of audit evidence are crucial for forming an opinion on the financial statements. Audit evidence refers to the information gathered by auditors during the audit process to support their conclusions. This article aims to analyze and determine which of the following statements about audit evidence is correct.
Statement 1: Audit evidence should be obtained from the entity being audited.
This statement is correct. According to auditing standards, auditors are required to obtain audit evidence from the entity being audited. This is because the entity has the most direct knowledge and access to its internal controls, transactions, and records. By gathering evidence from the entity, auditors can better assess the effectiveness of internal controls and the accuracy of the financial statements.
Statement 2: Audit evidence should only be obtained from external sources.
This statement is incorrect. While external sources can provide valuable information, audit evidence should be obtained from both internal and external sources. Internal evidence, such as the entity’s accounting records and internal controls, can provide a more comprehensive understanding of the entity’s financial position and performance. External evidence, such as confirmations from third parties, can provide additional support and validation of the internal evidence.
Statement 3: Audit evidence should be obtained only from reliable sources.
This statement is correct. Audit evidence should be obtained from reliable sources to ensure its credibility and accuracy. Reliable sources include the entity itself, independent third parties, and regulatory bodies. Auditors should exercise professional judgment in determining the reliability of the evidence and consider factors such as the nature of the evidence, the source, and the risk of material misstatement.
Statement 4: Audit evidence should be obtained in a sequential manner.
This statement is incorrect. There is no strict requirement for auditors to obtain audit evidence in a sequential manner. The audit process is flexible, and auditors can gather evidence simultaneously or in any order that is most efficient and effective. The key is to obtain sufficient and appropriate audit evidence to support the auditor’s conclusions.
In conclusion, the correct statements concerning audit evidence are:
1. Audit evidence should be obtained from the entity being audited.
3. Audit evidence should be obtained from reliable sources.
Understanding these principles is essential for auditors to perform their duties effectively and provide reasonable assurance on the financial statements.
