Question

AU-C 500 Audit Evidence, in the AICPA auditing standards refers to information produced by the entity. What must the auditor do to evaluate whether information provided by the client is sufficiently reliable?

Provides some specific steps the auditor should do with respect to information supplied by the client.

Answer 1

DETAILS GIVEN IN QUESTION:

AU-C 500 - What must the auditor do to evaluate whether information provided by the client is sufficiently reliable?

Provides some specific steps the auditor should do with respect to information supplied by the client.

ANSWER:

The reliability of the audit evidence is influenced by its source and nature and the circumstances under which it is obtained

It is also influenced by the controls over its preparation and maintenance.

The auditor should ensure following to evaluate whether the information provided by client is sufficiently reliable:

1.Audit evidence must be obtained from independent sources outside the entity.

2. If audit evidence is generated internally, then its reliability is increased when the related controls, including those over its preparation and maintenance, imposed by the entity are effective.

3. Auditor shall obtain audit evidence directly as it is more reliable than audit evidence obtained indirectly or by inference.

4.Audit evidence should be in documentary form as it is more reliable than evidence obtained orally.

5. Auditor should gather audit evidence from Original documents as evidence provided by original documents is more reliable than audit evidence provided by photocopies, facsimiles, etc.

Some specific steps the auditor should do with respect to information supplied by the client.

1.       Check source of audit evidence. It must be from independent sources.

2.       Check internal controls in preparation and maintenance if audit evidence is generated internally.

3.       Check documentary evidence for reliability. Original documents increase the reliability of the evidence.