Question

Question No 2: (2x5=10 Marks)

Assume that you are a newly appointed junior auditor in Delloite, an auditing firm. After a 3-month
rigorous training on the job, you have been awarded the certificate of completion and is now ready to
embark on your very first assignment. Today, your first job was to evaluate the audit evidence
gathered by your team from Sohar Trading and see if they are reliable or not based on ISA 500. The
following are the evidences gathered in various forms:
a) One auditor from your team sent letters to customers to confirm their payment to Sohar
Trading. Today, you received back the letter from the customers with their confirmation and
signature.
b) You are analyzing the cash balance and bank balance of the company. You have prepared
bank reconciliation to see where the difference on cash balance is. After you finished
analyzing, you include the bank reconciliation in your audit evidence file.
c) One key official sent an email to the audit team as a reply to your inquiry about the
company’s building construction.
d) The bookkeeper submitted to the audit team the original official receipt as support to the
company’s payment of the furniture purchased.
e) The accountant gave verbal confirmation to your inquiry about the suppliers dealing with the
company.
Required:
Evaluate the reliability of each of the documents above and identify the one that is considered the
most reliable and least reliable. (2 marks each)

Answer 1

a) Written and signed confirmation fron the customer redarding payment to Sohar Trading is definitely a reliable document.

Any documentary evidence from external party like customer is treated as the most reliable dcoument, so we can treat this document as the most reliable.

b) Reconciled statement of Bank and cash balance is a reliable document as it is supported by documents from bank. However the reconciliation of diffence should include the reveiew of the control process in the company and there should not be any loophole and lack of segregation of duties in the cash and bank management process of the company.

c) The email from the key person in the management replying audit query is reliable evidence provided that the person sending the mail is the correct person who has the knowledge a nd details about the building construction and the reply is supported by required numbers , analysis and document references.

d) The submission of original receipt as a proof of payment for furnitur purchase is a reliable evidence. Original documnets validating transactions is a very reliable document and we can treat this as another highly reliable evidence.

e) Verbal confirmation from the accountant regarding the supplier realted enquiry is not a reliable evidence. Any type of verbal communication without any documentary or analytical evidence either in original or by e mail or a download from Govt Portals ( for tax and legal aspects)  can not be treated as reliable evidence.

This is the least reliable audit evidence amonth all the available evidences.