Sufficiency is the measure of the quantity of audit evidence.
The quantity of audit evidence needed is affected by the
following:
- Risk of material misstatement (in the audit of financial
statements) or the risk associated with the control (in the audit
of internal control over financial reporting). As the risk
increases, the amount of evidence that the auditor should obtain
also increases. For example, ordinarily more evidence is needed to
respond to significant risks.
- Quality of the audit evidence obtained. As the quality
of the evidence increases, the need for additional corroborating
evidence decreases. Obtaining more of the same type of audit
evidence, however, cannot compensate for the poor quality of that
evidence.
Appropriateness is the measure of the quality of audit evidence,
i.e., its relevance and reliability. To be appropriate, audit
evidence must be both relevant and reliable in providing support
for the conclusions on which the auditor's opinion is based.
Relevance. The relevance of audit evidence refers to
its relationship to the assertion or to the objective of the
control being tested. The relevance of audit evidence depends
on:
- The design of the audit procedure used to test the assertion or
control, in particular whether it is designed to (1) test the
assertion or control directly and (2) test for understatement or
overstatement; and
- The timing of the audit procedure used to test the assertion or
control.
Reliability. The reliability of evidence
depends on the nature and source of the evidence and the
circumstances under which it is obtained. For example, in
general:
- Evidence obtained from a knowledgeable source that is
independent of the company is more reliable than evidence obtained
only from internal company sources.
- The reliability of information generated internally by the
company is increased when the company's controls over that
information are effective.
- Evidence obtained directly by the auditor is more reliable than
evidence obtained indirectly.
- Evidence provided by original documents is more reliable than
evidence provided by photocopies or facsimiles, or documents that
have been filmed, digitized, or otherwise converted into electronic
form, the reliability of which depends on the controls over the
conversion and maintenance of those documents.