QUESTION Corroboratory evidence inspected by an auditor in the course of an audit includes: 1. A...

QUESTION
Corroboratory evidence inspected by an auditor in the course of an audit includes:
1. A letter from the bank confirming the company’s bank balance, which is sent directly to the auditor.
2. The creditor’s monthly statement from the company’s file.

3. Copies of sales invoices sent to customers from the company’s files.
4. Delivery notes, sent with goods, receipted/signed by customers and held in the company’s office.
5. Title deeds for the company’s properties, which are held at the company’s safe deposit box at the bank.
6. A bank statement from the client’s files.
7. Material requisitions filed in a storeroom.
8. A board minute authorizing the purchase of new equipment.

Required:
For each item, discuss and comment on its reliability as audit evidence. Is the evidence highly reliable,
reliable or of low reliability?

Expert Solution

1. Confirmation by bank is a strong evidence as regard its ownership, existence and valuation assertion because it is an external confirmation which is directly received by auditor. Hence it is highly reliable.

2. Creditors’ monthly statement from the company file has low reliability, as it does not provide a confirmation from the creditors. It is just a source of document from the books of the company.

3. Copy of sales invoice from the companies file again has low reliability as there is no confirmation received from debtors. So just by seeing the sales invoice it cannot be judged that those are genuine or not.

4. Delivery notes which are sent with goods and signed by customers is reliable source, because it is properly signed by the customers.

5. The title deeds of the company properties have high reliability as it provides all the details regarding the ownership of the assets and properties.

6. A bank statement from the client file is also a reliable source as the bank statement is provided by the bank which is generally genuine in nature.

7.Material requisitions have low reliability as that can be manipulated by the employees.

8. A board minute which authorizes purchase of new equipment is highly reliable as this is the summary of the board meeting on which an auditor can rely.

ekkarill92 answered 2 years ago

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