Question

Question 1

The statements that follow are with regard to evidence that is sufficient and appropriate. As a future auditor, you are required to indicate if you agree with each statement and provide reasons for your decisions:

a) An auditor can only properly measure the appropriateness and sufficiency of audit evidence that will be used when expressing opinions are by utilizing the statistical sampling method only when they are gathering evidence.

b) The conduction of an audit in prior years for an entity will not have any influence when the auditor is determining if the evidence gathered is sufficient and appropriate for the current audit.

c) The level of professional skepticism that the auditor possesses is a factor that has an influence on the appropriateness and sufficiency of audit evidence.

d) When the auditor is making a decision on whether or not sufficient and appropriate evidence has been obtained they will first need to make considerations regarding the sufficiency of the evidence gathered.

Answer 1

a) It is right that Statistical Sampling methods heps auditoe to collect Sufficient and Appropriate audit evidence, but sometimes auditor can get it also by applying some other methods like Reperformance, Analytical Procedures, Inspection of Inventories and/or using non statistical methods which are based on auditor's judgement.

As per Standards on Auditing also either of methods if applied properly can provide sufficient and appropriate audit evidence.

b) Although If the Auditor has obtained Sufficient and appropriate audit evidence, it should not ignore the previous audit findings. It may be possible that the management must become smart enough to conceal frauds based on previous year audit procedures, auditor have performed.

Also as explained in ISA 330, audit evidence obtained from previous audits may, in some situations or circumstances, provide appropriate audit evidence where the auditor performs audit procedures to establish its continuing relevance.

c) Professional Skepticism means the auditor must have a questionable mind. Auditor must apply it while performing audit procedures as it will give him/her sufficient and appropriate audit evidence about whether there is a material misstatement in the financial statement. Auditor must evaluate the reliability of audit evidence obtained.

It will reduce the Detection risk and ultimately lead to a sufficient and appropriate audit evidence.

d) Suficiency here refers to Quantity of Evidence. An Auditor must have obtained adequate audit evidence before applying the test of quality or appropriateness on it. For example if auditor has been provided a single bank statement and asked to audit, there is no mean to obtain sufficient and appropriate audit evidence and eventually the auditor will provide wrong opinion based on it.