Question

How does each of the following influence the reliability of the data: (1) data obtained from external versus internal sources, (2) data obtained directly versus indirectly, (3) data from original documents versus electronic scans, and (4) and data from written information sources versus records of verbal conversations?

Answer 1

1. The data from external sources is more reliable than internal sources since external data has lesser scope of manipulation and distorting the figures. Internal sources can be influenced by the management and also can conceal material facts. Data generated internally is more reliable when the controls imposed by the entity are more effective.

2. Data obtained directly is certainly more reliable than the data is taken through informal ways such as enquiry or asking questions.

3. Data that is obtained through original documents is more reliable since it serves as a record and also can help in validation of the data in the financial statements than electronic scans and photocopies. The data obtained through electronic means can increase their reliability if the internal controls are effective and strong.

4. Data through written information is more reliable than the information through verbal conversations i.e. the data that is obtained through written notes of a meeting is more reliable than a conversation with the management.