Under ISA 500, the objective of the auditor is to design and perform audit procedures in such a way as to enable the auditor to obtain sufficient appropriate audit evidence, to be able to draw reasonable conclusions on which to base the auditor's opinion.
What Is the Difference Between "Sufficiency" and "Appropriateness"?
- Sufficiency is the measure of the quantity of audit evidence. The quantity needed is affected by the auditor's assessment of the risks of material misstatement and also by the quality of that evidence.
- Appropriateness is the measure of the quality of audit evidence; that is, its relevance and its reliability in providing support for the conclusions on which the auditor's opinion is based.
Audit evidence includes both information contained in the accounting records underlying the financial statements and information obtained from other sources.
What Must the Auditor Consider When Using Information as Audit Evidence?
When designing and performing audit procedures, the standard requires the auditor to consider the relevance and reliability of the information to be used as audit evidence, including information obtained from an external information source.
How Does the Auditor Select Items for Testing?
When designing tests of controls and tests of details, the standard requires the auditor to determine means of selecting items for testing that are effective in meeting the purpose of the audit procedure.
What Falls Within "Accounting Records"?
The standard defines accounting records as the records of initial accounting entries and supporting records, such as checks and records of electronic fund transfers, invoices, contracts, the general and subsidiary ledgers, journal entries and other adjustments to the financial statements that are not reflected in journal entries.
What If Information Relies on the Work of a Management's Expert?
If information to be used as audit evidence has been prepared using the work of a management's expert, the standard requires the auditor, to the extent necessary and having regard to the significance of that expert's work for the auditor's purposes, to evaluate the competence, capabilities and objectivity of that expert, obtain an understanding of that expert's work, and evaluate the appropriateness of that work as audit evidence for the relevant assertion.
What If Audit Evidence Is Inconsistent or Its Reliability Is in Doubt?
If audit evidence obtained from one source is inconsistent with that obtained from another, or the auditor has doubts over the reliability of information to be used as audit evidence, the standard requires the auditor to determine what modifications or additions to audit procedures are necessary to resolve the matter, and to consider the effect of the matter, if any, on other aspects of the audit.
Legal References
- ISA 500 — Audit Evidence, Paragraphs 4, 5, 6, 7, 10 and 11.
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