Explain about the factors that influence the reliability of Audit Evidence

Auditing and Assurance Revision Questions and Answers

Answer:
The reliability of information to be used as audit evidence is influenced its source, nature, and the circumstances under which it is obtained, including the controls over its preparation and maintenance. Even when information to be used as audit evidence is obtained from sources external to the entity, circumstances may exist that could affect its reliability. For example, information obtained from an independent external source may not be reliable if the expert may lack objectivity. While recognizing that exceptions may exist, the following generalizations about the reliability of audit evidence may be useful:

i. Independent Source – The reliability of audit evidence is increased when it is obtained from independent sources outside the entity.
ii. Effective internal control system – The reliability of audit evidence that is generated internally is increased when the related controls, including its preparation and maintenance, imposed the entity are effective.
iii. Method of obtaining – Audit evidence obtained directly the auditor (for example, observation of the application of a control) is more reliable than audit evidence obtained indirectly or inference (for example, inquiry about the application of a control).
iv. Form of Audit Document – Audit evidence in documentary form, whether paper, electronic, or other medium, is more reliable than evidence obtained orally (for example, a contemporaneously written record of a meeting is more reliable than a subsequent oral representation of the matters discussed).
v. Type of Documents – Audit evidence provided original documents is more reliable than audit evidence provided photocopies or facsimiles, or documents that have been filmed, digitized or otherwise transformed into electronic form, the reliability of which may depend on the controls over their preparation and maintenance.



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