Page 108 - CA Inter Audit PARAM

CA Ravi Taori
Note: Not happy with answer given in Module. Checking any financial item doesn’t mean only
Reperformance. Reperformance is one of the methods for examination.

Factors affecting Sufficiency Old Course -- (P16M/N17E/M18R/N18M/N20R/N20E/
QNO Bhaskar CNO SA500.125 M19R/SM20/SM21/M23M/M23R)
500.07
New Course -- (SM25)
The quantity of audit evidence needed is affected by the auditor’s assessment of the risks of misstatement.
Auditor’s judgment as to sufficiency may be affected by few factors. Explain
OR
The quantity of audit evidence needed is affected by the auditor’s assessment of the risks of misstatement
(the higher the assessed risks, the more audit evidence is likely to be required) and also by the quality of
such audit evidence (the higher the quality, the less may be required). Obtaining more audit evidence,
however, may not compensate for its poor quality. Analyse and Explain stating clearly the factors affecting
the auditor’s judgement as to sufficiency of audit evidence.
OR
What do you mean by the term 'sufficient Appropriate Audit Evidence? State various factors that help the
auditor to ascertain as to what is sufficient appropriate audit evidence.
OR
General factors which may influence the auditor’s judgment as to what is sufficient and appropriate audit
evidence.
OR
State various factors that help the auditor to ascertain as to what is sufficient and appropriate audit
evidence.
Answer ➢ Interrelationship Between Quantity & Quality
• The sufficiency and appropriateness of audit evidence are interrelated.
• The higher the quality, the less quantity may be required. Obtaining more audit evidence,
however, may not compensate for its poor quality.

➢ Sufficiency & Factors Affecting Sufficiency (More Evidence from Different Sources and in
Bigger Size)
• Sufficiency is the measure of the quantity of audit evidence.

• Auditor’s judgment as to sufficiency may be affected by the factors such as:
• Materiality
o Meaning of Materiality
Materiality may be defined as the significance of classes of transactions,
account balances and presentation and disclosures to the users of the
financial statements.

o Relationship
Less evidence would be required in case assertions are less material to users
of the financial statements. But on the other hand if assertions are more
material to the users of the financial statements, more evidence would be
required.

• Risk of material misstatement

o Meaning of RMM
Risk of material misstatement may be defined as the risk that the financial
statements are materially misstated prior to audit. This consists of two
components described as follows at the assertion level (a) Inherent risk—
The susceptibility of an assertion to a misstatement that could be material
before consideration of any related controls. (b) Control risk—The risk that
a misstatement that could occur in an assertion that could be material will
not be prevented or detected and corrected on a timely basis by the entity’s
internal control.

o Relationship

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