Page 109 - CA Inter Audit PARAM

CA Ravi Taori
Less evidence would be required in case assertions that have a lower risk of
material misstatement. But on the other hand if assertions have a higher
risk of material misstatement, more evidence would be required.

• Size and characteristics of the Population.
(Size of Population Direct Relationship & Characteristic of Population Homogeneous
– Less Heterogeneous – More)
Size of a population refers to the number of items included in the population. Less
evidence would be required in case of smaller, more homogeneous population but
on the other hand in case of larger, more heterogeneous populations, more
evidence would be required

Factors affecting reliability Old Course -- (N16M/P16M/M17R/M17M/M17E/M18R /N18M/N18R/
QNO
500.09 Bhaskar CNO SA500.140 M18R/M19E/ N19R/N21R/ N22R/M22M)
New Course – (J25M)
The auditor of a limited company has given a clean report on the financial statement on the basis of xerox
copies of the books of accounts, vouchers and other records which were taken away by the Income Tax
Department in search under section 132 of the I.T. Act, 1961. Comment.
OR
Discuss the principles, which are useful in assessing the reliability of audit evidence.
OR
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. Explain. Also state clearly generalisations about the
reliability of audit evidence.
OR
State the generalisations about the reliability of audit evidence
OR
The reliability of information to be used as audit evidence, and therefore of the audit evidence itself, is
influenced by its source and its nature, and the circumstances under which it is obtained, including the

controls over its preparation and maintenance where relevant. Therefore, generalisations about the
reliability of various kinds of audit evidence are subject to important exceptions. While recognising that
exceptions may exist, state the generalisations about the reliability of audit evidence that may be useful.
OR
With reference to SA 500, Audit Evidence, discuss the different sources and their reliability, of audit
evidence.
OR
Audit evidence is influenced by its source, nature, and the circumstances under which it is obtained.
Elucidate the guiding principles which are useful in assessing the reliability of audit evidence.
OR
Manya Textiles is manufacturer of bed sheets, curtain cloths, other handloom items etc. having its plant at
Panipat. Auditors SJ & Co. is having doubts over the reliability of information given to him as audit evidence.
Also, auditors observed inconsistent information while conducting audit. Guide the auditor as to how they
should proceed in the given situation.
Answer ➢ Reliability
• The reliability of information to be used as audit evidence, and therefore of the audit evidence
itself, is influenced by its source and its nature, and the circumstances under which it is
obtained, including the controls over its preparation and maintenance where relevant.
• For example, information obtained from an independent external source may not be reliable if
the source is not knowledgeable, or a management’s expert may lack objectivity. While
recognising that exceptions may exist, the following generalisations about the reliability of
audit evidence may be useful:
• The reliability of audit evidence is increased when it is obtained from independent
sources outside the entity

• Audit evidence in documentary form, whether paper, electronic, or other medium, is
more reliable than evidence obtained orally

www.auditguru.in 4.8