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Audit Evidence - 4 Video Lecture | Crash Course for CA Intermediate

FAQs on Audit Evidence - 4 Video Lecture - Crash Course for CA Intermediate

1. What is audit evidence and why is it important in the auditing process?

Ans. Audit evidence refers to the information collected by auditors to support their conclusions and opinions on the financial statements of an entity. It is crucial because it helps auditors determine whether the financial statements are free from material misstatement, thereby increasing the reliability of the financial reporting. The quality and quantity of audit evidence affect the auditor's judgment and the overall audit opinion.

2. What are the different types of audit evidence?

Ans. The main types of audit evidence include physical evidence (such as inventory counts), documentary evidence (like invoices and contracts), analytical evidence (which involves comparisons and ratios), and testimonial evidence (obtained from inquiries with management and employees). Each type serves a different purpose and helps in forming a comprehensive view of the financial statements.

3. How does the reliability of audit evidence vary?

Ans. The reliability of audit evidence varies based on its source and nature. Generally, evidence obtained from independent sources outside the entity is more reliable than that obtained internally. For example, bank confirmations are considered highly reliable. Similarly, written documentation is usually more reliable than verbal testimony. The auditor must assess these factors when evaluating evidence.

4. What is the relationship between the sufficiency and appropriateness of audit evidence?

Ans. Sufficiency refers to the quantity of audit evidence collected, while appropriateness refers to the quality and relevance of that evidence to the audit objectives. Both are essential in forming a solid basis for the auditor's opinion. Auditors must gather sufficient and appropriate evidence to conclude that the financial statements are accurate and comply with applicable accounting standards.

5. How do auditors determine the amount of audit evidence needed?

Ans. Auditors determine the amount of audit evidence needed based on several factors, including the assessed risks of material misstatement, the complexity of the transactions, the effectiveness of internal controls, and the auditor's prior experience with the entity. Higher risk areas typically require more extensive evidence, while lower risk areas may require less. This risk-based approach helps ensure that the audit is efficient and effective.

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Sep 30, 2025 Last updated

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