CPA Exam — AUDPerforming Further Procedures and Obtaining EvidenceEasy
An auditor is evaluating the audit evidence obtained during the audit of a private company. Which of the following factors would generally increase the persuasiveness of audit evidence?
- AEvidence obtained indirectly or by inference.
- BEvidence that is objective rather than subjective.
- CEvidence obtained from internal sources within the client's organization.
- DEvidence obtained from a related party of the client.
Show answer & explanationAnswer & explanation
Correct answer: B. Evidence that is objective rather than subjective.
Objective evidence, such as bank statements or external confirmations, is generally more persuasive than subjective evidence, such as management inquiries or estimates, because it is less prone to bias and personal judgment.
Why the other options are wrong
- A. Indirect evidence is less persuasive than direct evidence that confirms conditions directly.
- C. Evidence from internal sources is generally less persuasive than external evidence due to potential management bias.
- D. Evidence from related parties is inherently less reliable due to potential conflicts of interest and lack of arm's-length transactions.
Persuasiveness of Audit Evidence
The persuasiveness of audit evidence is determined by its appropriateness (relevance and reliability) and sufficiency.
- Reliability is enhanced by objectivity, independence of source, and directness.
- Sufficiency refers to the quantity of evidence.
- Appropriateness refers to the quality of evidence.
Memory trick: Objective, External, and Direct evidence is always Best.