Rank the reliability of the following items of audit evidence: 1. Schedules of details of physical inventory counts conducted by the client
2) Auditor's notation of inferences drawn from ratios and trends
3) Copies of bank statements held by the client
4) Copies of bank statements obtained directly from the bank
A) 2, 3, 4, 1
B) 3, 4, 2, 1
C) 4, 2, 3, 1
D) 4, 1, 2, 3

Question

Quizplus · Accepted Answer

According to generally accepted auditing standards, the most reliable audit evidence is obtained from external sources, such as banks. Therefore, copies of bank statements obtained directly from the bank (choice 4) are the most reliable. Auditor's notation of inferences drawn from ratios and trends (choice 2) is less reliable because it involves subjective analysis by the auditor. Copies of bank statements held by the client (choice 3) may be reliable, but they may have been altered or tampered with by the client. Schedules of details of physical inventory counts conducted by the client (choice 1) are the least reliable evidence, as they may be inaccurate or incomplete.

Rank the Reliability of the Following Items of Audit Evidence