Determine which of the following is the most correct statement regarding the reliability of audit evidence.
A) Information that is indirectly obtained from external sources is the most reliable audit evidence.
B) Reliability of audit evidence is dependent upon the evidence being subjective.
C) Reliability of evidence refers to the amount of evidence obtained.
D) If internal controls are effective, evidence obtained is more reliable than when the controls are not effective.

Question

Quizplus · Accepted Answer

Internal controls help in reducing the risk of material misstatements and provide more reliable evidence. Therefore, if internal controls are effective, the evidence obtained is more reliable compared to when they are not effective. The reliability of audit evidence is not dependent on subjectivity (B) but on its relevance, sufficiency and appropriateness. The amount of evidence obtained (C) is important, but it does not determine the reliability of the evidence. Lastly, information obtained indirectly from external sources, in some cases, may actually be less reliable due to potential biases and limitations of the sources, hence it is not the most reliable evidence (A).

Determine Which of the Following Is the Most Correct Statement