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Question

Refer to the following information to answer the next 4 questions (Q17 to Q20) The word Audit is derived from Latin word “Audire” which means ‘to hear’. Auditing is the systematic examination of financial statements, records and related operations to determine adherence to generally accepted accounting principles, management policies and stated requirement. Importance of auditing can be judged from the fact that even those organizations which are not covered by Companies Act get their financial statements audited. It has become a necessity for every commercial and even non- commercial organization. A company appoints an auditor who submits his opinion on the truthfulness and fairness of the financial performance and position of the company. An auditor’s Report is the format of result of all the effort that goes into the audit. Communicating the Auditor’s findings to interested users is part of all audits. Thus, the Final phase of an Audit involves preparing that communication, which is known as auditor’s report.

Audit evidence is information used by the auditor in arriving at the conclusions on which the auditor's opinion is based. Which of the following is not a means of obtaining audit evidence?

A Inspection Correct Answer Incorrect Answer
B Observation Correct Answer Incorrect Answer
C External confirmation Correct Answer Incorrect Answer
D Recalculations Correct Answer Incorrect Answer
E None of the above Correct Answer Incorrect Answer

Solution

Audit evidence refers to the information used by the auditor in arriving at the conclusions on which the auditor’s opinion is based. Audit evidence includes both information contained in the accounting records underlying the financial statements and other information. Audit evidence can be obtained through inspection of internal and external records of original documents, physical observation of process and procedures, external confirmation from third party, recalculation, reperformance or inquiry.

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