Ankit jhaankit jha asked 1 year ago
1 Answers
RaviRavi Staff answered 1 year ago

Below is complete para from SA 500
Appropriateness is the measure of the quality of audit evidence; that is, its relevance and its reliability in providing support for the conclusions on which the auditor’s opinion is based. The reliability of evidence is influenced by its source and by its nature, and is dependent on the individual circumstances under which
it is obtained.
Explanation
Appropriateness = Quality = Relevance + Reliability
Relevance = Can it fulfill purpose of audit procedure ? = Eg Auditor has doubt that certain purchase bills are unrecorded, checking existing entries in creditor account wont help much, asking list of all purchases from supplier, checking unrecorded inventory in godown, checking gross profit ratio of that product may help, so they become relevant audit evidence.
Reliability depends on
Source — evidence from external source is more reliable
Nature — Written is more reliable than oral / Original is more reliable than xerox
Circumstances  — External confirmations as demanded by auditor received directly by auditor without company involvement are more reliable.   (auditor’s choice & no intervention of client)
Internal Controls & Maintenance — If accounting software is very good with adequate accuracy & completeness checks then data , reports generated will be more reliable  

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