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Evaluating the Competence and Reliability of Audit Evidence in Public Accounting

Description: This paper assesses how audit evidence is evaluated in public accounting for reliability and competence.

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    Evaluating the Competence and Reliability of Audit Evidence in Public Accounting Week 2 – DQ 2 The third generally accepted standard of audit fieldwork requires that auditors obtain sufficient, competent audit evidence to afford a reasonable basis for an opinion regarding the financial statements under examination. In considering what constitutes sufficient, competent audit evidence, a distinction should be made between underlying accounting data and all corroborating information available to the auditor. What presumptions can be made about the following? • The relative competence of evidence obtained from external and internal sources. • The role of internal control with respect to internal evidence produced by a client’s data processing system. • The relative persuasiveness of auditor observation and recalculation evidence compared to external, external - internal, and internal documentary evidence. Response #1 Relative competence of evidence has to do with the measure of evidence’s quality (reliability). Evidence must be relevant to the assertion to be considered competent. Put differently, evidence must have logical precise relevance to management’s assertions in the financial statements. In regard to reliability, evidence must be considered worthy of trust. Trustworthiness may be hard to determine from external sources if the source is not alert and fully informed. On the other hand, external sources can be mor e reliable some times as well, such as in the case of bank statements compared to documents provided by management. In the role of internal control with respect to internal evidence, such evidence produce by a client’s data processing system would be considered less reliable evidence if internal control were considered ineffective. On the contrary, if internal control

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