Suniti, a CA student, is part of an engagement team conducting audit of a company TIM Private Limited. According to audit programme, she is…
CA Intermediate · Auditing and Ethics · MTP · May 2024
Suniti, a CA student, is part of an engagement team conducting audit of a company TIM Private Limited. According to audit programme, she is responsible for verifying purchases and PPE items appearing in books of accounts from records/bills of company. Besides, she has also been entrusted responsibility to obtain written representation from management regarding carrying out of physical verification of inventories during the year. During course of her work, she finds that: (i) One purchase bill amounting to 5.00 lacs pertaining to TIM Industries has been entered in books of TIM Private Limited. (ii) The management has refused to provide a written representation relating to physical verification of inventories during the year. She has brought it to knowledge of engagement partner who has decided to use lack of such a representation as audit evidence. Discuss whether each of above constitutes audit evidence. State reasoning for your answer.
Suggested Answer and Working Notes:
Audit evidence comprises both information that supports and corroborates management's assertions, and any information that contradicts such assertions. Purchase bill of 5.00 lacs pertaining to TIM Industries has been entered in books of TIM Private Limited. Therefore, it is contradicting management's assertion relating to occurrence of such purchases. Hence, it constitutes audit evidence. Further, the absence of information (for example, management's refusal to provide a requested representation) is used by auditor, and therefore, also constitutes audit evidence. In the given case, management has refused to provide a written representation relating to physical verification of inventories during the year. Therefore, absence of information is used by auditor and it also constitutes audit evidence.
Topics: Audit Evidence
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