FRP & Associates are the statutory auditors of Paint Private Limited. Company is into the business of trading and has operations across India.…

The auditor has to obtain sufficient appropriate audit evidence to draw reasonable conclusions on financial statements. Sufficiency is the measure of the quantity of audit evidence. CA M will ensure that the evidence collected by CA Ravi will be sufficient for the purpose of audit by considering following factors: (i) Materiality: It may be defined as the significance of classes of transactions, account balances and presentation and disclosures to the users of the financial statements. Less evidence would be required in case assertions are less material to users of the financial statements. But on the other hand, if assertions are more material to the users of the financial statements, more evidence would be required. (ii) Risk of material misstatement: It may be defined as the risk that the financial statements are materially misstated prior to audit. This consists of two components, namely, inherent risk and control risk at the assertion level. Less evidence would be required in case assertions that have a lower risk of material misstatement. But on the other hand, if assertions have a higher risk of material misstatement, more evidence would be required. (iii) Size of a population: It refers to the number of items included in the population. Less evidence would be required in the case of smaller, more homogeneous populations but on the other hand in case of larger, more heterogeneous populations, more evidence would be required.