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What is financial materiality?

In accounting, materiality refers to the impact of an omission or misstatement of information in a company’s financial statements on the user of those statements. … The materiality concept is used frequently in accounting, especially in the following instances: Application of accounting standards.

Which audit evidence is the most reliable?

Audit evidence obtained directly by the auditor (for example, observation of the application of a control) is more reliable than audit evidence obtained indirectly or by inference (for example, inquiry about the application of a control).

What is reliability of audit evidence?

audit evidence are useful: • Audit evidence is more reliable when it is obtained from knowledgeable. independent sources outside the entity. • Audit evidence that is generated internally is more reliable when the. related controls imposed by the entity are effective.

Why the auditor needs evidence?

Audit evidence is important because it is all the information that an auditor gathers to reach his audit opinion about an organization’s financial statements and/or internal control environment. … Audit evidence can be divided into internal and external sources.

What are the six characteristics of reliable audit evidence?

Relevance – must pertain to the audit objective being tested. Effectiveness of client internal controls – good internal controls can mean better information. Auditor direct knowledge – auditor determinations are stronger that client comments. Qualifications – individual is a qualified source.

What is internal audit evidence?

1.

What are the five types of audit tests?

Following are the five types of testing methods used during audits.

  • Inquiry.
  • Observation.
  • Examination or Inspection of Evidence.
  • Re-performance.
  • Computer Assisted Audit Technique (CAAT)