Question

Assume that you are a newly appointed junior auditor in PwC, an auditing firm. After a 3-month
rigorous training on the job, you have been awarded the certificate of completion and is now ready to
embark on your very first assignment. Today, your first job was to evaluate the audit evidence
gathered by your team from Salalah Trading and see if they are reliable or not based on ISA 500. The
following are the evidences gathered in various forms:
a) Your senior auditor assigned you to directly observe how a sale transaction is done in Salalah
Trading. You were given three days to observe the sale transaction completely.
b) You need to get confirmation from customers if they really are paying their loans to Salalah
Trading. The customers you have interviewed gave you their oral confirmation.
c) Your colleague, the auditor in-charge of physical examination of inventory of stocks gave
their written report to you as part of audit evidence.
d) In the file of audit evidences, you also found the ratio analysis done by the previous auditors
of Salalah Trading.
e) You also collected from the Sales Department the written agreements between the company
and their customers about “no refund policy”. They were signed by both the customers and
the manager.
Required:
1.Evaluate the reliability of each of the documents above and identify the one that is considered the
most reliable and least reliable.
2.Arrangement from most reliable to least reliable, stating the reason

Answer 1

1. a) Information obtained through observation is highly reliable.

b) Oral confirmation from customers is less reliable.

c) External confirmation received from the auditor in charge of physical examination of inventory is Reliable.

d) Information obtained through inspection of records is highly reliable.

e) Information collected through inquiry are reliable.

Above all the documents , Information collected through Observation is the most reliable and information collected through External confirmation is least reliable.

2. Arrangement in the order of reliability

1 - a

2 - d

3 - c

4 - e

5 - b