Sufficiency And Appropriateness Of Audit Evidences

To obtain reasonable assurance, the auditor shall obtain sufficient and appropriate audit evidence by performing “Audit Procedures” The process of obataining audit evidence is also known as Audit test too.At each assertion,Auditor shall retain each document of procedures performed as proof.

Total revenue from operations – 69202.76 Cr.
Cost of material consumed –

now let us discuss about the sufficiency and appropriateness of audit evidences

SUFFICIENCY OF AUDIT Evidence

Appropriatness of audit evidences

Appropriateness is the measure of the quality of audit evidence; that is, its relevance and its reliability in providing support for the conclusions on which the auditor’s opinion is based. The reliability of evidence is inﬂuenced by its source and by its nature, and is dependent on the individual circumstances under which it is obtained.

Appropriateness is the measure of the quality of audit evidence; that is, its relevance and its reliability in providing support for the conclusions on which the auditor’s opinion is based.

i	*Relevance*	Relevance means in context of audit which evidence is most logical.
ii	Reliability	Relaibility means how much can an auditor trust on eveidence provided by clients.

Suﬃciency is the measure of the quantity of audit evidence. The quantity of audit evidence needed is aﬀected by the auditor’s assessment of the risks of misstatement. The higher the assessed risks, the more audit evidence is likely to be required, but if we take in terms of quality of such audit evidence then higher the quality of audit evidence lesser is the quantity of evidence required.Obtaining more audit evidence, however, may not compensate for its poor quality.

Auditor’s judgment as to suﬃciency may be aﬀected by the factors such as:

1	Materiality
2	Risk of material misstatement
3	Size and characteristics of the population

Let us understand in detail

1	Materiality	Materiality 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.
2	Risk of material misstatement	Risk of material misstatement may be deﬁned as the risk that the ﬁnancial statements are materially misstated prior to audit.This consists of two components 1. Inherent risk and 2. Control risk
i	Inherent risk	Inherent risk—The susceptibility of an assertion to a misstatement that could be material before consideration of any related Controls.
ii	Control risk	Control risk—The risk that a misstatement that could occur in an assertion that could be material will not be prevented or detected and corrected on a timely basis by the entity’s internal control. 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.
c	Size and characteristic of the population	Size of a population refers to the number of items in cluded in the population. Less evidence would be required in case of smaller, more homogeneous population but on the other hand in case of larger, more heterogeneous populations, more evidence would berequired.

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