ACCA Advanced Audit and Assurance (AAA) Practice Exam

What constitutes audit evidence?

1. Only the financial statements provided by the client

2. All information used to support the auditor's conclusions

3. Reports from previous audits only

4. Internal memos and communications

The correct answer is: All information used to support the auditor's conclusions

The definition of audit evidence encompasses all information that is used to support the auditor's conclusions regarding the financial statements being examined. This includes not only the financial statements themselves but also a wide range of documentation and records that the auditor can utilize to form an opinion about the reliability of these statements. This comprehensive view ensures that the auditor can gather sufficient and appropriate evidence to conclude whether the statements present a true and fair view of the financial position and performance of the entity. Such evidence can include observations, inquiries, third-party confirmations, analytical procedures, and various forms of internal and external records. Choosing only the financial statements or limiting evidence to reports from previous audits would not provide a sufficiently robust basis for the auditor's conclusions. Additionally, internal memos and communications may be a part of the evidence but do not represent the entirety or the most complete understanding of audit evidence. Thus, the broad scope captured by the correct response appropriately reflects the diverse nature of audit evidence required for effective auditing practice.