ACCA Advanced Audit and Assurance (AAA) Practice Exam

What measure indicates the reliability and relevance of audit evidence?

1. Audit risk measurement

2. Appropriateness of audit evidence

3. Engagement team performance

4. Assessment of client personnel

The correct answer is: Appropriateness of audit evidence

The appropriateness of audit evidence is key to determining its reliability and relevance in the context of an audit. Appropriateness refers to the quality of the evidence, specifically its relevance to the assertion being tested and its reliability. Reliable evidence is consistent and credible, while relevant evidence directly supports the audit objectives and the specific financial statements being examined. In essence, this concept encompasses both the type of evidence gathered and its contextual application in relation to what is being audited. When auditors assess the appropriateness of the evidence, they consider whether it comes from trustworthy sources (reliability) and whether it directly addresses the assertions made by management (relevance). Evidence that is highly appropriate will significantly contribute to forming an opinion on the financial statements, hence enhancing the overall audit quality. Other measures, such as audit risk measurement, engagement team performance, and assessment of client personnel, while important in the audit process, do not directly indicate the quality of the evidence itself. They serve different purposes—audit risk assesses the potential for material misstatements, team performance relates to the efficiency and effectiveness of the audit, and client personnel assessment evaluates the integrity and competence of individuals involved with the financial reporting process, but they do not specifically focus on the evidence's appropriateness.