ACCA Advanced Audit and Assurance (AAA) Practice Exam

Which type of audit evidence is considered more reliable?

1. Evidence from internal sources

2. Evidence from external sources

3. Oral representations from management

4. Inferred evidence from observations

The correct answer is: Evidence from external sources

Evidence from external sources is considered more reliable because it is typically independent and objective. This type of evidence is often obtained from third parties who are not influenced by the entity being audited, making it less likely to be biased. For example, confirmations from banks, suppliers, or customers provide direct validation of transactions and account balances, reinforcing the credibility of financial assertions made by the management of the entity. In comparison, evidence from internal sources may be more susceptible to bias and manipulation, as it is generated and maintained within the entity being audited. Oral representations from management, while potentially informative, can lack verifiable support and may not always be truthful. Inferred evidence from observations can also be subjective and may not directly relate to the assertions being tested, thereby providing less assurance. Hence, external evidence stands as a cornerstone of reliable audit practice.