It is the responsibility of the auditor to obtain reasonable assurance by conducting audit engagement and expressing his opinion in the audit report. This expression of opinion results in reasonable assurance which is conveyed to users of financial statements via audit report. However, to form audit opinion, auditor is required to stay objective and he cannot express an opinion on his own and by his own free will rather his opinion must be based upon evidence i.e. audit evidence (as it is collected as a result of application of audit procedures during audit engagement thus called audit evidence) and it should be that sufficient and appropriate that a reasonable assurance can be drawn on the basis of such evidence by the auditor. Show
The term, which is a combination of two, “sufficient appropriate” requires auditor to obtain audit evidence which is sufficient enough and also so appropriate that it can back up the conclusions reached and opinions formed by the auditor. Sufficiency is the measure of quantity of audit evidence i.e. the amount of evidence obtained must be enough that it can be used and considered by the auditor. The quantity of audit evidence required depends on the assessment of risk conducted by the auditor. If the risk of material misstatement is high then higher quantity of audit evidence is required to establish (confirm) by the application of audit procedures. Appropriateness on the other hand is the measure of quality of audit evidence. Audit evidence is said to be appropriate if it is relevant and reliable in the given set of circumstances. However, the appropriateness of audit evidence is affected by the time, source and the circumstances under which such evidence is obtained. However, the two features of evidence are NOT independent and isolated rather they are closely interrelated. A quality audit evidence, even if it is in small quantity, might be enough in some situation i.e. higher the quality lesser the amount of evidence required, however, a large quantity of audit evidence cannot be a substitute for inappropriateness of audit evidence i.e. poor quality of audit evidence cannot be rectified by merely increasing the amount of evidence. Sufficient appropriate audit evidence is obtained by applying appropriate audit procedures keeping the risk assessment in consideration. It is up to the auditor to decide whether a certain audit procedure is appropriate enough to obtain sufficient appropriate evidence in a particular situation. Sufficient appropriate audit evidence is said to have been obtained if the audit risk is reduced by the auditor (through application of audit procedures) to such level that enables the auditor to draw reasonable inferences on which ultimately auditor’s opinion will be based. Thus, the emphasize on obtaining sufficient appropriate audit evidence is because auditor is required to reduce audit risk to an appropriate level which is so appropriate that reasonable assurance can be drawn which is in the end expressed in the form of audit report.
This phrase basically means that the team has gathered enough evidence to reasonably state that the financial statements are free from material misstatement. Sufficiency addresses the quantity of audit evidence while appropriate addresses the quality (relevance and reliability) of audit evidence.  Back To All Questions You might also be interested in... Discontinued Operations on the FAR CPA ExamOverview of Discontinued Operations In financial reporting, discontinued operations refer to a component of a company’s core business or product line that have been divested or shut down. Discontinued operations will be reported (net of tax) separately from continuing operations on the income statement. The reason that discontinued operations are reported separately is so that... Equity Method Excel WorkbookIf you would like to use the Excel workbook that was used to create the Universal CPA lecture on the equity method, please click the link below to download the Excel workbook: Equity Method Lecture Example https://youtu.be/QE4flnmuSkw How Hard is the CPA Exam?So you’re thinking about taking the CPA exam? Whether you have a dream of becoming a tax advisor, feel as though you need public accounting experience, or just want to solidify your business acumen, the CPA license is one of the most prestigious and well respected licenses in the business world. The exam itself is... What is difference between appropriate and sufficient audit evidence?Sufficiency of audit evidence is the measure of the quantity of audit evidence. Appropriateness of evidence is the quality of the evidence, i.e., its relevance and reliability to support the auditor's opinion. Audit evidence includes information provided in books of accounts as well as information from other sources.
What does sufficient appropriate audit evidence mean?Sufficient appropriate audit evidence is said to have been obtained if the audit risk is reduced by the auditor (through application of audit procedures) to such level that enables the auditor to draw reasonable inferences on which ultimately auditor's opinion will be based.
What are the two types of audit evidence?What Are the Types of Audit Evidence?. Physical examination. Auditors gather physical evidence to verify whether certain assets exist or to confirm the asset's condition. ... . Confirmations. ... . Documentary evidence. ... . Analytical procedures. ... . Oral evidence. ... . Accounting system. ... . Re-performance. ... . Observatory evidence.. How are sufficiency appropriateness related?Sufficiency addresses the quantity of audit evidence while appropriate addresses the quality (relevance and reliability) of audit evidence.
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What is the difference between sufficiency of audit evidence and appropriateness of audit evidence?
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