What does sufficient appropriate audit evidence mean on the CPA exam?
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Sufficient appropriate audit evidence. Enough evidence, of the appropriate kind. Sufficiency is quantity, appropriateness is relevance and reliability, and more of unreliable evidence does not fix it.
Defined against AU-C 500.05.
Worked example
To support the existence of trade receivables, a staff auditor collects 300 documents prepared by the client: aging reports, sales invoices printed from the client's system and emails from the sales team describing customer balances. A second staff member sends confirmation requests to 25 customers, chosen to cover the largest balances, and receives 25 replies directly from those customers.
Which set of evidence better supports existence, and does the larger pile make up for anything?
- Sufficiency is about quantity; appropriateness is about relevance and reliability. Both are needed, and they are judged separately.
- The 300 documents all come from the client being audited, so they are less reliable for existence, however many there are.
- The 25 confirmations come straight from independent third parties and speak directly to whether the balances exist, so they are more appropriate evidence for this assertion.
Answer: The 25 confirmations support existence better. The 300 internal documents add quantity but not quality, and gathering more of them does not cure their weakness.
The trap: Treating the larger count as the stronger case. More evidence of poor quality does not make up for its lack of reliability; it only makes the file thicker.
Based on AU-C 500.05.
Which CPA exam sections use sufficient appropriate audit evidence?
Sufficient appropriate audit evidence appears in the AUD section of the CPA exam.
Other terms defined against AU-C 500
- audit evidence: Everything the auditor uses to reach a conclusion, including the accounting records and anything corroborating them.
- audit procedures: The specific work performed: inspection, observation, inquiry, confirmation, recalculation, reperformance and analytical procedures.
- competence, capabilities, and objectivity: The three things evaluated before relying on anyone else's work: whether they have the skill, whether they have the resources to apply it, and whether they are free of pressure to reach a particular answer.
Related terms
- audit sampling: Selecting and evaluating less than 100% of a population of audit relevance so the sample is expected to be representative, giving a reasonable basis for conclusions about the whole population.
- report release date: The date the auditor grants the entity permission to use the report.
- written representations: Statements the auditor requires from management to confirm matters or support other evidence.