Evidence comes in various types and has different degrees of reliability. Follow

Question

Evidence comes in various types and has different degrees of reliability. Following are some statements that compare various types of evidence.

A bank confirmation versus observation of the segregation of duties between cash receipts and recording payment in the accounts receivable subsidiary ledger.

A bank statement included in the client%u2019s records versus shipping documents.

Physical inspection of common stock certificates held for investment versus physical examination of inventory components for a personal computer.

For each situation, indicate whether the first or second type of evidence is more reliable. Provide a rationale for your choice.

Evidence comes in various types and has different degrees of reliability. Following are some statements that compare various types of evidence.

Explanation / Answer

Answer for a)

In an Audit,the bank confirmation will be more reliable as it is prepared by external party.Moreover, people may tend to work sincerely if auditor observing it.

Answer for b)

Recalculation of depreciation may be considered as more reliable as the auditor is aware of outcome.

Answer for c)

Bank statement is more reliable as it is prepared by the party external to the client.

Answer for d)

Common stock certificates are prepared by the party external to the client.Moreover,it will be difficult to the auditor to determine the value of inventory components of personal computer. Hence, inspection of common stock may be considered as more reliable.

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